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Baroness Oppenheim-Barnes: My Lords, is it not a fact that the Government have failed to protect the people of this country, and continue to do so? Until something sensible is done, or at least responsibility taken, that is going to continue, and it is outrageous.
Baroness Scotland of Asthal: My Lords, I wholeheartedly disagree with the noble Baroness. The Government have taken trenchant steps to make sure that this country is properly protected, often in the face of virulent opposition from Members opposite and the Liberal Democrats. We will continue to put the safety of the people of this country first, second and last.
Lord Dykes: My Lords, bearing in mind that the public rightly need continual reassurance on proper sentencing, deterrent and punishment, and that is the priority, does the Minister agree that that can all, none the less, be achieved under current arrangements without the Prime Minister having to dent severely the Human Rights Act 1998—which, as has already been said, is a precious instrument—just because he has thrown a wobbly over the Sun newspaper?
Baroness Scotland of Asthal: My Lords, I do not agree with the categorisation of the noble Lord,
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although I agree that we must do all we can to ensure that the criminal justice system is effective; that it has the confidence of the people we serve; and that we continue to deliver. The Prime Minister expressed a view echoed by many people in this country.
Lord Stoddart of Swindon: My Lords, as I understand the position, this matter has come to a head because the judges refused to extradite hijackers to Afghanistan, in spite of the fact that Afghanistan is now quite different from when they hijacked the plane. Will the noble Baroness make it absolutely clear that the Government deplore hijacking, will not tolerate it and will extradite those engaged in it under any circumstances?
Baroness Scotland of Asthal: My Lords, I am absolutely happy to say that the Government deplore hijacking. Noble Lords already know that an appeal is under way. Therefore I am unable to say anything else about that case until it is concluded.
Viscount Bledisloe: My Lords, will the noble Baroness enlighten the House as to the difference between deportation by the Government from this country and extradition from this country at the suit of another country? There seems to be some confusion.
Baroness Scotland of Asthal: My Lords, I do not think that there is any confusion. We have arrangements under the new Extradition Act, which clearly sets out the basis on which we will respond to requests made by a convention country or requesting state. There are clear rules, under our immigration and asylum legislation, dealing with deportation from this country.
Business
3.6 pm
Lord Grocott: My Lords, with the leave of the House we shall have a Statement repeated this afternoon, at a convenient time after 5 pm. The Statement is about primary care trusts and ambulance trusts. It will be repeated by my noble friend Lord Warner.
Lighter Evenings (Experiment) Bill [HL]
Read a third time, and passed, and sent to the Commons.
Company Law Reform Bill [HL]
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I beg to move that the Bill be now further considered on Report.
Moved accordingly, and, on Question, Motion agreed to.
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Clause 502 [Special notice required for resolution removing auditor from office]:
Baroness Noakes moved Amendment No. 336:
"( ) The notice of the resolution must state the reasons for the proposed removal of the auditor from office."
The noble Baroness said: My Lords, Amendment No. 336 inserts a new subsection into Clause 502, which deals with the special notice procedure for removing an auditor from office. I am pleased to see that so many noble Lords are interested in this issue. My amendment requires the notice of the resolution to include the reasons for the proposed removal. In most cases members appoint auditors at the annual general meeting. In some cases the directors appoint new auditors if one resigns during the year. Quite rightly the auditors cannot be removed by the directors during the year; instead they must seek the members' approval. The auditors can submit their own representations, and in most cases the directors have to circulate them. However, the directors are not required to say why they are seeking a resolution to get rid of the auditors. Indeed, if the auditors prepare no representations, there might be no information at all available to shareholders, who need to decide how to cast their proxy votes, or whether to make the effort to attend the meeting.
The current procedure seems designed to keep the shareholders in the dark, placing the entire burden of information on the auditors' representations. But the auditors are not seeking their own removal. In any event, the directors do not in all cases have to circulate the representations.
A related point is Part 1 of Article 36 of the eighth directive, which the Minister told us in Grand Committee the Government do not know how to implement. This says that auditors must not be removed on the grounds of divergence of opinion on accounting treatments or audit procedures. It is highly likely that at present, when auditors are removed, it is precisely for these reasons. I rather suspect that the Government resisted my amendment in Grand Committee because it would make transparent the fact that auditor removal occurs in the very circumstances which will be prohibited by the directive.
In Grand Committee, the Minister merely told us that implementing the directive caused problems because it might stop members getting rid of an auditor they no longer trust. The truth is that members have no role in initiating the removal of auditors, other than to approve the directors' recommendation. It is not the members' trust but that of the directors that is at issue. In the absence of members being protected from directors removing auditors if they disagree with them over auditing or accounting, we believe that the case for disclosure of reasons is doubly strong. I beg to move.
Lord McKenzie of Luton: My Lords, as has been outlined by the noble Baroness, at present a company is entitled to remove its auditor at any time by ordinary resolution and does not need to justify its decision.
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This provision is currently in Section 391 of the Companies Act 1985, and it is repeated here in Clause 501. The audit directive—the replacement for the eighth company law directive, which was finally adopted on 25 April—will oblige us to ensure that auditors may be dismissed only where there are proper grounds.
We are implementing some of the new provisions in the new audit directive in this part of the Bill, notably those relating to the senior statutory auditor and to auditors' resignation statements. Other implementing provisions are to be found in Part 32. For the rest, we shall consult fully after publication of the final text of the directive before deciding how to implement it.
The provision about the dismissal of auditors is difficult to implement in the UK. There is no distinction in the UK between the company and the members acting in general meeting. In other European jurisdictions, however, the general meeting of the members of the company can be an organ of the company, distinct from the company itself. The directive, or at least the provision in it about dismissal of auditors, appears to be predicated upon the distinction between the company and its members in accordance with which a company could act against the interests of the members by dismissing the auditors by resolution of the directors. This, however, is not possible in the UK, where not only is the company identical with the members in general meeting but it is only by resolution in general meeting that auditors may be dismissed. We shall need to do some work to find a way of constraining the company's ability to dismiss its auditors without preventing the members in general meeting being free to dismiss auditors in whom they no longer have confidence.
In Grand Committee, and again today, it was suggested that it is fanciful to imagine the members deciding to get rid of an auditor, but in the real world the directors decide such a thing and the shareholders probably take little interest.
It is important to remember that the provisions in UK company law and the audit directive about dismissal of auditors apply to all companies. It is not just about the small minority of companies with hundreds of thousands of shareholders; most of the companies affected are relatively small private companies, and in most of those the shareholders are few and engaged.
At present, such shareholders can dismiss their auditor without having to justify their decision. We believe it is right that they should be able to do that, so we need to think carefully about how to implement the new audit directive. It has to be implemented by June 2008, and we see no reason for haste on this aspect. We need to consult those affected and to find the best way of doing it. We may find that we need to introduce a statement of reasons into a notice of a resolution for removal, as in Amendment No. 336; or we may be able to use the statement of reasons that the company has to send to the audit authority under Clause 514 when an auditor leaves. In any case, there will need to be some method by which the reasons are
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disclosed and recorded. But that in itself is not enough: to comply with the directive, we shall also have to provide a rule that the reasons must meet certain criteria, so as to be "good reason". We will somehow need to work in the reasons that according to the directive are not to be counted as good reason.
We shall also need to decide whether to provide specific mechanisms for challenging the reasons given and whether to provide specific remedies in the event of reasons being found to be adequate or of challenges being found to be unjustified. It is our strong view that it would be best to work out the best overall approach to this requirement in the directive, to consult widely with all of those who will be affected and then to implement it as an overall solution rather than to introduce parts of a possible piecemeal approach. Accordingly, I ask the noble Baroness not to press the amendment.
3.15 pm
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