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Recovery Of Awards Of Multiple Damages

Volume 976: debated on Tuesday 20 November 1979

The text on this page has been created from Hansard archive content, it may contain typographical errors.

I beg to move amendment No. 4, in page 6, line 9, leave out

'through a branch or establishment in that country'.

With this it will be convenient to take Goverment amendment No. 5.

It has been represented to us in the diplomatic note from the United States about the Bill that, if the exception in this subsection applies only where the activities concerned were carried on exclusively in the overseas country, the requirement that they should also be carried on through a branch or an establishment is superfluous. I agree with that, and the double test here could in some cases be needlessly severe. Our point is fully met by a requirement that the activities concerned should be carried on exclusively within an overseas country. I therefore propose to delete the reference to a branch or establishment in clause 6(3). As I have said, that covers the point that was represented to us by the United States, and it is in that sense that I am seeking to bring forward these two amendments.

Amendment agreed to.

Amendment made: No. 5, in page 6, leave out line 12.—[ Mr. Nott.]

I beg to move amendment No. 6, in page 6, line 12, at end insert—

'(4) A court in the United Kingdom may entertain proceedings on a claim under this section notwithstanding that the person against whom the proceedings are brought is not within the jurisdiction of the court.'.
This amendment is addressed to a point to which my right hon. and learned Friend the Attorney-General and other hon. Members referred in Committee. It is concerned with making the remedy of recovery under clause 6 as effective as possible. The hon. and learned Member for Abertillery (Mr. Thomas) referred to this matter.

The remedy in clause 6 is limited to certain individuals and bodies corporate that have a connection with the United Kingdom. Such persons can bring an action against another person who has obtained a multiple damage action in an overseas country, but unless that person is present within the jurisdiction of the United Kingdom courts, proceedings may not be able to be served and, unless he has assets here, a subsequent judgment may be an empty one. The hon. and learned Member for Abertillery moved an amendment in Committee that was designed to strengthen clause 6 by permitting actions between subsidiary or associated companies of the two original parties to an overseas multiple damages judgment.

We all recognise that the right conferred by clause 6 will be limited in its application. In his reply, my right hon. and learned Friend the Attorney-General said that he had sympathy with the intentions of the hon. and learned Gentleman but that the Government did not think it right to claim jurisdiction over overseas companies by virtue of the presence within the United Kingdom of subsidiary or associated companies of those companies and that that was so notwithstanding that the United States might claim jurisdiction in similar circumstan- ces. He said that two wrongs did not make a right. On further consideration, that remains the Government's view.

My right hon. and learned Friend the Attorney-General said, however, that the Government were exploring whether the rules under order 11 of the rules of the Supreme Court should be amended to permit service of process outside the jurisdiction of the United Kingdom in a case arising under clause 6. That would not be a full answer to the considerations that were discussed in Committee of how clause 6 could be made to function as effectively as possible. Nevertheless, it is a part answer and it is one that we think can legitimately be given in view of the objections that we take to the exorbitant claims of others to jurisdiction over persons or activities within the United Kingdom and the reactive and countervailing nature of this remedy.

This amendment will therefore permit United Kingdom courts to allow service of process outside the United Kingdom inactions for claims arising under clause 6. It will be followed by appropriate amendments to the procedural rules. It is designed to enable the United Kingdom victim of a multiple damages judgment to assert his rights as fully as possible. However, once the original judgment creditor, the defendant in the clause 6 action, has been served, all the conditions specified in clause 6 will apply. The action will lie between the original parties to the overseas judgment and will not be in the wider sense in which the hon. and learned Member for Abertillery sought to suggest. No change is proposed to the basis on which any judgment claims under clause 6 can be enforced.

If an action has been started in that way against someone outside the jurisdiction, will it proceed if no appearance is entered?

I should explain that we were concerned to make the clause as effective as possible. On the other hand, we were equally concerned not to indulge in some of the "wrongs" for which we are criticising the United States. On that basis, we have to accept that there may be circumstances in which we cannot attach an overseas company because it is not within our jurisdiction. If the clause were greatly broadened it would commit some of the "offences" of which we accuse other countries and, therefore, we have to keep it as limited as it is.

I hope that the Secretary of State will not be churlish, having given us so much, if I criticise him in some respects. My object in putting forward the amendment as I did in Committee and, indeed, in seeking to make the points that I made on Second Reading was to ensure that clause 6 would be an enforceable clause and, therefore, a practical matter of law.

In that context, I welcome what the Secretary of State says and I am glad that he has conceded so much. However, in our view he has not gone far enough. Although the scope of recovery and jurisdiction has been enlarged to some extent, the difficulty so far as the United States is concerned still remains that it would never enforce a judgment because it would go against its public policies on anti-trust legislation. It could be argued that a company might not be in or submit to the jurisdiction of a British court in spite of the concessions that the Secretary of State has made tonight.

The Government have recognised that leave is needed to serve abroad. I wonder whether, in the terms of the amendment, a Frenchman who has been adversely affected in the United States by the anti-trust legislation could come to this country and pursue his claim against an American company in a British court.

I return to the matter of subsidiary companies. As we understand it, the problem still remains that American companies that are based in this country can go to their solicitors and legal advisers to change their names and become subsidiary companies in the United Kingdom. That, as I see it, would defeat the ends of the clause. It is vital, as I have said on other occasions, that the clause should be effective in the sense that it can be enforced in the courts. At the moment, it cannot be unless subsidiary companies are taken into account as well. Although I welcome the amendment as far as it goes, as we see the position it does not go far enough.

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In my view, the clause goes quite far enough, if not too far. In any other form of action than this new, strange but never- the less legitimate form of clawback, is there any precedent for bringing within our jurisdiction persons who are not within the jurisdiction of the court in the natural sense of the word? Maybe we ought to extend our juridical imperialism in the way that the Americans have done, but I should have thought that this was something new. Although I am not frightened of new things if they are necessary, it is nice to know, if this is new, what the limits of it are.

I should have thought that this was new, and I would therefore like to be reassured that the Government are happy that it can be achieved and that it is not merely what I think the lawyers call a brutum fulmen.

The phrase just used by the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) went right over my head. Perhaps someone else can explain the meaning of it.

The Secretary of State, in his brief and lucid remarks, twice offered to say more if his hon. Friends sought further information. I hope that his gesture applies equally to the Opposition Benches. I think that the phrase he used was that "It had been represented to us in a note from the Embassy of the United States", or "from the United States". Can he tell us the date of those representations? Was it before or after the Committee proceedings? I think that it has some relevance. Did the representations help the right hon. Gentleman to change his mind after the Committee proceeedings, or are they remarks and comments that were passed and made available, quite rightly, by the right hon. Gentleman to all members of the Committee?

If the clause is to ensure that a person against whom the proceedings are brought is not within the jurisdiction of a British court—we are aiming at someone somewhere in the United States, I take it—is not the logic of that that the person bringing the charge could also be outside the jurisdiction of the British courts? If one can charge a person who is not within one's jurisdiction, one might also be legitimately thought to be able to accept charges against someone. Are these the limits that the right hon. Gentleman is seeking? It is not an empire-building clause, as the hon. and learned Member for Darwen indicated, but it has in it a little of the spirit of
"Wider still and wider shall thy bounds be set."

I am very interested in the amendments put forward by my right hon. Friend the Secretary of State, because he has sought to strengthen what is already a pretty strong Bill in dealing with overseas countries with which we trade. We know that we are talking of one country in particular, where such protective measures as we are seeking to introduce tonight are necessary in the judgment of many of us, but I still feel that there is not enough strength here. Although my right hon. Friend has introduced a certain strength to the words of the clause, I believe that he has still left out the guts that are required to give real strength to the Bill.

We have spent a long time on the Bill in the House and in Committee. It is very important that we should not have wasted our time and that at the end of the day we should be passing a measure which will be strong enough to merit such dramatic action.

It is dramatic to pass a measure that is against our friends in the world with whom we trade. However, it is necessary for the Government to protect our interests by means of legislation because of certain onerous trading conditions that are applied, in return, on us by other Governments.

I am going back a bit. In Committee I sought to strengthen clause 5. I remind the Government that judgments for punitive damages in class actions have been delivered in overseas courts, especially in the United States. Unfortunately, these were not considered in Committee as they were omitted from the Bill. Nor have they been introduced by the Government at this stage. Although there is strength in what my right hon. Friend seeks to do in clause 7 in widening the Bill, there is no reference to punitive damages in class actions. I must ask my right hon. Friend to comment on this matter. I am not sure whether he will give me an assurance at this stage.

Is the hon. Gentleman addressing himself to amendment No. 6 or to some other part of the Bill?

I was addressing myself to amendment No. 6. Perhaps I was back-tracking a little, but no more than I felt I was able to do as long as I escaped your wary eye, Mr. Deputy Speaker.

I have two points to raise. One I shall deal with on Third Reading. The other point I raised on Second Reading. I was greatly concerned at the unique precedent created which was admitted by the Minister and which affected especially the shipping industry.

No other country concerned about this kind of countervailing legislation has gone as far as Britain. To my mind, not a great deal of justification was given on Second Reading or in Committee. I wonder whether the Secretary of State is able to help me as I am concerned with the consequences of this legislation. Frankly, I thought that it went too far before it went to Committee, but it has gone considerably further since it came out. It now, apparently, applies not only in Britain and within the jurisdiction of our courts but we have extended the precedent to areas outside our immediate jurisdiction and their laws. The report of the Standing Committee debate does not say for which countries we are responsible. The Minister said that the clause should
"enable a body corporate incorporated in a territory outside the United Kingdom for whose international relations Her Majesty's Government are responsible to bring an action for recovery under the clause in the United Kingdom courts."—[Official Report, Standing Committee F, 6 December 1979; c. 61.]
I should like the Minister to give an indication of what countries he has in mind. From my inquiries in the Library, it seems that we are extending the clause to approximately 22 other countries or islands. The Committee was in some doubt whether we were interfering with legislation in other countries. The Bill will have the effect of changing the laws of other countries, although our responsibility in them is limited to their international relations. Presumably, that means that if we get into a squabble with America about her use of her laws to maintain a situation in which triple damages will follow from a guilty finding in an action under anti-trust legislation, those countries will also then be involved in an international incident, apparently without any consultation. I may be wrong.

Perhaps the Minister will tell us whether those countries were consulted by the Foreign Office and whether they have any objection to the House apparently passing laws that will affect the operation of companies registered in those countries. I see that the Secretary of State is showing disagreement, and, there fore, I shall not delay the House by pursuing the point.

When the right hon. Gentleman replies, I wonder whether he can tell me whether my interpretation of the Committee proceedings is correct. I have read the reports of the proceedings, and, as a layman, I found the legal interpretations in them difficult to understand. I do not say that in a critical way. I remember that there was some argument about whether it was a Committee for hon. Members or a lawyers' Committee when we were discussing who should be appointed to serve on it. The general view at that time was that it was a lawyers' Committee, and on reading the reports of the debates I believe that that was probably right.

Let me give an example of what I mean, taken from the shipping industry, an industry with which I am familiar. Many shipping companies register in countries outside our jurisdiction for tax avoidance reasons. If a shipping company has done that, are we now saying in the Bill that we shall give that company the privilege of making a claim, against American legislation, using British law, because of the relationship between ourselves and these dependent countries? In the example I gave earlier, the company concerned would be using our law to make a claim against the United States, in spite of the fact that it was registered in another country for tax advantages.

I hope that the Secretary of State can clarify that point and tell us why the sudden decision to extend this legislation was dealt with in Committee and why he was not aware of it before he introduce the Bill.

I see that during the debate on Second Reading I said that I was puzzled about how the clause was expected to operate as a matter of practice and how it could be enforced. I quote myself not to add authority to what I say but merely because it seems that the need to in- troduce this amendment underlines the point that was made, not only by myself but by a number of my hon. Friends, during Second Reading about the puzzling nature and the apparent—even to lawyers, who, after all, are imaginative if they are anything—difficulty, if not impossibility, of enforcing it.

I ask my hon. Friend whether, in the time that has elapsed since 15 November, he has received any representations from the United States, the American Embassy or any representatives of authority to indicate that the purpose of the clause and the amendment—indeed, the Bill—might not be as necessary as we thought it was when we introduced it.

As was made clear when the Bill was introduced, we were most reluctant to introduce any measure that showed any antipathy towards our time-honoured friends, the United States, and it was merely because that country had refused to be reasonable about the matters with which the Bill deals that we had to introduce it. Can my right hon. Friend assist with any information that has been received since the date when these fears and doubts were expressed, which was a relatively short time ago?

10.45 pm

With the leave of the House, I shall reply to the points that have been made. Perhaps I would be permitted to deal with the reaction from the United States in the short Third Reading intervention that I hope to make. It is easier to make the point there than in response to comments on a particular amendment.

I turn to the points made by the hon. Member for Kingston upon Hull, East (Mr. Prescott). Courts in this country can accept a case brought by a person only if he meets the tests set out in the clause. Those tests are that he must be either a United Kingdom citizen or a United Kingdom-registered company or be doing business in the United Kingdom. That does not give the widest-ranging powers that the hon. Member specified. If a Frenchman did business in this country and came within the definition of clause 6(1)(c)—
"a person carrying on business in the United Kingdom"—
he would be able to make use of the clause and recover awards of multiple damages through our courts.

"Business" can be a very wide term. Suppose that a French company was manufacturing violin strings in France, earthenware pots in some other country and lawn mowers in this country. If the Frenchman was sued, or got into difficulties in the United States about the violin strings or the earthenware pots, and his British company had nothing to do with it, could he still come to the British courts?

It would have to be the same company. That enables me to answer a point that was made earlier about why we had not widened the scope of the Bill to include subsidiary companies. I am told—I do not profess to be an expert in these matters—that in English law we assert the corporate separateness of the holding company and its subsidiary. It would offend the principles of our law if we permitted service against a subsidiary.

It has been said that this widening of the Bill would have greatly strengthened it, particularly clause 6, but it would have gone against the assertion of corporate separateness. It also would have taken us into an area to which my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) referred. We would have been getting perilously near the kind of juridical imperialism of which we are accusing the United States.

It is difficult to get this balance right. If we had not been concerned about causing some of the "offences" of which we are accusing the United States, I would have been happy to have added that broader aspect. I did not want to do that because it would offend against our existing principles and it would have put us in the position of the United States.

I concede that this is a difficult argument. But the sensitivity of which the Secretary of State is well aware is the extra-territorial application. Let us take the example that he gave of companies that come together in a conference system. This was one of the weaker examples compared with the RTZ system, which was much clearer. In the case of the conference of shipping companies, if one of them is registered in one of the countries to which the Secretary of State has referred and it operates a conference system as a company in this country, it gets both the advantages of the tax havens of Bermuda or Hong Kong and the privileges that go with the separate corporate identity here. This amendment will not get rid of the extra territorial application. The Secretary of State is carrying our legislation through to these countries when we have responsibility only for the company's international relationships.

I am not attempting to legislate against tax havens. The hon. Gentle man might find them offensive. I am trying merely to provide a remedy in this country to a body corporate, incorporated or carrying on business in the United Kingdom, against the award of what we regard as penal damages against that same company in the United States.

I accept that the hon. Gentleman may dislike some shipping companies using tax havens. That is a separate issue that I shall be happy to debate with him on another occasion.

We are worried about the position where a company takes advantage of the clause and goes, for instance, to Hong Kong or the West Indies and is able to take advantage of the legislation. We are concerned that American companies, under the clause as drafted, could operate in this country through subsidiary companies and slip through the net. A coach and horses would be driven through the main purpose of the Bill.

I shall come to that latter point in a moment. I understand that criticism. I freely acknowledge that there may be ways in which the counterparts of my right hon. and learned Friends in the United States avoid a position where punitive damages would be recovered in Britain. I accept that. There are ways of avoiding many laws. That, no doubt, has provided—I mean it in the friendliest sense—fees for the hon. and learned Member for Abertillery (Mr. Thomas) for many years. There is nothing wrong in lawyers seeking a way round the law. That is part of their business.

I am not claiming that clause 6 will have universal application. We could have brought forward a clause that would have been even more fierce in its juridical imperialism than some of the practices that we are criticising on the part of the United States. It was the judgment of the Government, which my hon. Friends can agree or disagree with, to demonstrate our strong disapproval of the principle of punitive damages. We wished to do so in a narrow sense. We do not wish to embark upon powers that we are criticising in the United States. We did not wish to pursue the matter in that way. We are open to the criticism that we have not gone far enough. It was a question of finding a balance, and we believe that we have the balance about right.

If we went as far as the hon. and learned Gentleman wishes us to go, we would be leading ourselves into difficult waters on our claims in defence of our companies which are subjected to some of these problems from American jurisdiction. We cannot have it both ways. We cannot claim that we strongly object to what the Americans are doing to our companies—and that is the basis of our political and diplomatic offensive—and at the same time take similar powers.

I am not posing as a great expert on these matters. I was hoping that the Bill would start in another place, where there are men of enormous experience who would wish to debate these matters in great depth. It so happens that the Bill came first to this place. I think that I have given an answer that is as clear and straightforward as possible.

In the end we return to the criticism of the hon. and learned Member for Abertillery—namely, whether it is worth having clause 6. I believe that it is, even on the narrow basis that we have suggested.

I understand fully the sensitivities. I understand the apprehensions of the Government about offending our American friends. I share those misgivings and apprehensions as far as they go. However, having been attacked about the Bill, why do not the Government have the courage to say "We may as well be hung for a sheep as for a lamb"?

I have answered the question. I have said that it is a matter of judgment how wide we take the powers. Our judgment was that it was right to take them in the form in which they now appear. I cannot elaborate any further. The hon. and learned Gentleman is entitled to disagree or to vote against the Government. It was better to have a narrowly drawn clause 6—

Some hon. Members are asking me to broaden it while other hon. Members feel that it is too wide. That may be an indication that it is about right.

My hon. and learned Friend the Member for Darwen asked about service outside the United Kingdom. In a number of international conventions, jurisdiction is conferred on United Kingdom courts. In those instances service is permitted outside the territory of the United Kingdom with the leave of the court. We are not going beyond what has already been agreed in a number of international conventions.

I am able to tell my hon. Friend the Member for Canterbury (Mr. Crouch) that we have considered the classes of judgment that come within clause 5. We consider that to include these classes of judgment would take the Bill far beyond its intended scope. I know that my right hon. and learned Friend the Atttorney-General intended to write to my hon. Friend to explain fully his reasons for not seeking to extend it even further. I am sorry that my hon. Friend has not received my right hon. and learned Friend's opinion. I can assure him that he will have it.

The Minister has told us that he would have preferred the Bill to go first to another place, whose Members are more informed and able to give proper answers. That attitude does not fill me full of confidence.

It is resented on both sides of the House that the Americans are applying their legislation extra-territorially. That is fundamental. If we extend the influence of the Bill to other countries, that has an extra-territorial implication. If a colony is involved, we enact law in this place and it is applied in the colony. But we are talking about countries that have their own political institutions and law-making bodies.

We are referring to about 22 countries, including Hong Kong, Bermuda and the Cayman Islands—namely, the territories. I am told that in these territories the United Kingdom has some responsibility for international relations. I naively assumed that that meant that we deal with relations with other countries on their behalf. But they make their own labour laws and laws on how their countries will be managed.

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Will the Secretary of State say clearly that in the countries where we have responsibility for international legislation we have a right to impose legislation affecting company law? We are passing legislation affecting their company law. It seems that we are changing a body of law that exists in those countries. If that is happening, it is an extra-territorial application of our legislation.

We are on Report stage. The hon. Member is allowed to address the House on a second occasion only with the permission of the House. If this is an intervention, it is a fairly long one.

I understand that the hon. Gentleman is making an interruption in my remarks.

We are not legislating in the dependent territories. This matter came up in Committee. The hon. Gentleman can read the debate. It was short. We are giving the opportunity for people in the dependent territories to make use of the British courts. The dependent territories are as they are described. We are not legislating for those dependent territories. We are merely saying that residents of those territories may have access to the British courts for the purpose of recovering punitive damages abroad. That is a different matter.

When the hon. Gentleman talked originally about 25 countries, I had not appreciated—I apologise for the fact—that he was referring to the British dependent territories. I thought that he was referring to countries such as France and Germany and others. I hope that I have answered the question. The matter was debated in Committee.

The hon. Gentleman may raise a point of order provided that it is a point of order.

The right hon. Gentleman said that if anyone wanted further information, he would make it available.

Order. That has nothing to do with the Chair. It has nothing to do with the procedure of the House.

I wish to ask the right hon. Gentleman two fairly simple questions. He has had a complicated evening.

If the hon. Gentleman will remind me of the pieces of information for which he asked but which I have not given, I shall do my best to give him an answer. He raised a number of points. I thought that I had replied to them. There must be some point that he raised that I have not answered. Perhaps he can help me.

I asked the whether the representations to which the right hon. Gentleman referred from the United States Embassy had been made before or after the Committee stage. I asked whether he agreed that it was logical that if British courts could entertain proceedings against a person in a third country, this meant that we were prepared to entertain cases from people in a third country. We want to protect British trading interests. I am not prepared to say that we should protect trading interests that have nothing to do with the United Kingdom.

I answered the second question clearly, I drew the hon. Gentleman's attention to clause 6(1)(a), (b) and (c), which answer the question. I did not answer the first question. I apologise. It was the United States diplomatic note No. 56 dated 9 November 1979. The Second Reading was on 16 November. It was a United States diplomatic note commenting upon our general policy. I apologise for not answering that question. I hope that the hon. Gentleman is now satisfied.

Amendment agreed to.