Skip to main content

Clause 7

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.

Short Title, Interpretation, Repeals And Extent

I beg to move amendment No. 7, in page 6, line 21, after 'to', insert 'the law or'.

Towards the end of the Committee stage, the hon. and learned Member for Abertillery (Mr. Thomas) asked whether the definition of an overseas country in subsection (3) adequately covered the position of federal countries where there were political subdivisions within the federation and where those subdivisions had their own laws in addition to and distinct from federal laws. I agreed to consider the definition again to see whether any amendment was needed.

Clearly, our intention is that the reference to matters relating to an overseas country should cover all overseas countries and any constituent parts of such countries, including the laws of such constituent parts. Having considered the matter, I agree with the hon. and learned Gentleman that our intention should be placed beyond doubt. Therefore, I put forward these amendments, which are purely technical, for that purpose.

I am extremely grateful to the Secretary of State for agreeing with the argument advanced by the Opposition in Committee. It seemed to us an important—inded, crucial—matter. It only goes to show that if one nags long enough and loud enough and persists long enough—indeed, one may even be right—one wins in the end.

Amendment agreed to.

Amendment made: No. 8, in page 6, line 22, at end insert

'references to the law or'.—[Mr. Nott]

11.6 pm

I beg to move, That the Bill be now read the Third time.

As I stated on Second Reading, our objective in introducing the Bill was to reassert and reinforce the defences of the United Kingdom against attempts by other countries to enforce their economic and commercial policies unilaterally on us. I explained that, in effect, the practices to which we have taken exception had arisen from the extra-territorial application of United States domestic law.

I have already informed the House of the recent editorial in the Washington Post relating to this legislation entitled "Anti-trust: The New Imperialism", in which that famous newspaper concluded:
"the Sherman Anti-trust Act is not a suitable instrument for the regulation of world trade. Maintaining international competition is the proper business of diplomats and negotiation, not federal judges and litigation."
I can give my hon. Friend the Member for Burton (Mr. Lawrence) a number of examples of articles in newspapers and obiter dicta by American lawyers and others who have found this measure interesting, and a great number of them have greatly approved of it on the principles enunciated in the Washington Post.

I am not aware that so far there have been many comments on the specific recovery provisions of clause 6. I have no doubt that that aspect of the Bill will receive fairly widespread comment in coming years. Up to the present time, I have not heard many comments on these provisions. Clearly, clause 6 will create the greatest amount of discussion in coming years.

We remain open to hear the remarks of experts in the United States on this provision. Other countries are certainly interested in this approach. I have already indicated that some would say that it goes too far. Others say—as does the hon. Member for Kingston upon Hull, East (Mr. Prescott)—that it does not go far enough. However, I believe that it demonstrates to other countries that this Government intend to be vigorous in puholding the sovereign rights of this country's companies and persons where extra-territorial application applies to them. In cases where punitive damages are awarded against British citizens, we feel that we must also demonstrate our dislike of this practice, and we have done so in a symbolic sense in clause 6.

Time alone will show whether clause 6 should be amended, widened or narrowed. We shall have to see how this legislation develops. I believe that it has been a necessary strengthening of the protection of British companies and persons against the extra-territorial applications of the laws of other countries. Clause 6 is symbolic and I hope that in some circumstances it will be effective. I ask the House to see how these measures proceed. With the leave of the House, Mr. Deputy Speaker, I shall answer any questions that might be raised.

11.11 pm

The Secretary of State made it clear that this legislation, with which I profoundly disagree, is a countervailing measure to the extra-territorial applications of other nations' laws. The legislation is designed to resist the enforcement of economic and commercial practices and laws on companies and persons within our jurisdiction. Most of the references in the debate have been to American companies, though the Bill does not single out any particular country. It refers to any country which takes action which the Bill is designed to prevent.

There is another country of which the Minister should take note whose economic and commercial policies—embodied in its law—are being imposed on British—

Is the hon. Gentleman dealing with a matter in the Bill? That is the only relevant matter that can be raised during Third Reading.

Any reading of the Bill makes it quite clear that this issue comes within its scope, Mr. Deputy Speaker, particularly in relation to clause 1, which is concerned with overseas measures affecting United Kingdom trading interests.

The Minister made it clear that commercial and economic laws of other countries imposed in areas of British jurisdiction would be resisted. Our attention has been directed mainly towards the United States, whose actions have led to this legislation, though the Bill is not concerned with a particular country. The legislation is directed against any country which adopts the specified practices.

I am attempting to alert the Minister to the examples of India. The application of such practices by India might be somewhat different, but the ends are the same. I hope that the Minister will take this example as a warning and give us his view later.

India, which is in trading relationship with Britain, is refusing to comply with what this Parliament has decreed, namely, that on British ships all seafarers of whatever colour will receive the same rate of pay. On a British ship British legislation applies, but the Indian Government are forcing their policy of cheaper wages on us, thus causing some difficulty.

The Minister, who knows about the case through me, might be able to indicate to the House what the Government's reactions are likely to be to the Indian Government's policy. That policy is in clear contravention of promises given by the previous Government.

11.15 pm

I congratulate my right hon. Friend on the robust nature of the Bill, which is an indication that the Government are not prepared to tolerate infringements of the reasonable freedoms of our subjects to trade because of some aberration in the American laws which enable Americans to be imperialistic about their trading regulations.

Nevertheless, it is sad that we have had to introduce this legislation. After all, we have reached a time when, perhaps, we can be forgiving to the American colonies about their behaviour so many years ago. It might even have been an attractive matter to them that we have a strong currency, North Sea oil and determined and dynamic leadership. Some of us were, perhaps, entertaining hopes that maybe the American colonies would, once again, come back into the fold of the motherland.

This legislation underlines the sadness in the deterioration of this part of international legal relations. We have to protect ourselves. Although the Bill is self-protecting, it is not protectionist. One of its purposes is to liberate international trade. The effect of the anti-trust legislation in America is to discourage international trade and to deplete Western and international shipping. Another effect of the anti-trust legislation is to favour State trading organisations against free enterprise countries because of the defence which is allowed to any international trading company to avoid the anti-trust legislation. Soviet Russia and the OPEC countries are given concessions and trading allowances which are denied to the British. As a result of this legislation, companies such as Rio Tinto-Zinc are being clobbered.

The Government have given clear notice to the United States that they are not prepared to put up with this. On that we should congratulate the Government. Because of every other sphere of Anglo-American relations, I hope that the day will come when the Americans relent and give up their attempt to spread their anti-trust legislation beyond their own shores. I hope that they will realise that they are treading on the toes of their friends. If the British cannot claim to be the close friends of the United States, I do not know who can.

I hope that the Bill will never have to be implemented or used to resist American anti-trust legislation. I know that the only people who will benefit from that are the lawyers. I hope that those who share that noble profession will not think that I am being critical of our powers and faculties. British lawyers have always wished to operate under the highest traditions of restraint and integrity and with tolerance to other legal regimes. I hope that the legislation will lead to an improvement in friendship between Britain and the United States and that the United States will, at long last, be reasonable and tolerant about the effects of its legislation.

11.18 pm

Perhaps I should have declared an interest long ago—and perhaps it may seem strange that I do so now, notwithstanding views that I have expressed in Committee and elsewhere. I happen to be a director of two American multinational companies. I am sure that copies of our proceedings have been sent to the United States. Nevertheless, it is in Committee that I speak my mind.

I do not agree with my hon. Friend the Member for Burton (Mr. Lawrence) that this matter represents a playground for lawyers.

Britain, with its practice in trading, has been a playground for American lawyers and executives. They have been able to decide whether they can do anything to curb us, in their own interests. I have seen this happen. I speak as a business man who has seen active, high-powered executives trying to apply the decisions of the enormous administrative federal quangos which run the United States beneath the Washington emporium.

I have seen how the Americans have tried in their imperialism to make that work in other countries. I have had enough of it. I have worked with Americans, and I served with Americans in the war. I know enough about them to know that they would be the first to raise their hats and say "It is about time you noticed it. It is about time you did something. We take our hats off to you for recognising that we were pushing you as far as we dared."

The Americans are tough entrepreneurs in world trade, as the British were in the nineteenth century. They stop at nothing, and rightly so, until someone else stops them and says "Wait a minute. Why should your judgments apply in this country? They are not necessarily fair judgments, and they are not always judgments that British law smiles on benevolently".

My right hon. Friend the Secretary of State has been magnificent in steering this legislation through. It has not been happy for him to do so, but he has been courageous. I am sure that he has had to face up to some restraint from the Foreign Office. He must have been disturbed a little by the letter from the United States Government on this matter. But it has not deterred him from saying that something must be done to protect our trading interests.

I take off my hat to my right hon. Friend. He has steered the Bill through extremely well, with his customary lucidity and directness, which we welcome. Those qualities were combined with the generous wit that he always brings to these matters—even if he sometimes declares an interest that he does not know what it is all about. We welcome that, too.

I was a little disturbed that my right hon. Friend said that some of the measures in the Bill were symbolic only. I tried to trespass slightly in the debate on amendment No. 6 to express the reservation that I would strengthen some areas of the Bill, particularly with regard to punitive damages, which no lawyer, no court and no judge in this country accepts. We do not like punitive damages, because they are retrospective and so on.

We may not like punitive damages, but the concept is well known to the English courts and is sometimes invoked.

I do not mind being interrupted by any lawyer, however distinguished his antecedents. I am a free man as long as I have the Floor and have your eye, Mr. Deputy Speaker. The great strength of this House is that it is a mixture of laymen and lawyers.

I wanted to make the Bill a little stronger on that matter, but I leave it at that because my right hon. Friend has travelled a long way in meeting all my objections and I know that he has further to travel, even tonight.

11.23 pm

The hon. Member for Canterbury (Mr. Crouch) has a rover style. His American friends might be very grateful that he is leaving it at that. We are all glad that he is still in the position that he occupied before he said what he did in Committee. How long he lasts after tonight may be another matter.

I do not know the hon. Gentleman's factories, but perhaps Airfix needed his style of management at Meccano. I think that there would have been a better result there if it had had it.

The hon. Member for Burton (Mr. Lawrence) spoke of friendship with the United States, and all of us, on both sides of the House, would entirely agree with what he said about that. Perhaps the Secretary of State can tell us whether the protection of British trading interests was on the agenda for the meeting between the Prime Minister and the President and, if so, where it figured.

I turn to one serious point. We are concerned about protecting British trading interests. I want to protect British trading interests in the United Kingdom and the trading interests of genuine British companies wherever they operate outside. I do not want to protect a company or persons simply because, though they are operating in other parts of the world, they happen to have a British base.

The trade that we are protecting has nothing to do with British trade in the true sense. It might in the overall sense, but I do not want British courts to be used by a company which happens to be British based but whose operations that we are protecting are elsewhere and are nothing to do with true British interests. The Bill will now go to another place. Perhaps that point will be considered before it reaches there.

In Committee it was suggested that the Secretary of State should have discreation on clause 6, as in other matters, but the right hon. Gentleman made the point that there is no equivalent discretion in the United States. However, the information is not new, and I therefore ask what representations the United States Government have made since the Committee stage. Are they just sitting there waiting? If that is so, we should carry the legislation through.

We are determined to protect British trading interests, even though we do not like the way that we have to do it, and if the United States, having got this far, comes up with a solution, that might be the way to do it. We do not want any bother with big brothers or little brothers, but if action is needed, we should take it. Our concern must be to protect British interests within the United Kingdom and legitimate British companies wherever they operate.

11.26 pm

I shall be brief, as I know that my right hon. Friend the Secretary of State wants to catch a train. I have one small reservation about clause 5(3). My reading of the Bill suggests that it would cover contractual penalty clauses, and I believe that if a United Kingdom company agreed to a penalty clause with a foreign company, it could get out of its contractual obligations by relying on the provisions of clause 6, which I regard as being thoroughly undesirable.

11.27 pm

The Bill is the culmination of almost 30 years of what has unhappily become intense bitterness about United States enforcement of legal controls over commerce outside that country. On both sides of the House there has been considerable concern about the intrusion of American anti-trust procedures in international shipping, aviation and, in particular, uranium trading. The defences erected by the Bill are similar to steps taken by other countries in that they restrict the provision of evidence for, and the appearance of witnesses at, United States anti-trust proceedings. However, the provisions to be found in clause 6 in relation to the recovery of punitive damages are without precedent in this country and abroad.

As the House knows, I have a certain disquiet that these matters could not have been solved by international agreement. As I sought to make clear on Second Reading, from an international standpoint I am not happy that criminal laws and courts should be used for these ends, although their use in that way serves policy objectives that are important to this country, and I am the first to realise that.

In another important sense, international law is badly served if legal institutions are converted into political and diplomatic policy makers and enforcers. The unhappy feature of the matter is that in the circumstances it cannot be helped, as many efforts have been made over the years to deal with the problem at diplomatic and other levels. Those efforts having dismally failed, we welcome the Bill with certain misgivings.

I understand that there are signs—I hope that that is right—that the Americans are rethinking the basis of their anti-trust legislation and jurisdiction, and the Bill may prod them further along that road. Two recent cases—Timberlaine and Mannington Mills—have cast doubt on the anti-trust test laid down in the Alcoa case of 1945—namely, whether the actions of a company affect those within American jurisdiction even if the company itself is outside it. In August, I understand, a Californian judge dismissed a consumer anti-trust action against OPEC, so one hopes that that indicates a new sense of realism.

There is it. The Opposition have had a large measure of accord with the Conservative Party in dealing with the Bill. I take this opportunity to thank the right hon. Gentleman for protecting my flanks at an early stage of the Committee proceedings. I was most grateful for that. We are extremely grateful also for the fact that so many of our proposals have been taken on board by the Government and are now part of the Bill.

I conclude by repeating my reservation about clause 6, because without this clause the Bill would be nothing. Without the clause it would be a pointless measure, and I feel that the Government have not really had the courage, when they have come to grips with it, to grasp the nettle of the adverse application of American anti-trust legislation. Unless clause 6 is properly enforceable, the Bill will be a tiger without claws. We do not want to see that, and we hope that when the measure goes to the other place this aspect of the Bill will be considered.

11.31 pm

With the leave of the House, I should like to reply to this short debate.

I recognise the concern of the hon. and learned Member for Abertillery (Mr. Thomas) about clause 6 and the opposite concern expressed by one or two of my hon. Friends. It is far from being a pointless Bill, even without clauses 5 and 6, in the sense that it considerably strengthens the 1964 Act, and I think that clauses 1 to 4 stand up and are important in themselves.

As the hon. and learned Gentleman said, there has recently been an indication that the American courts are beginning to show some concern about this area. He mentioned the Timberlaine case, and perhaps a new sense of realism will come into judicial judgments in the United States. We must see. I fear that one sometimes detects a trend on the part of Congress in the other direction, but I take the hon. and learned Gentleman's point.

We acknowledge that this is a difficult area, and I say to my hon. Friend the Member for Burton (Mr. Lawrence) that throughout the Bill I have sought to stress that we are merely responding to a situation of a very particular nature which has been developing over several decades and which in recent years has become more acute.

I stress again that the Government are, as ever, ready and willing to try, by discussion and negotiation, to resolve all problems underlying our commercial relations with the United States. We think that that is the right way to proceed, particularly as both we and the United States share a common commitment to a generally liberal attitude to world trade.

What would happen if a United Kingdom company agreed in a contract with a foreign company that, in the event of the United Kingdom company being in default, it would, by way of compensation, pay multiple damages? That would be a penalty clause and a perfectly usual one. In those circumstances, would the United Kingdom company be able to recover those damages?

I think that I should be most foolish to answer an extremely complicated question of that sort when winding up the Third Reading debate. Not being a practising lawyer, throughout the Bill I have been careful to choose my words when dealing with legal points. I shall, of course, give my hon. Friend an answer in writing as soon as I can. He has asked an important question, but I am reluctant to give an immediate answer.

We do not think that clause 6 will affect contractual penalties, since the judgment must be the result of a multiplier being applied to compensatory damage. I am not aware that contractual penalties are ever determined in this way, and, if they are, they are not enforceable in English law. I believe that that is the answer to the point made earlier by my hon. Friend.

I can say to the hon. Member for Liverpool West Derby (Mr. Ogden) that we have heard nothing from the United States since the Committee stage. No doubt we shall receive further representations. The hon. Member's anxiety that this should apply purely to British companies is understandable, but we must ensure that a Bill of this nature applies to those classes of persons to whom the law would generally apply, namely, those who are established, resident and operating here. It is British trade, but British trade must also include the subsidiaries of Ford, United States, operating and resident in this country. The point is that the bodies should be resident here, and with the single exception of the dependent territories, a question which we debated earlier, we are not giving the right to companies from third countries to enter this country and take action for recovery under clause 6 in the way with which I think the hon. Member was concerned in Committee.

The hon. Member for Kingston upon Hull, East (Mr. Prescott) asked about a quite different matter. It is not for me to say whether it comes within the Bill. That is for you, Mr. Deputy Speaker. However, I am aware of the background to the hon. Gentleman's inquiry. It is, as he says, the fact that the Indian Government have never responded to the opportunity to raise the level to an agreed formula whereby the wages of their sea men might rise in the same way as that agreed with Pakistan and Bangladesh. I understand that the National Union of Seamen has a great interest in the matter of removing differential rates of pay. If the hon. Gentleman would like to make separate representations to us through the NUS or on his own, we should be happy to listen to them. It is a difficult question because I think that the hon. Gentleman knows only too well the position of the Indian Government and the reason why they are reluctant to agree with the formula. However, if he would like to approach us on this subject, we shall look at it again.

I conclude by saying that I am grateful to the hon. and learned Member for Abertillery for the friendly, co-operative and helpful way in which he has received the Bill. I thank my hon. Friends in particular for the help they have given on the Bill and for the amendments they have tabled, a very considerable number of which we have accepted. It is not a particularly easy measure. It is very complicated and technical. Some of my hon. Friends have much more experience of this question than I do. I believe that the Bill is broadly speaking, right, and I think that the time has come to take this step in defence of British interests trading overseas.

Question put and agreed to.

Bill accordingly read the Third time and passed.