Delegated Legislation Committee
Draft Food Additives, Flavourings, Enzymes and Extraction Solvents (amendment etc.) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Sir Roger Gale
† Clarke, Mr Simon (Middlesbrough South and East Cleveland) (Con)
† Hammond, Stephen (Minister for Health)
† Hodgson, Mrs Sharon (Washington and Sunderland West) (Lab)
† Huddleston, Nigel (Mid Worcestershire) (Con)
† Mann, John (Bassetlaw) (Lab)
† Menzies, Mark (Fylde) (Con)
† Morris, James (Halesowen and Rowley Regis) (Con)
† Morton, Wendy (Aldridge-Brownhills) (Con)
† Norris, Alex (Nottingham North) (Lab/Co-op)
† O'Hara, Brendan (Argyll and Bute) (SNP)
† Peacock, Stephanie (Barnsley East) (Lab)
† Robinson, Mary (Cheadle) (Con)
† Smith, Nick (Blaenau Gwent) (Lab)
† Throup, Maggie (Erewash) (Con)
† Tomlinson, Michael (Mid Dorset and North Poole) (Con)
Turley, Anna (Redcar) (Lab/Co-op)
Zeichner, Daniel (Cambridge) (Lab)
Jeanne Delebarre, Committee Clerk
† attended the Committee
Fifth Delegated Legislation Committee
Monday 1 April 2019
[Sir Roger Gale in the Chair]
Draft Food Additives, Flavourings, Enzymes and Extraction Solvents (Amendment etc.) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Food Additives, Flavourings, Enzymes and Extraction Solvents (Amendment etc.) (EU Exit) Regulations 2019.
I think I can say on behalf of the whole Committee without reservation that it is a pleasure to see you in the Chair, Sir Roger.
The Government’s priority is to ensure that the high standards of food safety and consumer protection that we enjoy in this country are maintained when the UK leaves the European Union. This instrument is crucial to meeting our objective of a functioning statute book after exit day. Food additives, flavouring enzymes and extraction solvents are important substances referred to collectively as food improvement agents.
Sitting suspended for a Division in the House.
These substances perform technological functions in or on food during its production or storage. Examples include preservatives, which are highly effective in protecting consumers from dangerous pathogens. They are used to improve the taste, texture and appearance of food. Common examples are artificial sweeteners and flavourings. In general, they are not sold to the final consumer but are traded between businesses.
As all hon. Members know, the Government’s top priority is to secure a deal, but at the same time it is the responsibility of a responsible Government to prepare for all possible scenarios. An extension to article 50 does not rule out no deal as a possible scenario. It is therefore absolutely right that the Government continue to prepare for no deal, and this instrument is part of that preparation. We are committed to ensuring that the UK’s legislation and policies function effectively in a no-deal scenario. It is for that scenario that these draft regulations have been laid before Parliament.
The instrument is to be made under the powers in the European Union (Withdrawal) Act 2018. It makes the minimum necessary amendments to retained legislation that governs the use of food improvement agents. It was due to be debated on Tuesday 19 March, alongside four other instruments on regulated products in food. Minor drafting errors were identified and have now been rectified.
The Government remain committed to ensuring high standards of food and feed safety and consumer protection. We will ensure that what we enjoy now is maintained in any deal or no-deal scenario. The instrument will ensure that the controls contained in the 11 retained regulations that govern food improvement agents continue to function effectively after exit day.
There will be no change in how food businesses are regulated or run. All existing food improvement agents permitted for use in the UK prior to exit day will continue to be permitted immediately after exit, and conditions and requirements attached to their use will be preserved. That will ensure continuity and clarity for UK food businesses and for those exporting their food products to the UK, and will maintain existing levels of public health protection and food safety.
I wish to make it clear to the Committee that, as with previous statutory instruments presented to the House by the former Minister, my hon. Friend the Member for Winchester (Steve Brine), the instrument makes no policy changes. It makes only essential changes that are necessary to ensure that we have an effective and fully operative statute book on exit day. The instrument’s primary purpose is to ensure that legislation continues to function effectively after exit day. The amendments are critical to ensure minimal disruption to food controls in the event that we leave the EU without a deal. The changes also ensure that a robust system of controls will underpin the ability of domestic businesses to trade, both in the UK and internationally.
I stress that food safety will not be affected by the short delay caused by the instrument’s withdrawal and re-laying before Parliament. The existing list of permitted substances, along with their specifications and conditions of use, will be retained by virtue of the European Union (Withdrawal) Act 2018. The Food Additives, Flavourings, Enzymes and Extraction Solvents (England) Regulations 2013, which provide for the enforcement of provisions relating to those products, remain operable.
In the unlikely event that urgent action is required on unsafe foods in any short interim period between exit and the coming into force of the instrument, the Food Safety Act 1990 and retained EU food law will continue to provide food safety protections for consumers. That legislation, which has already been corrected, allows for enforcement action to be taken against placing any unsafe food on the market.
The instrument makes no changes to policy, beyond the minor and technical amendments to correct deficiencies arising as a consequence of the UK leaving the EU. Those deficiencies concern the assignment of functions to EU institutions on processes to which the UK will no longer have access and on which it can no longer rely. The instrument assigns powers and responsibilities that are currently incumbent on EU entities to the appropriate UK entities.
Under EU legislation, the European Commission currently holds a range of powers and functions to enable new substances to come on to the market, to amend the current conditions of use and purity criteria, and to remove substances from the permitted lists. The instrument transfers those powers from the Commission to Ministers in England, Scotland and Wales, and to the devolved authority in Northern Ireland. It also transfers responsibility for risk assessment from the European Food Safety Authority to UK risk assessors. The Committee should note that all powers in that category relate to technical, scientific and administrative adjustments that may be necessary to respond to changing circumstances.
Risk assessment and the oversight of food controls will be essential to ensure that food remains safe, whether it is imported or produced in the UK. The Food Standards Agency and Food Standards Scotland are responsible for protecting public health in relation to food, and will continue to be independent science and evidence-based Government departments. Those functions will be delivered through an increased risk assessment capacity that has already been put in place.
The instrument will revoke EU regulation 257/2010, which places no obligations on the UK. That regulation established a programme for the European Food Safety Authority to re-evaluate the authorised food additives that were assessed for safety prior to 2009, which ensured that those substances remained safe for the general population in the light of the latest scientific data and technological developments. To date, re-evaluations for all colours, preservatives, antioxidants and aspartame have been completed, while re-evaluations for remaining food additives are ongoing. The official deadline for the completion of the re-evaluation programme is the end of 2020. All the EFSA’s re-evaluations are published online and will remain accessible to the UK after it exits the EU. Through the Foods Standards Agency and Food Standards Scotland, the UK will continue to scrutinise the European Food Safety Authority reports as we do now, alongside other robust scientific evidence, and will consider if action on the UK authorised list is necessary.
By way of further assistance, the Committee may wish to know that article 26 of regulation (EC) 1333/2008 will be retained on exit day. It preserves the duty placed on producers or users of a food additive to immediately notify the UK of any new scientific or technological information that may affect the safety assessment of a food additive. The UK has sufficient safeguards and expertise in the Food Standards Agency and Food Standards Scotland to ensure that food additives on the UK authorised list are actively kept under review on an ongoing basis. Consequently, there is no need to establish a UK re-evaluation programme and replicate work already far advanced by the EFSA.
This instrument will have no impact on the food industry, as there are no changes to the controls on the use of substances. There are also no changes to the authorisation process for any new substances, except that the roles of the European Commission and the European Food Safety Authority will be replaced by relevant UK entities. To support the changes, the Food Standards Agency intends to publish detailed guidance on the UK authorisation processes. Scientific data requirements in support of applications will remain the same, and the same package of data can be submitted to the UK and the EU, avoiding any unnecessary additional burden.
This instrument is a necessary measure to ensure that the high standard of food safety and consumer protection we enjoy in this country is maintained, and that the relevant regulations continue to function effectively after exit day. Due to the instrument being laid under the European Union (Withdrawal) Act 2018, the scope of its amendments is limited to achieving that objective. At an appropriate point in future, the Department will review whether the UK’s exit from the EU offers us opportunities to re-appraise current regulations while continuing to ensure that we protect the nation’s health and food safety standards. I urge hon. Members to support the instrument, which I commend to the Committee.
It is a pleasure to see you in the Chair, Sir Roger. We are very happy that you joined us by stepping in for your colleague. I thank the Minister for introducing the statutory instrument and summarising its provisions after it was withdrawn two weeks ago. I welcome him to his position, although I am not sure if it is permanent. I know he was already a Health Minister, but by taking on the public health brief, he will know he has big shoes to fill. His predecessor and colleague, the hon. Member for Winchester, who resigned from his ministerial position last week, was a formidable and accomplished Minister who I had a lot of respect for, and I wish him well.
Things are constantly changing and developing with Brexit, as we know. I would like to express once again my severe regret that almost three years since the referendum, the Government have failed to significantly prepare or lay sufficient Brexit legislation before the House in a timely manner. As I am sure the Whip especially will know, we have been very busy of late, and we have missed the 29 March deadline. Unless the Government can compromise on a way forward and secure support from across the House today or very soon, we are heading towards no deal on 12 April. In that scenario, this legislation will be vital. I hope that this week—I have been saying this for many weeks now—will be the week we achieve a good deal with the EU that will protect jobs, workers’ rights, our environment and, most importantly, our economy.
This SI was due to be debated two weeks ago, but was withdrawn from the Order Paper at the last minute. Can the Minister please illuminate and explain why that was? So far, an explanatory memorandum has accompanied all the statutory instruments that we have debated, apart from this one. Is that because the explanatory memorandum for the original draft still applies, or because the Government have omitted to provide one? I would be grateful if he could explain the reason for the delay and set out the differences between the two versions of the SI.
Throughout the debates on SIs, I have raised concerns about the time available to scrutinise them. This SI perfectly highlights my point that without a clear summary being available to the Opposition of what the SI is designed to achieve and what consultations the Government have undertaken, it is almost impossible to scrutinise the legislation properly in the given timeframe. There has been a lack of time to scrutinise properly the Food Standards Agency SIs that the Government have brought to the House and crucial details have been omitted from them, which industry representatives have raised concerns about, too. Now that the leaving date has changed, what conversations has the Minister’s Department had with the industry about what these SIs will mean for their businesses and day-to-day working, and has the Department provided more information and reassurance to them?
Food improvement agents are used in or on food for a technological purpose during its production or storage. They are also used to improve the taste, texture and appearance of food. Examples include artificial sweeteners, preservatives and flavourings. The majority of us will come into contact with food improvement agents daily. However, the Minister must appreciate that, for medical reasons, not everyone is able to consume food improvement agents. The relevant legislation provides specific labelling requirements for certain food products sold to consumers. An example would be mandatory warnings on products containing aspartame, as it is a source of phenylalanine, which could be detrimental to those suffering from PKU—phenylketonuria. Any reduction in standards for food labelling and mandatory warnings on products could be dangerous for people with dietary requirements. What may seem unnecessary to people who do not have those dietary requirements will be vital to those who do. What assurance can the Minister give that this legislation will not put PKU patients, in particular, in danger? I am particularly concerned that it could make the PKU diet even more difficult to maintain if warnings are removed from food labelling.
This SI will revoke for the whole of the UK a regulation that established a programme for the re-evaluation of approved food additives, as it is not thought appropriate or necessary to retain that legislation for the UK. Will the Minister elaborate on why that is? The SI goes on to say that there are other mechanisms by which new and emerging scientific data must be brought to the attention of decision makers by applicants. Will he please tell the Committee what those mechanisms are? The former Minister wrote to me about this SI, saying:
“I would like to reassure you that the UK will continue to monitor scientific evaluations and outputs from international assessment bodies such as EFSA and The Joint FAO/WHO Expert Committee on Food Additives…to ensure that we remain alert to emerging scientific analyses.”
Has this Minister made any assessment of how long it would take to update regulations in the event of any new scientific analysis? What will happen if our European neighbours decide that a food additive is unsafe? Will we follow the lead of our neighbours? How will those decisions be made? Under these changes, if an application is made for a new additive to be introduced, will that be made public, and if not, why not? What will be the arrangements for collecting data, monitoring the effectiveness of the regulations and regularly reporting?
The Food Standards Agency will take on a lot of responsibility in this area after Brexit. Is the Minister confident that the agency is prepared and properly resourced to take on that extra burden? The health and safety of the public is paramount in all this, and I hope he ensures that safeguards are in place so that food containing any food improvement agents that are found to be harmful is quickly removed from the market. I look forward to his response.
It is a pleasure to serve under your chairmanship, Sir Roger. May I, too, express my delight at your arrival? This is the latest in the seemingly never-ending procession of statutory instruments we have had to examine because—let us be frank—the Government’s self-imposed, ideologically driven red lines led them stubbornly to refuse to take no deal off the table, despite that being the will of Parliament.
Like the hon. Member for Washington and Sunderland West, I am not surprised in the least that the earlier SI was pulled because errors were found. The speed and volume in which SIs are being put through the House makes such mistakes almost inevitable. I am genuinely pleased that the minor drafting errors were spotted and have been rectified, but what about the inevitable mistakes in the hundreds of other SIs we have discussed? Which errors have not been picked up? It will be left to others after us to pick up those mistakes, wherever they may be.
Given where we are, we acknowledge that preparations for a potential no deal have to continue. It is important that existing food improvement agents permitted for use in the UK prior to our leaving the European Union will continue to be permitted for use, and that all conditions and requirements attached to their use will be maintained. For that reason, like the official Opposition, we do not oppose the SI. However, we do have some questions.
Although it is right that European legislation will be preserved in UK law, the falling away of EU frameworks that we have come to rely on will mean that, where the EU decides to ban or strictly regulate an item, that will not automatically be the case here. That will create an uneven playing field between the EU and the UK. I fear we may be heading down a path whereby a weaker regulatory regime and standards develop in the UK. I hope the Minister can address that.
What resources have the Government made available to ensure that the new bodies will have the power to undertake their new duties adequately? Although the regulations may provide for the same powers, surely staff will have to be trained to implement those new powers. What steps have the Government taken to train them? I read in some of the background to the regulations that the Government estimate it will take less than 60 minutes for staff to read and understand the proposed regulations, and to disseminate the key information onwards. How was that estimated? Is the Minister satisfied that, if the organisations involved in the regulation of food look at the guidance for less than an hour, that will cover all bases? Given the paltry amount of time the Government claim that will take, is he satisfied that nothing will slip through the net?
I also seek clarity about exactly what will replace the EFSA. How will it operate, what teeth will it have, and how confident is the Minister that those new organisations will stand up robustly to both the industry and special interest groups? This is another piece of hasty legislation that is being pushed through. Sadly, once again, it is indicative of this Government’s utterly shambolic approach to Brexit.
Let me try to address hon. Members’ questions and comments. The hon. Member for Washington and Sunderland West asked what errors were identified in the SI and what has been done to rectify them. As I said in my opening remarks, they were relatively minor drafting errors, mainly due to style rather than content. For instance, there was a drafting error in regulation 16(b), where an obligation to inform the Food Standards Agency and Food Standards Scotland of the receipt of an application for a product to be included on a list was not included for smoke flavourings. That has been corrected.
There was a comment about the failure to comply with proper legislative practice, which related to whether some text should have been prepared and presented as a footnote instead. Although it was considered that we did not have to follow that practice, we have followed it. I hope the hon. Lady will be satisfied that they were relatively minor drafting errors. She was right to make the supposition that the original explanatory memorandum still applies to this, as it did to the other three regulations that were introduced in this batch.
The hon. Lady asked about the impact on industry. As I hope she took from my words, the instrument will have no impact on the food industry. There are no changes to the controls on the use of substances or to the authorisation process for new substances, except, as we have said and as I tried to explain—I hope she took the point—that the roles of the European Commission and the European Food Safety Authority will be replaced by the relevant UK entities. I have also made the point that scientific data requirements in support of applications remain the same, so the package of data that must be submitted remains the same. Therefore, there should be no unnecessary additional burdens.
The consultation that took place with industry was open for six weeks between 4 September and 14 October, but, because it is so important that food safety and standards are maintained, it was left open for another week so that any latecomers could be included in the analysis. In total, 50 responses were received, of which some 82% supported the Government’s approach. I hope the hon. Lady is reassured that industry has been consulted, that it understands the impact on it—that is, that there is very little impact—and that it is satisfied.
The hon. Lady asked about aspartame and the PKU impact. No changes are being made to labelling. Therefore, PKU sufferers will continue to see labelling as they do now.
Both the hon. Lady and the hon. Member for Argyll and Bute raised the subject of the European Food Safety Authority. As I said at the beginning, the instrument will not change the FSA’s top priority in the UK, which is to ensure that UK food remains safe. The FSA has strengthened its risk analysis. The hon. Gentleman asked whether capacity has been strengthened, and I can tell him that capacity and resource for risk assessment and risk management have been strengthened. The FSA is also expanding its access to scientific experts who can provide the necessary scientific advice and other scientific services to meet any potential increased need for risk assessments.
As I pointed out, the UK will still have access to the re-evaluation programme until the end of 2020. All those re-evaluations will be undertaken through the Food Standards Agency and Food Standards Scotland. The draft regulations, along with other instruments, will transfer the functions of the EFSA to those bodies—[Interruption.] Inspiration has reached me to confirm that point.
The hon. Gentleman asked how we will ensure that we have the required expertise and resource to maintain standards in the UK. As I said, we have already put in place extra capacity and access to extra scientific advice. We are also looking at expanding the role of scientific advisory committees, to help us to uphold the principles of protecting public health and maintaining consumer confidence through openness and transparency.
Question put and agreed to.
That the Committee has considered the draft Food Additives, Flavourings, Enzymes and Extraction Solvents (Amendment etc.) (EU Exit) Regulations 2019.
Draft Protecting Against the Effects of The Extraterritorial Application of Third Country Legislation (Amendment) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Mr Virendra Sharma
† Churchill, Jo (Bury St Edmunds) (Con)
† Courts, Robert (Witney) (Con)
† Efford, Clive (Eltham) (Lab)
† Esterson, Bill (Sefton Central) (Lab)
† Fabricant, Michael (Lichfield) (Con)
† Hollingbery, George (Minister for Trade Policy)
Hosie, Stewart (Dundee East) (SNP)
† Jones, Graham P. (Hyndburn) (Lab)
† Kerr, Stephen (Stirling) (Con)
Kyle, Peter (Hove) (Lab)
† Lopez, Julia (Hornchurch and Upminster) (Con)
† Malhotra, Seema (Feltham and Heston) (Lab/Co-op)
Phillipson, Bridget (Houghton and Sunderland South) (Lab)
† Quince, Will (Colchester) (Con)
† Twist, Liz (Blaydon) (Lab)
† Vickers, Martin (Cleethorpes) (Con)
† Watling, Giles (Clacton) (Con)
Mike Winter, Committee Clerk
† attended the Committee
Fourth Delegated Legislation Committee
Monday 1 April 2019
[Mr Virendra Sharma in the Chair]
Draft Protecting against the Effects of the Extraterritorial Application of Third Country Legislation (Amendment) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Protecting against the Effects of the Extraterritorial Application of Third Country Legislation (Amendment) (EU Exit) Regulations 2019.
The existing EU regulation that we are seeking to transition, No. 2271/96, is commonly known as the EU blocking regulation. As its formal name suggests, it is designed to protect UK and EU businesses from the harmful effects of the extraterritorial application of legislation adopted by another country. That refers to a situation in which a country has enacted certain laws, regulations and other legislative instruments that purport to regulate activities of natural and legal persons outside its jurisdiction who are not its citizens and who are not legal persons incorporated in that jurisdiction. It could, for example, result in penalties against a UK citizen for carrying out activities in the UK that we consider to be fully legitimate under our law. The UK and EU have long opposed the extraterritorial effect of sanctions legislation on our businesses and the dissuasive impact that that can have on legitimate trade.
The blocking regulation is designed to protect UK businesses in two key ways. First, article 4 guarantees that courts in EU member states will not recognise or allow the enforcement of judgments against EU businesses for fines that they incur in a third country for breaching sanctions with extraterritorial effect. Secondly, article 6 enables businesses to seek damages through the courts in any member state should they be negatively impacted by the application of extraterritorial legislation within the scope of the blocking regulation.
There may be occasions on which compliance with third-country sanctions regimes is necessary—in the interests of businesses and our wider Government policy to continue to trade with Iran, Cuba and Libya. Where those instances occur, the EU has the power to issue authorisations for businesses to comply with third-party sanctions regimes. How is that done? The EU considers requests for compliance authorisations in accordance with the process and criteria set out in Commission implementing regulation 2018/1101 of 3 August 2018, referred to as the implementing regulation.
Using powers under section 8 of, and paragraph 21(b) of schedule 7 to, the European Union (Withdrawal) Act 2018, this draft SI amends the blocking regulation and the implementing regulation as retained in UK law and fixes them for the UK-only context. Generally speaking, the draft SI transfers the functions of the European Commission to the Secretary of State, as would be expected of all SIs made under the EU withdrawal Act. For instance, once this draft SI enters into force, UK businesses will be able to apply to the Secretary of State for permission to comply with US extraterritorial sanctions and the Secretary of State will be able to grant that permission, according to whether they judge the applications to be consistent with criteria set out in legislation. Such criteria include considering whether, if an authorisation were denied, a company would face significant economic losses that might threaten its viability or pose a serious risk of bankruptcy, or whether it would lose access to essential inputs or resources.
Currently, the Commission defines the scope of the blocking regulation—that is, which specific pieces of legislation it applies to—through tertiary legislation amending and updating the annex to the blocking regulation. The draft SI transfers that power to the Secretary of State through the mechanism of the laying of an SI under the negative procedure.
As we leave the EU, we must ensure that we continue to protect UK businesses from the effect of extraterritorial legislation. Our opposition to extraterritorial legislation is of long standing and predates the blocking regulation. The UK has had legislation making that evident on the statute book since 1980; I am referring to the Protection of Trading Interests Act 1980. We firmly believe that our operators should be able to continue legitimate trade free from the harmful effects of the extraterritoriality that we consider to be illegal under international law. These draft regulations are a key part of that policy stance and are particularly relevant given our foreign and trade policy stances on Cuba and Iran.
I welcome the opportunity for full scrutiny of this draft statutory instrument and look forward to hearing colleagues’ contributions.
It is a pleasure to serve under your chairmanship, Mr Sharma. Thank goodness the Government were defeated in their attempt to prevent the business of the House motion from going through; otherwise this debate would have been held on the Floor of the House rather than under your chairmanship. I think this is probably the right way around.
The statutory instrument appears to be a sensible piece of proposed legislation. It is necessary to ensure that British legal and natural persons are not subject to judicial overreach by the courts or judiciaries of foreign countries when implementing their Governments’ foreign policy objectives. I thank the Minister for his opening remarks and for taking us through the detail of what is quite a technical set of draft regulations. I saw him outside, and while I will not say that he was sweating in his preparation, he was certainly going through it with a fine-toothed comb. He may not be the only member of this Committee to have been through such a process.
A number of concerns flow from the Minister’s opening remarks about how the draft regulations might be applied in a domestic setting, and whether what he has expressed as the Government’s desire is indeed what will happen. It is right and proper that the United Kingdom should determine our own approach to foreign policy and the treatment of our citizens and those legal and natural persons who call the UK home.
The draft regulations address the continued disapplication of third-country laws that might have an impact on our citizens. In particular, they refer to listed sanctions measures imposed by the United States on Cuba, Iran and Libya. The underlying EU regulations were introduced as a response to the Helms-Burton Act 1996, which allows US-based companies to sue foreign persons for trade relating to expropriated US-owned goods or assets. Such trade is considered trafficking under that Act and claims may be brought under title III by US companies even where the link between that trade and what may have been expropriated is tenuous.
Similarly, Canada, Mexico and Argentina have applied blocking measures in their respective jurisdictions, showing a similar level of concern to the EU in doing so. Such was the international uproar over the measures when they were introduced that successive United States Presidents have suspended the application of title III for a period of six months on a rolling, concurrent basis. I think I am right in stating that no such cases have been brought against British companies to date.
The current President of the United States, however, has demonstrated that he takes a rather different interest in and approach to international diplomacy and international law compared with his predecessors. In January, he determined that the suspension of title III would be continued on a 45-day basis only. That period has now expired, and it seems it is now open season for US companies to take action against foreign companies. It is against that backdrop of the very real threat of legal proceedings and substantial financial claims being made against British individuals and companies that we consider these important draft regulations.
The draft regulations seek to replicate the EU’s existing list of third-country legislation to which these measures relate. However, as one might expect, they allow the Secretary of State to add to or delete from the list. Given the imminent threat faced by British businesses, can the Minister confirm that the Government do not intend to delete anything from that list once we have left the European Union? Perhaps he could also indicate whether he has any intention of adding to that list, and whether he is aware of any further extraterritorial legislation that may be in the pipeline, particularly given the approach of the current United States Administration with respect to Venezuela.
British businesses will rightly be concerned about the risk of extraterritorial judgments being awarded against them, encouraged by a White House that has declared open season for US investors. Can the Minister tell us what assessment his Department has made of the potential impact of such claims and of the exposure of British entities to them?
Under the existing EU measures, namely Council regulation 2271/96—the so-called blocking regulation—and Commission implementing regulation 2018/1101, which have been implemented into our domestic law by statutory instruments 1996/3171 and 2018/1357, EU persons are specifically forbidden from complying with the judgments, actions or proceedings of any judiciary of those third countries, unless otherwise authorised to do so by the European Commission. The blocking regulation obliges any EU person who may be so affected to notify the Commission within 30 days, so that a determination as to whether to authorise may be made.
In order to clarify the Government’s policy intentions, I ask the Minister whether either he or the Secretary of State intends to regard authorisations already given or refused by the European Commission as precedent to follow, and whether any future decisions by the European Commission will inform our own.
The current list of extraterritorial legislation to which these draft regulations apply includes only laws and regulations introduced by the United States. The Secretary of State has had many conversations—both formal and informal—with his counterparts in the United States. The Minister may have had similar conversations. During those discussions, what conversations have taken place on matters covered by these draft regulations, and what representations has the Secretary of State or the Minister made in defence of British businesses against potential title III claims?
On the face of it, these draft regulations appear relatively straightforward, largely replacing references to European Union institutions that remain in retained EU law with references to the United Kingdom. Such amendments will ensure that the provisions, which currently seek to disapply the effects of extraterritorial third-country legislation, will continue to apply in a UK-specific context after Brexit.
In so doing, however, the Government have made a number of amendments to the original European wording and have sought to delete provisions that provide for a degree of scrutiny by the European institutions, without suggesting similar scrutiny measures to replace them. That should be a matter of concern to members of this Committee.
Under article 5 of the blocking regulation, the Commission may authorise that a person complies with third-country legislation, to which these draft regulations apply, where to not do so
“would seriously damage their interests or those of the Community.”
Draft regulation 3(6) seeks to transfer that power to the Secretary of State, who may make such authorisation by way of a statutory instrument.
The Government have also sought to amend the powers under article 5 by further allowing the Secretary of State to make, by way of regulation,
“provision in connection with the making and consideration of applications to be so authorised.”
Such extra powers appear to be wide in scope, and it is unclear precisely in which circumstances the Government envisage they would need to be employed. I would be grateful, therefore, if the Minister explained the Government’s intention and whether these powers will be used without the further approval of either House of Parliament.
Under article 7 of the blocking regulation, the Commission is obliged to
“inform the European Parliament and the Council immediately and fully of the effects of the laws, regulations and other legislative instruments and ensuing actions mentioned in Article 1, on the basis of the information obtained under this Regulation, and make regularly a full public report thereon”.
Draft regulation 3(8)(c) seeks to transfer those powers to the Secretary of State but removes the obligation to inform Parliament immediately and fully of the effects of the laws, regulations and other legislative instruments and ensuing actions mentioned in article 1. It retains the obligation to make a public report, but removes the sense of urgency by removing the reference to “immediately” for the new arrangements.
Why has the Minister removed the obligation to immediately inform Parliament? Will he set out when and how such public reports will be delivered, including under the reporting obligations set out in article 4 of the Extraterritorial US Legislation (Sanctions against Cuba, Iran and Libya) (Protection of Trading Interests) Order 1996, as amended in 2018?
Article 7(b) and article 8 of the blocking regulation make provisions for the European committee on extraterritorial legislation to be consulted in respect of authorisations that are to be made compelling a person to comply with the extraterritorial application of third-country legislation. The draft regulations omit those provisions and contain no proposal for any corresponding committee to have such a role in the United Kingdom.
Can the Minister tell us whether there are plans to create such a committee? If not, how will existing European Union committee scrutiny be replicated in respect of the regulations? The Government pretending to return sovereignty to our Parliament, while repeatedly applying powers withdrawn from European institutions exclusively to the Executive, has become a familiar occurrence. As an aside, I draw the Minister’s attention to what we think is a drafting flaw resulting from draft regulations 3(8)(c) and 3(8)(d), which suggest that article 7 requires no additional paragraphs.
Turning to other proposed changes, draft regulation 3(7) amends article 6 of the blocking regulation, which sets out the powers of an affected person to seek redress or recovery of damages. The clause has been referred to as the “clawback clause”, as it allows affected counterparties to initiate proceedings against the foreign entity by which they have been affected. A judgment may be made that results in the awarding of damages and legal costs, and in the potential confiscation of assets to settle outstanding liabilities.
The blocking regulation dictates that such proceedings must be made in accordance with the Brussels convention, which requires claims to be made in the jurisdiction of the member state wherein the person causing the damage, or an intermediary or assets held thereby, is located, as the Minister mentioned in his opening remarks. It would be helpful to understand why the Government have sought to remove that section entirely, and how they propose to administer penalties for failures to comply with the obligations set out under the blocking regulation.
Draft regulation 3(12) seeks to amend article 11 of the blocking regulation, which sets out to whom it applies. Draft regulation 3(12)(g) inserts a new definition:
“For the purposes of this Article, a natural person is resident in the United Kingdom where that person has been so resident for a period of at least six months within the 12-month period immediately prior to the date on which, under this Regulation, an obligation arises or a right is exercised.”
The question of residence has been debated many times by hon. Members in this House and has been clearly defined in statute, with the most familiar test being whether a person has been present in the United Kingdom for at least 183 days in a 365-day period. The definition presented in the draft regulations does not appear to apply the same test, in that it suggests that a person must be resident for at least a six-month period. I ask the Secretary of State—[Interruption.] No, not the Secretary of State; he is not here. If only he were.
I do not think the Minister minds.
As the Secretary of State is not here, we will settle for the Minister. Can he clarify whether it is the Department’s intention that persons must have been resident for a continuous six-month period or is the 183-day test to be applied?
These are serious and complex matters and I welcome the opportunity to debate them today. As the United Kingdom seeks to be a stronger voice in defence of the rules-based system that underpins global trade and international relations, it is important not only that such legislation is in place, but that the Government address the matters raised in this debate and put their policy intention on the record.
As a small matter of fact, the Burton-Helms Act is not back on the register, but 17 April is just around the corner, so I absolutely take the point made by the hon. Member for Sefton Central. That is why Cuba is included on the list.
The hon. Gentleman asked a number of questions. I was asked to confirm whether the Government have any intention of deleting from or adding to the list, and the answer is no. I have had no conversations to that effect that I am aware of, and my officials advise that that is the case as far as they, too, are aware. He asked whether there was any Government assessment of the potential effect on UK companies of any such claims coming forward. The answer is that it is impossible to know without knowing how many claims would come forward, when they would come forward, to whom and on what issues. Therefore, it is impossible to make that sort of estimate.
However, I cannot think it would necessarily change any policy decisions, certainly in this regard. This draft instrument is designed to demonstrate to the United States that we do not respect the extraterritoriality of its legislation. That is the principal issue we face; I do not think that doing that assessment would have changed our mind about that, and in any event I cannot see how we would calculate it.
I am sure it is not an easy thing to do, but presumably some assessment must have been carried out when the EU originally brought in the blocking regulations. Of course, we are staying consistent with that approach, but presumably there is some sense of intent on the part of the United States Government, or of companies in the United States, that would inform the decision and why it is so important that these regulations are transferred.
One could argue about this for hours. Quite straightforwardly, we have not done such an assessment. The regulations are there, for example, in addition to the penalties and fines that the hon. Gentleman is talking about, to ensure that the United States or United States-based companies cannot sue UK companies in UK courts. I do not know how one would assess the level of return and/or cost that that might represent.
To my mind, this is about a base principle: we do not recognise the extraterritorial power of the US regulations, and we are therefore legislating to ensure that British companies do not have to comply with them in our courts or indeed elsewhere. I am not at all aware that any cost analysis was done when the measure was previously put in place, but I do not believe we would add much to the mix by doing another one for a UK context, particularly given that it has been in place for the best part of 20 years. It is what it is; it has been in place for 20 years, and we are seeking today to transfer it into a UK context.
The hon. Gentleman asked about notification and the amount of time within which it is expected that people will tell the Government. The answer is 30 days. He also asked whether I have had any conversations with the United States trade representative, Bob Lighthizer, and others. In a personal context, I can answer that I have never had such conversations, nor am I aware of any other such conversations having taken place with others.
We will publish a list of those who have been authorised and what they have been authorised for. The EU does not currently publish such a list, so we believe that will be a useful piece of information and that it will apply transparency to our suggested arrangements. We went over the issue of legal cost to jurisdictions and other member states. Plainly, there is no equivalent item for ensuring that the member state in which that person lives is notified to the Commission, because that person is living in the United Kingdom as a citizen, so I cannot see why that section is required.
I will speak quickly about enforcement. The Department for International Trade does not carry an investigation directorate. If we found that a complaint merited further investigation, we would pass the details on to the police and they are entirely entitled to investigate it. If companies feel that they have been disadvantaged by other people complying with the extraterritorial legislation of the United States, they are entitled, if they wish, to bring an action against that company in civil courts. That is provided for.
Finally, I thank the hon. Gentleman for his pointer towards the drafting errors in draft regulations 3(8)(c) and 3(8)(d). I have no particular knowledge of that, but I have no doubt that the lawyers will look at it carefully.
I asked the Minister about the transfer of the current scrutiny arrangements. The specific institutions of the EU that scrutinise the operation of the regulations in the EU have not been replicated in the UK; they have just been taken on by the Secretary of State. On the issue of the immediacy of reporting to Parliament, the requirement for the EU to report immediately is not replicated in the proposed regulations.
It is the UK Government’s intention to publish, as I have described, in every instance. We have not yet determined the exact method for that, or the period in which it will be done, but I can say that the Opposition and others have my absolute commitment that those names will be published along with what those names or companies are allowed to do.
Question put and agreed to.