Skip to main content

Public Bill Committees

Debated on Tuesday 8 November 2022

Retained EU Law (Revocation and Reform) Bill (First sitting)

The Committee consisted of the following Members:

Chairs: Sir George Howarth, † Sir Gary Streeter

† Bacon, Gareth (Orpington) (Con)

† Bhatti, Saqib (Meriden) (Con)

Blomfield, Paul (Sheffield Central) (Lab)

† Creasy, Stella (Walthamstow) (Lab/Co-op)

† Evans, Dr Luke (Bosworth) (Con)

† Fysh, Mr Marcus (Yeovil) (Con)

† Ghani, Ms Nusrat (Minister for Science and Investment Security)

† Glindon, Mary (North Tyneside) (Lab)

† Grant, Peter (Glenrothes) (SNP)

† Jones, Mr David (Clwyd West) (Con)

† Madders, Justin (Ellesmere Port and Neston) (Lab)

† Morrissey, Joy (Beaconsfield) (Con)

† Nici, Lia (Great Grimsby) (Con)

O’Hara, Brendan (Argyll and Bute) (SNP)

† Randall, Tom (Gedling) (Con)

† Sobel, Alex (Leeds North West) (Lab/Co-op)

Stuart, Graham (Minister for Climate)

Huw Yardley, Sarah Thatcher, Committee Clerks

† attended the Committee


Sir Stephen Laws KCB KC, Former First Parliamentary Counsel

Professor Catherine Barnard, Professor of European & Employment Law, University of Cambridge

Professor Alison Young, Sir David Williams Professor of Public Law, University of Cambridge

Martin Howe KC, 8 New Square

Tom Sharpe KC, One Essex Court

Mark Fenhalls KC, Chair, Bar Council

George Peretz KC, Working Group on REUL, Bar Council

Eleonor Duhs, Partner, Head of Data Privacy, Bates Wells

Public Bill Committee

Tuesday 8 November 2022


[Sir Gary Streeter in the Chair]

Retained EU Law (Revocation and Reform) Bill

Colleagues, welcome to this interesting Committee, as we get stuck into this important Bill. We are now sitting in public and the proceedings are being broadcast. I have taken my jacket off, so feel free to disrobe in any way that you feel is appropriate. I have a few preliminary announcements. Hansard colleagues would be grateful if Members could email their speaking notes, if they exist, to When I was first elected, we never had to say such things, as we did not have emails. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.

We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and, if we need to, a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters without debate. I call the Minister to move formally the programme motion in her name, which was discussed yesterday by the Programming Sub-Committee for the Bill.



(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 8 November) meet—

(a) at 2.00 pm on Tuesday 8 November;

(b) at 9.25 am and 2.00 pm on Tuesday 22 November;

(c) at 11.30 am and 2.00 pm on Thursday 24 November;

(d) at 9.25 am and 2.00 pm on Tuesday 29 November;

(2) the Committee shall hear oral evidence in accordance with the following Table:




Tuesday 8 November

Until no later than 9.50 am

Sir Stephen Laws KCB KC

Tuesday 8 November

Until no later than 10.25 am

Professor Catherine Barnard, Professor of European & Employment Law, University of Cambridge; Professor Alison Young; Sir David Williams, Professor of Public Law, University of Cambridge

Tuesday 8 November

Until no later than 10.55 am

Tom Sharpe KC, One Essex Court; Martin Howe KC, 8 New Square

Tuesday 8 November

Until no later than 11.25 am

The Bar Council; Eleonor Duhs, Bates Wells

Tuesday 8 November

Until no later than 2.35 pm

Sir Richard Aikens, Brick Court Chambers; Barnabas Reynolds, Shearman and Sterling; Jack Williams, Monckton Chambers

Tuesday 8 November

Until no later than 3.05 pm

Sir Jonathan Jones KC, Linklaters; Hansard Society

Tuesday 8 November

Until no later than 3.35 pm

Trades Union Congress; Unison

Tuesday 8 November

Until no later than 4.20 pm

Green Alliance; Wildlife & Countryside Link; Unchecked UK; RSPCA

Tuesday 8 November

Until no later than 4.40 pm

The Scottish Government

Tuesday 8 November

Until no later than 5.10 pm

Law Society of Scotland; Charles Whitmore, Research Associate, Cardiff University; Dr Viviane Gravey, Senior Lecturer, Queen’s University Belfast

(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 10, Schedule 1, Clauses 11 to 20, Schedules 2 and 3, Clauses 21 to 23, new Clauses, new Schedules, remaining proceedings on the Bill;

(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 29 November. —(Ms Ghani.)

The Committee will therefore proceed to line-by-line consideration of the Bill on Tuesday 22 November at 9.25 am.


That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Ms Ghani.)

Copies of written evidence that the Committee receive will be made available in the Committee Room and circulated to Members by email.

The next motion relates to deliberating in private. We may not need to move this motion, colleagues. My suggestion is that I will start every panel by turning to the Labour lead to ask the first questions. We will then go across the Committee. Indicate to me if you wish to ask a question to the particular witness, bearing in mind that the knives are absolute; we have 15 or 20 minutes, or whatever, with each group of witnesses, and we cannot go beyond that.

It would be helpful, if you are asking a question, and if there is more than one witness at the time—particularly if we have witnesses on Zoom and witnesses in person—to indicate who in particular you would like to answer the question, or whether you would like them all to answer. That would be quite helpful, but you will probably forget that after about 10 minutes. Are we happy to proceed on that basis without going into a private session to agree how we will ask the questions? If everyone is happy, that is that.

This is a serious moment, colleagues. Before we start hearing from the witnesses, do any Members wish to make a declaration of interests in connection with the Bill? No. In that case, we will now hear oral evidence from Sir Stephen Laws, former First Parliamentary Counsel, who is waiting patiently for us on Zoom. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and we must stick to the timings in the programme motion that the Committee has agreed. For the first witness, we have until 9.50 am.

Examination of Witness

Sir Stephen Laws KCB KC gave evidence.

Will the witness please introduce himself for the record?

Sir Stephen Laws: My name is Stephen Laws. I was First Parliamentary Counsel from 2006 until 2012. Before that, I had been a career drafter and civil servant since 1975. I am now a senior research fellow at Policy Exchange.

Q Good morning, Sir Stephen. My first question is quite overarching. The Bill is set up to remove EU law by omission, in essence, rather than by a positive decision to retain it; if there is not a decision by a Minister between now and the end of 2023, it automatically falls away. Do you think that is the most sensible way to proceed with more than 2,500 statutory instruments?

Sir Stephen Laws: Yes, I think it is. The ideal for the law is that all law can be found from easily accessible sources and relied on to mean what it says without being qualified by complex, obscure or general glosses, or involving complex historical research to find out whether it is valid. The Bill, by removing everything that is subject to those disadvantages—because the ideal is not the situation at the moment for retained EU law—is an important step towards securing that the ideal is achieved, by forcing the decisions to be made about how this law can be properly integrated into UK law quickly. Things will only get worse if that does not happen.

Retained EU law is imprecise because it has been removed from the context needed to make sense of it. That will get worse because the sources become of historical interest only, and the methodologies in the UK system for dealing with EU law will become lost knowledge and of historical interest only. The law will become obscure. The Bill is a useful way to force things to become better.

Q Are there adequate safeguards for scrutiny of the way in which this legislation will proceed?

Sir Stephen Laws: The way in which it is scrutinised is a matter for Parliament to work out. It is not something that you would expect to be wholly within the Bill. When deciding what parliamentary scrutiny there should be, it is important to decide what parliamentary scrutiny is for. There is a sort of myth that Parliament should treat itself as the author of legislation and should look at every line, and that legislation for which Parliament has not looked at every line has not been properly written. That is an unrealistic position.

Parliament is a political filter for legislation. It is important that it should identify the bits of legislation that are politically salient, and that it should provide an incentive for technical quality. The first can be achieved, as was the case with the legislation under the European Union (Withdrawal) Act 2018, by having a really rigorous system of triaging subordinate legislation made under the Bill to ensure that Parliament picks up the things that are politically salient. The second is achieved in practice already right across the board by random sampling; what keeps drafters keeping the quality of their drafting up is not that Parliament will look at every line, but the fact that they do not know which lines Parliament will look at, so they have to get them all right.

The Bill establishes the conventional methods of scrutiny, but they need to be backed up by a parliamentary process decided by Parliament and not set out in legislation, because, as we have learned in the last six years, if you put provisions about parliamentary procedure in legislation, you find yourself in the courts. That is not where the processes of Parliament should be.

Q You referred to there being ways to identify politically salient pieces of legislation. How do you see that happening if the Bill becomes law?

Sir Stephen Laws: By the support given to the parliamentary Committees that look at legislation, and perhaps by asking the Government to make sure that their plans for legislation are exposed first, so that Parliament has an opportunity to look at the plans and say, “Well, if that’s what you’re going to do, those are the things that we want to look at in particular.”

Q Would you accept that we do not actually know what the Government’s plans are at the moment?

Sir Stephen Laws: Yes, I would, because they have not told you what they aim to do with all this legislation that is going to be repealed. I suggest that you ask them to do that as the process proceeds.

I have a feeling that that might happen.

Sir Stephen Laws: Yes, I thought that it might happen too.

Q Good morning. Now that we have left the European Union, is it right that the influence of retained EU law should be reduced in statute and in the courts?

Sir Stephen Laws: Yes, it is. EU law applied in a situation where we are not in the EU is quite difficult to work out. The provisions of the 2018 Act are extremely complex; they are glossed. A lot of the EU law was made in the context of trying to harmonise across Europe. When you are trying to work out what it means, you want to know what it is for, and what a lot of it was for is not now relevant. It is not about harmonising rules across Europe; it is about applying rules in a domestic context.

Q Do you agree that the Bill strikes the right balance between providing for legal certainty and allowing the Government to seize the opportunities of no longer being tied to EU law?

Sir Stephen Laws: On the whole, yes. I have some reservations, because there are respects in which the Bill contains worrying aspects through which it might be possible for inertia to reassert itself, and for the status quo to become the default for what replaces it. My experience of all legal change is that it is most effective when it is ratcheted—when people do not have the option of saying, “Oh well, we will exercise this power to keep things the way they were.” That needs to be watched carefully and, if possible, legislatively discouraged.

Q You have already talked about the conflict between domestic law and laws made to harmonise across Europe, but, for the record, does not the fact that the EU legislates in a very different way from the UK create tensions between retained EU law and other domestic law?

Sir Stephen Laws: Yes, it does. The major difference between the way the UK traditionally legislates and the way the EU—and indeed lots of other countries—legislate is that under a parliamentary system the Government take responsibility for the effect and quality of the law. That means that when law is made, it is made to do something that people have agreed on. Very often, law made in Europe—in different languages as well—was a matter of agreeing words, irrespective of what the words achieved. If you could agree on the words, that was the best that you could hope for; that may happen very occasionally in my experience, and very rarely indeed in the UK. In the UK people agree on the substance, so you know what the law does. Retaining all this law that was there because it was a compromise on words is making life difficult for those people who have to use it.

Q Good morning, Sir Stephen. One of the things that we were told about leaving the European Union was that it would return powers to Parliament. What does this Bill do to the balance of powers between Parliament and Ministers?

Sir Stephen Laws: Well, most of the law that this relates to—certainly the early clauses about subordinate legislation—is not law that Parliament made; it is law that Parliament enacted or approved because it had to. The law that will be made under the Bill will be made by a Government accountable to Parliament. The powers in the Bill are equivalent in some ways to the power under section 2(2) of the European Communities Act 1972, but in that case there was no choice about the substance of how you exercised the power; the argument was all about the means. Under this Bill, Parliament will have an opportunity to look at the substance as well as the means.

Q You said that Parliament enacted all this legislation because it had to. Is it not the case that, for every single piece of legislation that we are talking about in the Bill, a United Kingdom Government Minister was present at the time that the legislation was agreed in Europe?

Sir Stephen Laws: Yes, but that does not mean that Parliament agreed to the substance of the legislation—nor, in some cases, did the Minister. They are all part of compromises. In the end, the European law had to be enacted because it was European law.

Q You say that Parliament did not agree. Is not it the case that the European Scrutiny Committee, which existed throughout the time that we were members of the European Union, had the power to call in Ministers and put a stop on ministerial approval of European Council decisions until the Committee, and therefore Parliament, were satisfied that it was the right thing to do? Whether or not Parliament exercised that authority, is it not the fact that there was a Committee of Parliament that could prevent Ministers from acting against the will of Parliament?

Sir Stephen Laws: There were mechanisms to feed in the UK view, but the UK view did not necessarily have to prevail.

Q If enacted as drafted, what difference will the Bill have on the application of EU law in Northern Ireland, in particular in relation to the Northern Ireland protocol and the Good Friday agreement?

Sir Stephen Laws: Frankly, that is not a question that I have prepared for, so I cannot say much. What I can say about the Good Friday agreement is that I am not sure that the protocol is relevant, because the law by which the protocol applies is the law of the things that are not retained just because we were carrying over the old law, which is what this Bill is mainly about. I am sorry; I have not looked specifically at the Northern Ireland aspects of the Bill.

Q Good morning, Sir Stephen. The Bill abolishes the principle of the supremacy of retained EU law. Do you think that that is the right course?

Sir Stephen Laws: Yes, I do. I think that that is part of the confusion. If we are going to work out what the law means, it is important that the system for retained EU law should fit the system that we have for all other law, which is that the latest views of Parliament should count.

Q In your initial response, you said that we should replace the laws quickly. In your view, with 2,100 or so regulations, how quickly can Parliament include those laws in UK law?

Sir Stephen Laws: I did not intend to imply that every one of the laws that will disappear needs to be replaced. A rational approach is to say that everything will cease to have effect unless we replace or retain it. There is a fallacy around legal reform that was criticised by Cass Sunstein, the American jurist and adviser to President Obama, which is that the law is very fond of the status quo: the law thinks that if we know the law already, changing or removing it must be less clear. I think that the status quo is something that needs to be justified just as much as any proposal for change needs to be justified.

We have had six years to look at all this law and to decide what of it is so valuable that we need to keep it. If people are now not able to defend specific bits of the status quo that they think are important, it is likely that they never will be able to. People will keep relying on the fact that it is the law already and must be clearer than a change, but to say that we should not change law because change is always more uncertain than keeping things the way they are is an argument against all legislation. We might as well wind up Parliament all together if we are to pursue that argument.

Q At the moment, it is important for business and the finance sector to have clarity in the law, which to an extent we get from retained EU laws. With the sunset clause and the lapsing of so many regulations, the concern is that there might be a lack of certainty, so that people are unclear what they will get when they invest. That is particularly the case in my area as shadow Minister with responsibility for nature and the environment. Is that a concern we should take on board?

Sir Stephen Laws: I think you need to be concerned about it, but first, you have to exclude from the equation the idea that law becomes uncertain just because you are changing it; that is an argument against changing the law altogether. Secondly, you have to recognise that most law, but not all, is about either imposing duties on people to do things, or imposing duties on people not to do things. It is quite clear that repealing a law does not bring about anything that did not exist before. You do not, by removing a prohibition, require people to do what was previously prohibited; nor do you, by removing a duty, forbid people from doing what they were previously under a duty to do. For most purposes, if a law disappears, people can carry on behaving exactly as they did before until they see a good reason not to. It is just that they are not required to undertake that duty, or are no longer subject to a duty not to do something different. I am not sure that as much lack of clarity is produced by removing a whole load of law as is being suggested.

Q Even if the Bill has an extremely smooth run, we will have less than a year between Royal Assent and the sunset clause coming into force at the end of 2023. What are the implications of that? Should we not consider having a sunset clause that takes effect further down the line than the end of 2023?

Sir Stephen Laws: I do not think so, because as I have said, people have had six years to look at this law and see how much of it they think is important. Another year does not seem an unreasonable period in which to finalise their views on these things.

Q Thank you for your evidence, Sir Stephen. In 2016, a key reason for leaving the European Union was to re-establish the sovereignty of Parliament. Does the Bill help us to achieve that aim?

Sir Stephen Laws: Yes, because it removes a whole load of law that was enacted under a system that qualified parliamentary sovereignty by imposing obligations on the Government and, indirectly, Parliament, to produce particular forms of law. The Bill replaces that with a system in which all new law will be subject to questions, as to substance and form, in a parliamentary forum.

Q There have been comments about safeguards and scrutiny. Is Parliament capable of creating law that we legislators can scrutinise, and are sufficient safeguards in place when it comes to creating law?

Sir Stephen Laws: I do not think I can add much to what I said before: there is a great volume of law here; a great volume of law was produced under section 2(2) of the European Communities Act 1972 and, indeed, under the 2018 Act. It is important that Parliament develops a sensible system of scrutiny, so that it can do its job of questioning and legitimising matters that are politically salient, and providing a robust system of random sampling, so as to make sure that the quality of legislation is maintained.

There is time for one quick question, if anyone is bursting to ask one. Ah! I call Stella Creasy.

Q Thank you, Chair. I apologise; I am afraid a very grumpy toddler would not let me come in. On the subject of grumpy toddlers, our witness has just suggested that the Bill will allow for scrutiny of laws in “a parliamentary forum”. Can he explain how statutory instruments introduced by Ministers allow for appropriate parliamentary scrutiny? Is that not giving a lot of power to Ministers, rather than Parliament taking back control ?

You have 30 seconds, Sir Stephen.

Sir Stephen Laws: It is possible to underestimate the influence Parliament has, even if the procedures are relatively formal. In the last six years, we have seen that Governments who try to do things that do not have the approval of Parliament get themselves into a lot of trouble. By now, they have probably learned the lesson—indeed, I think they have always known the lesson— that Governments do not propose things to Parliament that they know Parliament will not, in the end, want to agree to.

Thank you. That is a high note on which to finish, Sir Stephen. Thank you for the clarity of your evidence.

Examination of Witnesses

Professor Catherine Barnard and Professor Alison Young gave evidence.

We will move on to oral evidence from Professor Catherine Barnard, professor of European and employment law at the University of Cambridge, and Professor Alison Young, Sir David Williams professor of public law at the University of Cambridge. Both witnesses are joining us via the magic of modern technology. For this session, colleagues, we have until 10.25 am. Could the witnesses please introduce themselves for the record? Professor Barnard, would you like to go first?

Professor Barnard: Thank you very much for the invitation. My name is Catherine Barnard. I am professor of EU and employment law at the University of Cambridge, and a deputy director of UK in a Changing Europe.

Professor Young: I am Professor Alison Young. I am the Sir David Williams professor of public law at the University of Cambridge, and a fellow of Robinson College, Cambridge.

Thank you for being with us. We have a plethora of questions for you. The first is from Justin Madders.

Q Morning, professors. My first question is for Professor Barnard. You have said in your written evidence that there is a serious risk of mistakes with the EU dashboard. Have you—or has anyone, to your knowledge—done a comprehensive audit of whether everything is on the dashboard that should be?

Professor Barnard: Thank you for that question. No, we have not. UK in a Changing Europe is trying to track the changes to retained EU law, but as we have seen from the Financial Times reports this morning, the National Archives has worked with Government and found an extra 1,400 pieces of retained EU law that the Government did not seem to know about until about last week, so it looks like there are about 3,800 pieces of law. If they found an extra 1,400 pieces after the extensive work that Government had done before that, it makes you wonder whether other things are out there. This is the issue with the sunset being the default position. As a default, it will turn off all retained EU law, even if the Government are unaware of what that retained EU law actually is.

Q Thank you for that news; I was not aware that there are another 1,400 pieces of legislation. I hope that the National Archives will send that information to the Minister, if not the whole Committee. It highlights one of our concerns about the Bill. Your report recommends the Bill making it clear which pieces of legislation are subject to the sunset clause; and/or the Government could exempt certain policy areas from the sunset clause. Could you explain to the Committee why you think that would be a good idea?

Professor Barnard: On the first point, listing the provisions that will be turned off avoids those bits of legislation that we do not know about—that is, they have not been found, despite an exhaustive search, including by the National Archives—being accidentally turned off, and our not knowing that they have been turned off until they become an issue down the line in some sort of litigation. One way of avoiding error is to have a list of legislation—it looks like 3,800 pieces of legislation have been identified—and to say, “This is the legislation that is potentially subject to the sunset.” If you list all those in the statute, it avoids the problem of the missed bits being caught up by the sunset.

Once you have done all that, you can say, “Right, we should consult on those bits of legislation.” I am not in any way advocating, as Stephen Laws suggested, being in stasis and doing nothing—quite the contrary. One of the reasons for Brexit was to think about how we can have laws that are more suitable for the United Kingdom. The trouble is that this slash-and-burn technique means that proper consideration is not given to what a future rulebook might look like.

Q Obviously, the vote to leave was over six years ago. Would it be reasonable for the Government to have said by now which laws they intend to retain, and which they intend to remove?

Professor Barnard: Absolutely. I am in no way advocating for no change—quite the contrary. However, the trouble is that the rather brutal approach envisaged by the sunset clause, and the lack of clarity about how the delay process in clauses 1(2) and 2 will work, will generate huge amounts of uncertainty for users. Unlike Stephen Laws, I would say that these laws cover things as fundamental as gas equipment safety and food safety—what goes into food and the listing of foods. These are things that people absolutely take for granted. The idea that manufacturers will carry on respecting the law even when they are no longer required to because the laws have been simply turned off is, I am afraid, for the birds. All businesses need to try to cut costs, and they will not necessarily comply with high standards in the absence of legislation telling them to do so.

Professor Young, did you want to add anything?

Professor Young: To confirm what Professor Barnard was saying, it is important to recognise that although we have had six years to think about which laws to keep and which to remove, we have to put that against a backdrop of those not having been six usual years. We have also had to deal with covid, which generated lots of difficulties, and we are now dealing with energy crises and austerity. I fully accept that there is a need to think about which laws we retain and which laws we change, and that we need a period in which to think about that, but you have to recognise that there are other things on the legislative agenda that might make it difficult to have a complete list of all of them.

I agree that having a list of those laws that we have found will increase legal certainty. It would then also always be possible, once others are found, for the Government to enact regulations and say, “These regulations will be subject to the sunset,” or “These will be subject to a different sunset.” That would give us much more clarity, while still enabling us to change laws to build on the advantages brought by Brexit.

Q I am not sure whether anyone ever has a normal political year any more; I am afraid it is what it is. My first question is to Professor Barnard. Thank you so much for your evidence this morning. It has been said that the principle of the supremacy of EU law is

“alien to the UK constitutional system”.

As a creation of the Court of Justice of the European Union, it

“sits uncomfortably with established constitutional principles”

in the UK now that we have left the EU. Is it inappropriate for a non-EU country to still have instances where EU law takes precedence over its law?

Professor Barnard: Thank you for that question, Minister. Yes, at first sight, it looks rather unusual to have the notion of supremacy of EU law. You are absolutely right that it was a creation of the Court of Justice. That said, the 2018 Act essentially gave a parliamentary imprimatur to the principle of the supremacy of EU law in respect of retained EU law. Supremacy comes with quite a lot of baggage attached. Thinking about what supremacy means, it is essentially a conflict-of-laws rule—we have loads of them in the legal system. Where there is a potential conflict between two blocks of rules, a conflict-of-laws rule says which one will prevail in which circumstances.

The 2018 Act says very clearly that, in respect of pre-Brexit UK-retained EU law, if there is a conflict with EU law, EU law will prevail for the time being. However, there is absolutely nothing to stop Parliament legislating to reverse that in the future. The purpose of the 2018 Act was to ensure clarity, legal certainty and continuity. You have continuity with the snapshot approach taken by the 2018 Act. If you turn it off, which, of course, a sovereign Parliament is absolutely free to do, there will still be issues about how to manage conflicts between the rules. Indeed, the Bill makes provision for the supremacy provision to be turned back on if a Department decides it is necessary in its particular area.

Q Professor Young, when you gave oral evidence to the European Scrutiny Committee in its inquiry on retained EU law, you explained that EU law is drafted differently from UK law, and needs to be interpreted in the light of what type of retained EU law it is. What challenges do these drafting differences pose to both amending and interpreting retained EU law?

Professor Young: Thank you, Minister. It is a matter of recognising that EU law tends to be drafted by setting out the purposes that it is meant to achieve in certain circumstances. Directives have a different format from regulations; they set out the aims and purposes, and allow member states discretion in how to implement them, which is why so much of retained EU law is secondary legislation that was enacted by the UK to implement particular provisions of directives. In that sense, it tends to be drafted in a slightly different style. You also have to recognise that its main aim was harmonisation, so that might influence how it was drafted.

While the UK was a member of the European Union, we got used to understanding how EU law was drafted, and to interpreting it in line with background EU law principles, including the general principles of EU law. Obviously, one of the things this Bill will do is switch that off. You then have to think about how, without those general principles, we will interpret any of the retained EU law that becomes assimilated or is retained by regulations. We might have to think about not just retaining particular provisions through regulations, but whether we need to add elements to amend them or make them clear, so that we have a fuller understanding of how they are meant to apply in certain circumstances.

Q Good morning to both witnesses. Professor Barnard, as we heard, this Bill sets an automatic date by which several thousand pieces of legislation will disappear off the statute book unless they are specifically left on. The number of such pieces of legislation, as we have just heard, is about 1,400 more than we thought this morning. Are you aware of any previous incident, either in the UK or elsewhere, where that approach has been taken successfully with such a large amount of legislation at once?

Professor Barnard: The simple answer is no; I am completely unaware of any precedent for this. Of course, that does not mean that we cannot try to adopt this approach, but we need to be extremely mindful of the associated risks. That is one of the reasons why we have proposed carving out areas, such as environment and social policy, that are already subject to obligations under the trade and co-operation agreement. That will ensure that we do not accidently turn them off but not turn them back on again through the powers in clauses 1(2), 2 or 12 to 15, and so will ensure that we are not subject to the trade and co-operation agreement’s dispute resolution mechanisms, which may result in tariffs being imposed on us.

Professor Young, I saw you nodding. Is there anything you want to add? Do you agree with Professor Barnard?

Professor Young: I agree. I too am unaware of any process that has tried to make such a big change to so many laws in such a short period. That is why it could impose so many practical problems. In most systems, when you have a change of legal system or regime, there is this element of what we did originally, which maintains legal certainty by retaining the old provisions. Then, step by step, in what we often call a sector-specific approach, there is a detailed assessment of whether we should keep those laws or change them. As far as I am aware, this is quite a novel way of doing this with such a large amount of law.

Q Thank you. I do not know whether you heard Sir Stephen Laws’s evidence immediately before you came on screen. He suggested that the concerns raised about the uncertainty that the Bill might create can be partly explained by the traditional resistance of the legal profession to change of any kind. He said it is wrong to assume that changing the law makes it less certain. Professor Young, how do you respond to that?

Professor Young: It is not necessarily that I am reluctant to change or am concerned about change. We need to think about what this is asking against the backdrop of what we are aiming for in the Bill. You have to recognise that the difficulties of uncertainty will be not for lawyers, but for those trying to carry out business. Those carrying out business and trade need legal certainty, so that they have an understanding of the rules, now and going forward. As for the elements and problems of uncertainty, we do not necessarily think that things will be uncertain because they are changing; the issue is that those carrying out business will not necessarily be 100% sure whether things will be retained in the long term. If so, how they will be retained? Has everything that might be revoked been listed? They are not 100% sure whether it has been revoked or not.

Other provisions in the Bill might further that uncertainty. For example, under the Bill, legal officers can refer an issue to the court if they think that a decision should have changed the interpretation of a particular piece of retained or assimilated EU law but did not. That can happen after the agreement has been included and the decision has been made by the parties. You might think, “Well, the Bill says that is not a problem because it won’t affect the result between the parties,” but you have to recognise that others in the legal system will have seen that case, and that interpretation of the law, and will have perhaps planned their business on that basis. They will suddenly find that there is a reference to the court that might change how the law is interpreted or what it means.

That is why we are concerned about certainty. We are concerned about the consequences for those carrying out trade, because they need legal certainty to plan their business activities.

Q Thank you. Professor Barnard, the concern about uncertainty was a significant element of your written submission to the Committee. Is there anything that you want to add?

Professor Barnard: I would just say that the business of legal academia is forever to be making proposals to change the law, to try and improve it in some way. The idea that lawyers are hostile to change is just not correct. The way in which the legal system has worked and has run successfully over the decades is on the basis of incremental change rather than this really quite remarkable slash and burn approach proposed by the sunset clause.

Q We have talked a little bit about the content, but could we talk a little about the process? You have just highlighted that there are actually another 1,400 pieces of legislation affected. The process then gives ministerial—not parliamentary—control about what happens next. Could you give us your reflections on that process and the scrutiny of it, and some of the practicalities? For example, which Ministers will retain responsibility for which pieces of legislation?

It would be quite helpful to know, with the extra 1,400, who has drawn the short straw? Are they all in one particular Department or across the Departments? A previous witness claimed that there would be adequate parliamentary scrutiny, and if Parliament did not like what Ministers were doing, it would intervene. What would this process mean for our ability to influence the content produced as a result of the Bill?

Professor Barnard: On the first point, as you rightly point out, there are provisions in the Bill to allow Ministers, by regulations, to keep retained EU law, which will eventually be called assimilated law, but what is not at all clear is the process by which the Minister decides to engage in that process. Remember, if the Minister decides to sit on his or her hands, the default kicks in, which is that those all those provisions will go. In reality, we understand that Government Departments have a reasonable idea of the law in their area, and civil servants will need to go through that law statutory instrument by statutory instrument.

There is a real issue about capacity in Government Departments. Jacob Rees-Mogg himself said that his own Department for Business, Energy and Industrial Strategy had identified that it needed 400 civil servants to be working on the 300 or so pieces of legislation that had then been identified. Presumably, now they have discovered an extra 1,400 that number will increase. It is a huge amount of civil service time. The issue is even more acute in the Department for Environment, Food and Rural Affairs, which is the Department most affected by retained EU law. The question is, what is the internal process? Even if the Secretary of State in DEFRA decides that he or she wants to retain all the legislation because it is so important in different forms, what happens? Does it go to the Cabinet? Is there some sort of star chamber that looks at what is being proposed by the Departments? We know none of that, and we know none of the detail about whether there will be any consultation with external stakeholders, which is particularly important in the field of agriculture, where a large number of stakeholders are affected.

Professor Young, do you want to add anything?

Professor Young: We also have to think about how ministerial Departments will liaise with each other, because those different Departments might be looking at the same statutory instrument that might regulate bits that fall within the ambit of their respective Departments. Something will also be required in Government to keep track of that and to work out what the process should be.

With regard to parliamentary scrutiny, under the Bill the default position would be the negative resolution procedure. Obviously, there are some exceptions, for example, if a measure is used to modify primary legislation, to create a power to enact subordinate legislation or to create a criminal offence in certain circumstances. There is an ability to bump that up to the affirmative resolution procedure, but it will be very difficult for Parliament necessarily to keep track of all this, because so much is coming through. As I am sure you are all aware, it is very difficult for either of the Houses to actually pass a resolution to say that they disagree with a particular provision. Because of the demands on parliamentary time, it will be even more difficult when you have so many provisions coming through. Although there is a process for parliamentary oversight, it will be difficult in the timeframe to ensure that that oversight can be exercised in a manner that enables Parliament properly to scrutinise the measures as they come through.

Q We know that the last time the Commons overturned a negative statutory instrument was in 1979, and that the Lords has not done so since 2000.

Professor Young: Exactly.

In your opinion, then, the ability of parliamentarians, as opposed to Ministers, to influence what laws come next, if they are enacted at all, is limited. Can you suggest, or are there examples from your experience, how parliamentary scrutiny could be strengthened in this Bill?

Professor Young: Obviously we have elements that we saw under the European Union (Withdrawal) Act 2018, which allowed for aspects of enhanced scrutiny in certain circumstances as well as the ability to exercise the affirmative resolution procedures. There can be procedures that you can use whereby you put forward drafts of delegated legislation and allow parliamentarians to scrutinise them. Obviously it is difficult to set that up and to have the time to do so.

I think we need to think about two issues. First, we need to think about what is the appropriate procedure that enables parliamentarians to have adequate scrutiny and we also need to think about how we ensure that parliamentarians have sufficient time to perform that scrutiny. That is why you accurately quoted the information relating to the last time that either the House of Commons or the House of Lords voted against a particular resolution. Perhaps that shows the very great difficulty of actually achieving the time to get that on the parliamentary agenda.

Q To clarify that point, obviously all of that requires a Minister to bring forward a proposal for any parliamentary scrutiny.

Professor Young: Yes.

Q So in your reading of the legislation, to confirm our reading of it, if a Minister chooses not to bring forward a replacement to a piece of legislation, there is no parliamentary scrutiny of that decision in and of itself at all?

Professor Young: That’s it; absolutely. The only way perhaps to get around that would be to ensure that different departmental Select Committees could go away and look at the area of their law, and perhaps write reports to propose that there should be changes or provisions should be retained or revoked. Obviously, that would only be a report and not necessarily something that a Minister would have to follow in any way, shape or form.

Professor Barnard: If I may just put a footnote to your questions, of course if Parliament did decide to vote by resolution against a statutory instrument, that risks running out of time. Therefore the default kicks in and the sunset kicks in, so you lose a measure all together.

Q First of all, as a shadow DEFRA Minister, we were expecting 570 regulations. I would like to know whether we will have any more, but that is an aside. As I said to Sir Stephen Laws, I am concerned about the amount of time that we will have between now and the sunsetting at the end of 2023. You gave a very good explanation of how thousands of regulations will likely fall because of the lack of time, but much retained EU law will have implications for the operation of the Northern Ireland protocol, which I understand is within scope of the sunset. What is your view on the operation of the Northern Ireland protocol, if we go ahead and, as expected, hundreds or possibly even thousands of regulations are automatically revoked at the end of 2023 because of the lack of parliamentary, ministerial and civil servant time to effectively replace them?

Professor Barnard: The Financial Times reports, and indeed the Mail on Sunday report, which is where the story about the extra 1,400 pieces originated, just talk about 1,400 pieces; they do not talk about the fields in which they fall. By definition, however, given that DEFRA already has the largest group of retained EU laws—it is about 500 and something—DEFRA is very likely to be affected by the discovery of an extra 1,400 pieces.

On your question about the Northern Ireland legislation, as you know, annex 2 of the Northern Ireland protocol lists all the areas of EU law that will continue to apply in respect of Northern Ireland on a dynamic basis. Clause 1(5) of the Bill contains a rather general and ill-defined carve-out for Northern Ireland legislation, but it is not clear because, as you will be aware, the Northern Ireland Protocol Bill is also going through Parliament at the moment, which will turn off a large amount of the EU legislation that applies in respect of Northern Ireland—all the annex 2 legislation. Other bits of legislation still apply, particularly in the field of equality law and social policy, but you have this generic and rather vague exclusion in respect of Northern Ireland in clause 1(5).

Professor Young: I have nothing to add.

Q I wanted to put this question to Sir Stephen Laws, but I will put it to both of you. He talked about the fact that, were regulations sunsetted and not replaced, people would just carry on doing what they did before, but the regulations create a legal floor. Many DEFRA environmental regulations in particular create environmental floors, so people may not do what they did before. They will lower their standards because the regulations will go. Do you think that that is a real danger with the sunsetting and the revocation of the regulations?

Professor Young: I agree that it is a real danger, because obviously a business takes business-based decisions. If a particular regulation that was perhaps making you not as competitive disappears, you might find ways of not following the old regulation because it might give you a competitive advantage in certain situations. We need to think about this against the backdrop of the United Kingdom Internal Market Act 2020, which provides that, if a good can be marketed in one component part of the United Kingdom, it can be marketed in any other component part of the United Kingdom. That will also incentivise what we call a race to the bottom—the idea that you will have a competitive advantage if you are not following other regulatory burdens that might make your good less competitive. If you are aware that you do not have to follow that, not only will you decide not to do so, which might give you a competitive advantage, but it might put others at a disadvantage across the 2020 Act. You can sell your good across the UK because you are adhering to a lower element, and it is lawful to sell it in one component part. I think that there is a real risk that people will not follow the former rules and regulations.

Professor Barnard: I think Sir Stephen Laws takes a very benign view of human and indeed business nature. If there is an opportunity to save costs by not complying with rules, businesses will take it. The only thing I would add to that is that businesses that are doing most of their trade with the EU will still be required to comply with EU rules, otherwise they will not be able to sell their products on to the EU market. Business that are part of supply chains that feed into the EU market will still have to comply with EU rules. Perhaps he is right there that there might be voluntary compliance, but it is actually market-induced compliance rather than absolute voluntary compliance.

Q I just want to follow up on that. Clause 15(5) specifies that no replacement legislation can increase the burden on businesses. That looks very much like it is locking in lower standards as one can only secure either parity or something reduced. Is that a correct interpretation or could burden be rewritten to allow us to have the higher standards that we were promised if we left the European Union because we could set our own standards? Professor Young, you looked like the one who was nodding most vociferously.

Professor Young: The problem with that particular provision is that it is that element of not reducing burdens, which includes elements of administrative inconvenience, as well as obstacles to trade or innovations or obstacles to efficiency, productivity or profitability. The difficulty is what would or would not be increasing burdens in these circumstances. On the one hand, you are right; this is incentivising a reduction in these burdens and the potential follow-on we would see is a reduction in standards, particularly because it is looking at obstacles to trade or obstacles to efficiency, productivity and profitability. Another way of potentially reading it is to say that if I take a number of earlier burdens, turn them into one burden with a higher standard, that is also not increasing the burden. The difficulty is that the clause could be quite ambiguous, which could, in some senses, perhaps alleviate some of the risk that that might incentivise towards removing burdens. However, that is going to leave these particular measures open to potential legal challenges because people will argue “This has increased my burden in these circumstances.” That, in turn, could add to legal uncertainty.

Q That is where the lawyers make their millions. In your interpretation of burdens, the TCA talks about us not using changes in our regulatory processes to undercut each other. So is there a risk in that interpretation that we may affect the TCA itself? How do you feel that this legislation interacts with those other forms of legislation?

Professor Barnard: Yes, you are absolutely right. That is one of the reasons we proposed carving out, for example, environmental law and employment law, because those are the two areas that are subject to the so-called level playing field provisions in the trade and co-operation agreement. We are free to lower our standards—that is our choice—but if we do and, depending on the provision, that materially affects trade between the UK and the EU, the EU can start the dispute mechanism in the TCA. In respect of the so-called rebalancing dimension in the level playing field, the retaliation is brutal, quick and immediate.

Q Just following up on the burdens issue, obviously lawyers can argue all day what a burden is. For us parliamentarians, whose opinion is it that this is reducing a burden? How would we as parliamentarians establish the basis upon which that decision has been made?

Professor Young, you look like you are about to burst forth.

Professor Young: Sorry, I could not quite hear who you were asking. It would be for the Minister to decide, when they are deciding to make a regulation, whether they do or do not think it will or will not increase a burden. There is a possibility for the Minister to make a statement, but there is no requirement to do so, and it will be up to parliamentarians when they see that particular measure to scrutinise it. If you think it imposes a burden and you are concerned about it, you could use the negative resolution procedure to vote against it.

Professor Barnard, did you want to add anything in 20 seconds?

Professor Barnard: No, I agree.

Thank you very much, both of you, for the clarity of your evidence. We are now moving on to our next group of witnesses. Thank you to those from Cambridge.

Examination of Witnesses

Martin Howe KC and Tom Sharpe KC gave evidence.

We are now moving on to hear more evidence in person, from Martin Howe KC of 8 New Square chambers and Tom Sharpe KC of 1 Essex Court chambers. In this session, we have until 10.55. Please introduce yourselves for the record; Martin, would you like to go first?

Martin Howe: I am a practising King’s Counsel, principally in the field of intellectual property law, and formerly European Union law, mainly in the field of free movement of goods and services—cross-border freedom to trade. That is my professional background. I became chairman of a group called Lawyers for Britain, which was set up during the referendum campaign to campaign among the legal profession for a leave vote. I wish we had been able to wind it all up—job done—but we still exist and I am still the chairman.

Tom Sharpe: I am Tom Sharpe, King’s Counsel. I spent too long as an Oxford don, but I have been in practice for quite a long time. The nature of my teaching at Oxford and my practice was heavily European law, which I now put in the semi-past tense. I have appeared in the European Court quite a few times. The central core of my practice has always been the regulatory area—competition law and state aids—but I have done quite a lot of judicial review work, attempting to overturn EU regulations and misapplied and misadopted directives. I, too, am a member of the Lawyers for Britain group, and Martin and I made submissions in Miller 1 and Miller 2.

Q Good morning, gentlemen. May I ask a rather specific question? I am presuming that you have read the Bill. Under clause 4, there is a reference to removing references to sections 183A to 186 of the Data Protection Act 2018. If you do not know why it is there, that is fine, but are you able to provide an explanation?

I am indeed. It is the best type.

Tom Sharpe: The honest answer is no. However, your excellent House of Commons research paper does indeed advert to this and describes the justification, which I have forgotten.

Q That is fine. I will refer back to that. I seek some free legal advice in relation to subsections (3) and (4) of clause 7, which are about the criteria for departing from retained law. The criteria are slightly different. Could you set out your understanding of the rationale for why that is the case?

Tom Sharpe: Slightly different between case law and—


Tom Sharpe: Shall I kick off? I know that Martin has some fairly strong views on this. What the Department is trying to do here is to provide some illustrative guidance as to the reasons why people can depart. They could have done nothing and left it open to the court, which would have been unsatisfactory. By and large, judges, like all of us, need some help and guidance. As to the differences, the justification is the TuneIn case, Martin, is it not?

Martin Howe: Warner against TuneIn, yes.

Tom Sharpe: Why don’t you pick this up? It is your area.

Martin Howe: One feature of the 2018 Act, as you know, is that it made European Court judgments continue to be binding after exit in the interpretation of retained EU law. I would have preferred to see them just as persuasive authority from the beginning, but that is what the Act said. It gave only a very tiny exception, allowing the Supreme Court and the High Court of Justiciary in Scotland to depart, but only in circumstances where they would depart from their own previous decisions. It was extremely narrow. That was slightly widened by a statutory instrument under the 2020 Act, which expanded that to the Court of Appeal, the Inner House of the Court of Session in Scotland and the Court of Appeal of Northern Ireland, but it still had a very narrow test. I do not think, even if you got rid of all these restrictions, that the judiciary would actually make very many changes to or departures from legislation.

That comes out from the TuneIn case, in which the Court of Appeal considered a very unsatisfactory area of jurisprudence by the Court of Justice—a very technical area on communication to the public in copyright cases—and did not feel that it wanted to depart from that law, basically because it thought that to do that you have to almost legislate to fill in what you are replacing the judgments with. Judges are naturally reluctant to do that. My view of these provisions is that they are helpful. They slightly widen the circumstances in which there can be a departure, but are unlikely to make much practical difference. They will mean very few cases that see actual departures.

Tom Sharpe: May I add a supplementary? In answer to your specific question, clearly, the case law, which is the second provision in clause 4, is much broader. All sorts of case law is affected, and some would say infected, by European principles. What this is simply doing is inviting Parliament to say that the breadth of review can be triggered by any impact or any influence. It is really very broad—“determined or influenced by”. I think that is the justification for it, and I think it is sound. What is the point of having an imperfect means by which higher courts can be seized of these matters if they are important enough to go up to the higher courts?

Q Good morning. There has been a lot of discussion about whether the Bill should be happening now and whether it should happen at all. My question is this: is now the right time for Government to reduce the influence of retained EU law in the UK statute books, as the Bill intends? I will turn to Mr Sharpe first.

Tom Sharpe: It is not the right time at all. This should have been started in 2016, and certainly the dashboard—the process of creation—should have happened then. When—or if and when—this is enacted, it will be, what, six years since the referendum? That is a very long time; it will probably be seven years when the Lords get hold of it. It seems to me that the promises that were made in the referendum and the obligations owed to those who voted for Brexit, which in turn, of course, were repeated in the 2019 election, have to be redeemed. It seems to me that it is appropriate for that to be done, and to be done by a means whereby good faith can be applied—that is to say, a balance between speed and comprehension, balancing the requirements of Government in order to get the legislation on the statute book with the interests of Parliament and the interests of stakeholders. It seems to me, as a general rule, that this is actually what it does.

Q Mr Howe, I will ask a supplementary, because I know you are eager to answer the question as well. We have heard a lot, especially from the critics, saying that the Bill is not needed because the European Union (Withdrawal) Act 2018 saved all the relevant EU law, and it has been suggested that the Act took a maximalist view on retaining EU law as, at the time, our future relationship with the EU was not yet known. What is your view on whether the Bill is necessary, and why?

Martin Howe: I think the Bill is desperately needed. The flaw with the 2018 Act is that it was clearly necessary to preserve what is now retained EU law on an interim basis until it could be reviewed and either kept or replaced or modified, but what was not necessary was making it impossible to change most of it except by Act of Parliament, which is what the 2018 Act did, and also to import a whole load of EU law doctrines on top of the legislation. It was all said to be for the purposes of legal certainty. In my view, it does not add to legal certainty; it generates legal uncertainties and allows vague things to be argued.

I have had a look to see what progress has so far been made in changing the vast body of EU retained law. There is one important Bill going through the Commons now, the Financial Services and Markets Bill, which would deal with that field, where we put in place our domestic policy choices.

There are also two further Bills that I have identified. One dealt with the Vnuk case, which was a case in the European Court that interpreted the motor insurance directive—in my view, misinterpreted it—to say that it applied to off-road vehicles, so things such as farm tractors would be compulsorily insured. That has now been corrected in our law, but only via a private Member’s Bill, which became an Act in April when the Government lent parliamentary time to the Bill. I think that the Government estimates are that it would have cost £2 billion per year—mainly to farmers, I suppose.

The other Bill, which is actually more important, is on the gene editing matter, where the European Court, in the case between the French peasants collective and the French Government, decided that the genetically modified organisms directive covered gene editing. Now, gene editing is a different technique from genetic modification. There is a lot of criticism of that judgment. It was completely unexpected and had very damaging effects, particularly on the life sciences industry in this country. That is subject to correction by a Bill that has just finished its Commons stages and has gone to the Lords.

Those are just two interpretations of two bits of EU law. That shows the complete impossibility of performing this exercise by primary legislation, and therefore how essential it is to have the statutory instrument power in the Bill. It is important to appreciate that the statutory instrument power does not apply to primary legislation, so Acts of Parliament that were passed in compliance with EU obligations are not within scope; only the secondary legislation is covered.

Q I assume, then, that you agree that the Bill allows for sufficient opportunity for parliamentary scrutiny.

Martin Howe: Well, it does. It is comparable to the parliamentary scrutiny that section 2(2) of the European Communities Act 1972 allowed when most of these measures were introduced.

Q Thank you. Returning to Mr Sharpe, does the Bill, as drafted, strike the right balance between providing safeguards and enabling the removal of outdated retained EU law from our statute books?

Tom Sharpe: I see the Bill as a framework Bill. Of course, it gives Ministers and Departments very considerable powers—powers of proposal, as you know, to amend, revoke or replace existing legislation.

As Martin has just said, an Act of Parliament, which was probably passed—if I may say so respectfully—before many of you were born, provided an enabling power to enact legislation of some quite sweeping character. Despite all the things that law students learned about how Parliament needed to approve legislation, not one single regulation—this is one of the bits we are discussing—has ever been debated, approved or amended by the House of Commons or Parliament. That is a striking statement, but it is absolutely true. We were forbidden, in law, to debate or amend such legislation. I suspect you all know that, but it does not hurt to be reminded.

As for the directives, of course they, too, were approved by Parliament—or, more accurately, not disapproved—but the power of Parliament was utterly residual because the objective of a directive had to be observed. If it was not, the UK would be subject to proceedings from Brussels—and it was, on occasion, but not as often as many other countries.

We are now debating a system of revocation, amendment and replacement, and giving it far more formality than we gave the creation of the laws themselves. That ought to give us pause for thought. That is the background. As far as parliamentary scrutiny is concerned, yes, most of it will be subject to negative resolution, and it is easy to make what I will disrespectfully call a good debating point about the times when statutory instruments have fallen under the negative procedure. But here, we are dealing with a sea change. We are dealing with masses of legislation, as we know, all of which will be subject to significant scrutiny within the House of Commons by parliamentarians and by the press. It seems to me that those issues have to be given notice. There is also the sifting procedure that we adverted to earlier, which I think could be quite a powerful brake on Ministers’ discretion.

Q The evidence submitted by the Bar Council, which I assume you are familiar with, says very firmly that it has profound concerns about the Bill, and that its preference would be for the Bill to be withdrawn in its present form. Why has the Bar Council got it so wrong?

Tom Sharpe: Where do we start?

Martin Howe: I am concerned by the attitude taken by the Bar Council. As a subscribing member, I fear that it is trespassing rather too far into political issues. Unfortunately, I think there is a sort of small “c” conservative lawyer’s mentality, which has led over time to various things, such as counsel saying in the “Lady Chatterley’s Lover” trial, “Members of the jury, would you allow your wives or your servants to read this book?” Since so many members of the Bar are imbued with the system of working with European Union law—it is all part of their practice and the way they operate—there is a natural mental attitude towards keeping it. I do not think that reflects the necessities of the democratic process following the referendum result.

Q Mr Sharpe, do you have anything to add?

Tom Sharpe: It is our trade union, and it does not speak on my behalf on this political matter, very obviously, and it should not have done that. I think there is a broad issue here. If you look at the criticism of the Bill by the Bar Council and by members working with it—the Hansard Society, which got a mention, and various leading members of the Bar whom I know very well; they are my friends and I respect them—the dominant theme is one of extreme pessimism. That is to say that if we have a mendacious Government, a supine Parliament and a lazy and ignorant press, all sorts of things can happen. Now, I do not think that is true. I have far more respect for this House, and even for Ministers and the press. If Ministers are getting out of hand, they will be put in check. If they are not, the judiciary has a role in reviewing the exercise of these powers. We can ignore the judiciary in this context, but it has an important residual role.

We can call it benign or naive, but I do not think that is right. I think that by and large the House of Commons does a pretty good job, and I see no reason at all why it will not continue to do so in relation to this important Bill.

Q You suggested that if a Minister gets out of hand, Parliament can act. You will recall, though, that quite recently a Secretary of State was found by an inquiry to have been guilty of severe bullying of civil servants, and nothing happened to her because a Prime Minister did not want her to lose her job.

To go back to the comments you made earlier about the difference between primary and secondary legislation, when was the last time Parliament amended a piece of secondary legislation?

Martin Howe: It does not. The procedure is a yes/no procedure either by affirmative resolution, in which case there has to be a positive vote or it fails; or by negative resolution, in which case, unless it is prayed against and there is a vote against it, it stands.

Q Does that not mean there is significantly less opportunity for parliamentary scrutiny if all that Parliament is allowed is: we do this or we do not do it? Does that not mean that, almost by definition, there is less opportunity for parliamentary scrutiny with secondary legislation than there would be with a Bill?

Martin Howe: Indeed. By its nature, there is much less opportunity than with a Bill, which you go through line by line, but all the legislation that is within the scope of the Bill to be potentially corrected, changed or left out by secondary legislation was introduced by secondary legislation. The primary legislation is not covered by the powers.

Tom Sharpe: Remember what we are discussing. I think it is very unlikely that there will be a wholesale slash and burn—to use the academic term that we heard earlier—of all EU retained legislation or assimilated legislation; a good deal of it will remain. I do not recognise the gloomy picture of businesspeople clawing their way to the bottom. I understand the theory, but in the course of a year I advise dozens of CEOs and chairmen, and not one has said: “We have a terrific opportunity to make extra money out of the consumer.”

What is missing here is public scrutiny and reputation, and we have to be balanced and less shrill about this: not everything will change; not everything will change at once; and some things will be changed—in particular under clause 15(3) where, respectfully, the real issues arise for parliamentary scrutiny. There, as you heard, some will be determined by affirmative resolution and others will go through the sifting procedure, which requires the Minister to come to Parliament to justify the choice of a negative procedure. You will have an opportunity to deal with that.

Q Martin, I was interested to hear you talk about how you were happy with the scrutiny mechanism in the Bill, because I note that in your evidence to the European Scrutiny Committee you argued for the need to have a delegated power to revise retained law and then suggested a commission to propose what should be done. That would be much more scrutiny than you are talking about now. What made you change your mind about the requirement for scrutiny that you previously advocated? I thought that the argument you made before was compelling.

Martin Howe: The argument I was putting forward was for a practical way to speed up the process. Frankly, it was a suggestion that I floated, a possible—

Q Are you disappointed that there is no scrutiny mechanism in the legislation, as you floated?

Martin Howe: What I was then proposing was not so much a scrutiny mechanism as a sort of motor to get the process going—

Q You made quite a strong argument, did you not, that there was a case for being able to look? You were advocating the superfluity of some of this legislation, but now the Bill contains none of that. Are you disappointed?

Martin Howe: No, because the main thing—the important thing—is to get the job done. What I am disappointed about is that I published a paper in July 2016, a month after the referendum, arguing that we should start a systematic process of review of European Union laws. I naively suggested that that would be with a view to revising what we needed to revise by the time of exit two and a half years later—

Q You felt it was naive to know what we were revising.

Martin Howe: No. I was naive to think that the process of revision would be started. I share Tom’s view that it would have been better had this process been started earlier, but it does need to be done.

Q You also said that there were limited respects—and gave two examples from your own practice—where you thought it was a good idea to retain EU law over pre-Brexit legislation. Do you accept that there might be other areas of law where it might be a good idea to retain some of those laws? In which case, would that not be helpful to us as parliamentarians? Your colleague dismissed the idea that the Bill will lead to slash and burn, but it has slash-and-burn powers within it. Surely it would be good practice—as you have argued—to know what it is that we are slashing and burning, and to have some process of exploring that as parliamentarians, if we are to be taking back control for this House?

Martin Howe: Well, it is a matter for Parliament as to what you press Ministers on with regards to their plans and intentions.

Q But we do not have powers to press them; we only have a negative resolution procedure. You made such a compelling case and argued in your previous evidence for several areas of law where you think we should retain. What has changed now?

Martin Howe: To be clear, I was not suggesting that they be retained in the long term. Those areas need revising and converting into coherent UK-based law. Elements of EU law should not be retained into the indefinite future.

Q You make a case for being able to change your mind yourself and having a process for changing your view on this legislation. Would it not be beneficial for this place to have powers to change the minds of Ministers? Like you, Ministers may make decisions that they come to regret.

Martin Howe: Sorry, I have not changed my mind on the relationship between retained EU treaty law and other EU law. The point is that that should be converted into domestic law, but our domestic legal system can cope with the question of precedence of one law over the other. I have never been in favour of indefinite retention.

Stella, you have asked a lot of questions. We are moving on, and we will come back to you if there is time.

Q Would it be a good idea to have, within each Department, where there might be cross-cutting issues between them, particular taskforces established by Ministers, including practitioners in the area, to look at how things can be made more competitive within those areas by this process of assessing what retained EU law is out there and how it might be replaced? Should regulators be involved in that process, given that it might be necessary to take a practical approach to getting these things done, and to get expertise from outside the Government and the civil service to accelerate the process and get it done in the time available?

Tom Sharpe: The general point is very well made, if I may say so. It seems to me that that type of exercise—that kind of inclusive thinking about making the country more efficient and getting rid of silly regulations—would be valid even if we were not dealing with the Bill.

One of the problems with the Bill is that it is a framework Bill, and I can see a quite compelling case for eliminating some of the opacity that surrounds the Government’s intentions. It is early days, and the Bill is just a Bill. I do not think it would be enhanced by Ministers detailing in fine print exactly what is to be done, but there is a case for some ministerial guidance as to where the priorities should lie.

As for doing away with dud regulation, I find it amusing to read the submissions to Government. This is an important point about consultation. My understanding is that there have been thousands of responses to the dashboard—I think I am right in that. That is an element of public consultation. It is amusing to me to see that so many bodies that campaigned remorselessly against some of the EU legislation that we had no control over now resolutely do their best to try to preserve it. With a little more honesty, they would have been more compelling, I think.

Q This is a follow-up question to Martin Howe. Would it be possible for those taskforce processes also to involve parliamentary scrutiny through the various Committees in the Lords and the Commons, which might help to look at this prioritisation and emphasis?

Martin Howe: That is helpful and it sounds like a good idea. Whether it ought to be spelled out in the Bill is a different question, because there needs to be a certain amount of flexibility over these processes. Certainly, involving outsiders in looking at these issues, as opposed to doing it as a purely internal measure within Departments, strikes me as beneficial.

Gentlemen, thank you for your evidence. Our time is now up. Thank you once again for being with us.

Examination of Witnesses

Mark Fenhalls KC, George Peretz KC and Eleonor Duhs gave evidence.

We will move on to our final group of witnesses for this morning. Of course, we have a long afternoon ahead of us. We will now hear oral evidence from Mark Fenhalls KC, chair of the Bar Council. I wonder whether he was listening to the previous panels.

Mark Fenhalls: I was listening, Chair.


Mark Fenhalls: I am very much looking forward to trying to do my best.

I am sure you will do a great job. George Peretz KC of the Bar Council’s working group on retained EU law is joining us via Zoom. We also have Eleonor Duhs, partner and head of data privacy at Bates Wells, here in person—I hope that was the correct pronunciation of your name.

Eleonor Duhs: It was, yes.

For this session we have until 11.25 am. George Peretz is not here yet, but if he does appear we will ask him questions as well. We turn to Justin Madders to start.

Q This is probably a question primarily for you, Mark. At the moment we are in a position where we know several thousand laws will be automatically sunsetted at the end of 2023. We do not know which ones they will be or why the Government will retain, remove or amend particular laws. As we have heard today, it appears that the Government do not even know themselves which laws will be covered by the Bill. Do you see any risks with this approach?

Mark Fenhalls: There is nothing but risk. I will tell you one brief anecdote to illustrate this point. Last week I was at an international conference, working with the Ministry of Justice on selling legal services overseas, and talking to lawyers and Bar leaders from around the world. They asked me what this country’s intentions were around its laws following the departure from the European Union. I explained that I have no difficulty with change; change is a necessary thing. We all hope there is a sunlit upland where we can find better or fewer rules and regulations in the future. But when I explained about the inherent uncertainty and risks around this, they all looked and me in horror and said, “Why would we do any business with the UK”—until 2024 on the current timescales—“if we don’t know what the rules and regulations are going to be around all these issues?” There is a tremendous problem with this Bill, which was described by previous witnesses as a “framework Bill”, because we do not know what Ministers are going to do and Parliament does not have the opportunity to take control of the process or scrutinise it.

In our judgment, the Government should take the approach referred to in relation to the Financial Services and Markets Bill, where it looks as though considered, measured changes are being put forward, and there is an undertaking not to change the rules and regulations without consultation with the sector. We cannot understand why financial services are the subject of such a responsible, measured approach, which does not seem to apply to consumer protection, cosmetic and household cleaning product safety, water and air standards, and so forth. If the Government could take the same measured response, sector by sector, that would be a more sensible and less risky way to proceed.

Q Following on from that, if the Government adopted the approach you are suggesting, how feasible would it be for there to be a considered and properly democratic approach to this before the end of 2023?

Mark Fenhalls: I am no expert in how much civil service time exists, but I would be astonished if it were remotely possible to cover but a fraction of this. I do not know why it is set up as anything other than a political problem. The reality is that this is our law. It was passed over four decades of membership while we were a part of the European Union. The previous witnesses may not like the process of scrutiny that existed, but we were part of that. We had MEPs and a Parliament that dealt with that. There was a democratic process, like it or not.

We now have a different democratic process, but these laws are part of our laws, which our businesses operate by and which provide protection to our citizens. If I may say so, I think Parliament has a responsibility not to import uncertainty and change without showing there is something better—and certainly not by just having the power to let the laws lapse.

Eleonor Duhs: Perhaps I could add something on the timeframes. In order to get the statute book ready for Brexit, which was in some ways a much more simple task than this, it took over two years and over 600 pieces of legislation. The reason I say it was a simpler task is that we were essentially making the statute book work without the co-operation framework of the EU. We were taking out references to the European Commission and replacing them with “Secretary of State”—that sort of thing. That was a much simpler task than what we have here, and that took over two and a half years.

A lot of areas also have several pieces of amending legislation. In data protection, which is the field that I work in, there are at least three pieces of legislation that amended and then re-amended the statute book—just to get it ready, from a technical perspective, for Brexit. There may be huge policy changes under this legislation, and the end of 2023 is simply not a realistic timeframe for the process.

I see that George Peretz has joined us. I do not know whether he wanted to respond to any of the questions first of all.

Yes, Mr Peretz, welcome. Did you hear the questions that were asked?

George Peretz: I had a slight technical hitch in joining. I was going to make a point about the effect of the sunset clause. Stephen Laws made the point that law reform is necessary and it happens, and one should not get stuck in defending the status quo. But there is every difference between a Government saying, “Here is the existing law, we propose to replace it with legislation, and here is the text of the proposed reform,” which is the normal process of law reform, and what is happening here. The Government are effectively saying to business and the wider world, “All of this law is open to change; we cannot tell you whether we will keep any of it. Some of it may just disappear, it may be replaced, and we cannot yet tell you what the replacement is. All of this is going to happen in 18 months.” That inevitably produces an enormous amount of uncertainty, and that is uncertainty above and beyond the inevitable uncertainty of law reform.

Q I have one further question for Mark. There was correspondence between the previous Secretary of State—the right hon. Member for North East Somerset (Mr Rees-Mogg)—and the Justice Committee over engagement with the judiciary in respect of the Bill, particularly the effect of clauses 7 to 9. Can you tell us what kind of dialogue there has been? Do you foresee any issues with the application of those clauses?

Mark Fenhalls: I am not privy to any of that correspondence; I cannot help with that. I do not know whether either Ms Duhs or Mr Peretz is familiar with it.

Eleonor Duhs indicated dissent.

Q Good morning, Mr Fenhalls. You talked about scrutiny quite a bit. Most retained direct EU legislation has not been through a UK parliamentary scrutiny process, but you keep going on about scrutiny. How much oversight did the UK Parliament have over laws that came into effect under section 2(1) of the European Communities Act 1972?

Mark Fenhalls: I am sorry if you think I am going on about it. All I am doing is saying that there was a democratic process, which we were party to for several decades: we were members of the European Union, and we followed the lawful processes. We now have this body of law, which Parliament owns, and we are all looking for an opportunity for Parliament to say, “Let’s now take advantage of our departure from the European Union, put aside the conflict of the past and work out a better way.” We are all delighted by that. None of us is hostile to change. We just want change in a measured and balanced way, so that we know what the alternatives are.

The effect of the Bill—I was thinking about it as I listened to the previous speakers—feels a bit like the uncertainty and the uncosted promises made by the former Chancellor, which so disrupted the bond market. [Interruption.] You asked the question, Minister. The difference between that and the Bill is that we are being told to trust Ministers to see what will happen, and we have no idea what they will do. We have no idea what is being left or what will be changed. There is conflict between current Bills before Parliament, such as the Levelling-up and Regeneration Bill, and the Bill we are discussing, and we do not know how the Government propose to address it.

Mr Fenhalls, you said you are not hostile to change, but you have been nothing but negative about the Bill. You also mentioned a democratic process. There was another democratic process in 2016—just for the record.

Q Good morning. In your submission from the Bar Council, Mr Fenhalls, you suggested that the Bill should be withdrawn. You have also accepted that we need to do something about the huge volume of retained EU law that we still have. What would be a better way to deal with all that law, rather than the way it is being dealt with in the Bill?

Mark Fenhalls: I am not a parliamentarian or a politician. The short answer to that is that I do not know, but I do know that every single stakeholder and lawyer I have spoken to—who are simply thinking about their clients’ business interests and the rights of the people involved—wants to know what the alternative proposals are before they take a view. The difficulty with this Bill is not change, because change in itself is fine; it is the fact that we do not know what the proposals will be. We have suggested what we suggested in our submission and we have put in fall-back positions saying that if the Bill is to proceed, we should put in place scrutiny measures or duties on Ministers to come to the House and say, “This is what we propose to do,” and not run the risk, for example, of the sunset causing us to crash into the wall at the end of next year.

For the record, there are two lawyers sitting behind you who quite clearly do not share the view that you just expressed about the various lawyers you have spoken to. Some of us think that lawyers argue with lawyers all of the time; that is what they are there for.

Before we continue, I think Mr Peretz wanted to come in on that point.

George Peretz: I wanted to come in in response to the Minister’s question about section 2(2) of the European Communities Act 1972. There are two points here. One is the point, developed by Martin Howe, that it considerably underestimates the degree of democratic scrutiny that EU law actually had, particularly in the European Parliament and on the reform of EU law. It also understates the mechanisms that Parliament had to scrutinise how Ministers acted in the Council of Ministers.

I suppose one is getting slightly political here, but perhaps the more important point is that one of the arguments for Brexit, as I understood it, was that it would strengthen democratic accountability for legislation. It is slightly disappointing that the argument put forward for the Bill is sometimes, “Well, the EU was undemocratic in this, so you cannot complain that this is equally undemocratic.” We can do rather better than that.

Q This question is for all three witnesses. Would the Bill be less of a concern if there was not a sunset clause, or if the sunset clause was later than the end of 2023? Are your concerns partly about how little time there is for the process to be completed?

Eleonor Duhs: I would still have some concerns, because the end of 2026 is not far away and that is what people are saying would perhaps be the revised timeframe.

There are some really significant things in this Bill in terms of changing the way in which the law works. I will give an example from data protection law. Clause 4 would change the relationship between retained EU law and domestic law. To show what that might mean in practice, I will give the example of a conflict between the UK general data protection regulations and the Data Protection Act 2018. This is not addressed by the provisions that Mr Madders asked about; that is simply about how data protection legislation as a whole interacts with the domestic statute book and is not overridden by it. In a conflict between the UK GDPR and the Data Protection Act 2018, if we remove the principle of supremacy, for example—which is what the Bill seeks to do—we could end up reducing data protection standards in the UK. That could cost UK businesses up to £1.6 billion and significantly increase red tape, so this is really important.

Last year there was a case called the Open Rights Group case, which was to do with exemptions in the 2018 Act that were overly broad. The Court of Appeal said that the UK GDPR had precedence—so this was decided under the retained principle of the supremacy of EU law—and that the provision in the 2018 Act was unlawful. If we had not had that retention of the principle of supremacy of EU law, and had had this new section 5(A2), the 2018 Act would have had precedence and the broader exemption would have applied, which would have reduced rights in the UK.

Why is it helpful for rights in the UK to remain as they were before? Because our current standard of protection of personal data has been deemed by the EU to be essentially equivalent to their standards of protection. That allows a data adequacy decision and, at the moment, the free flow of data between the EU and the UK. If we did not have that—if we lost data adequacy, which could happen under proposed new section 5(A2) in clause 4—UK businesses would have to spend time putting in place contracts and would have to do transfer risk assessments.

The New Economics Foundation and University College London wrote a paper entitled “The cost of data inadequacy”, which they published in November 2020. It stated that losing the free flow of data could cost UK businesses up to £1.6 billion in extra red tape, and it would have other economic implications, including a reduction in UK-EU trade, especially digital trade; reduced domestic and international investment in the UK; and the relocation of business functions, infrastructure and personnel outside the UK. So the Bill could have really significant implications for trade.

Q Mr Peretz, do you want to comment on my previous question? How much of the concern about the Bill is simply down to the very short time provided by the sunset clause? If we moved that clause further back, would it ease your concerns?

George Peretz: The short time is clearly a concern given the enormous work that will need to be done both in Whitehall and by Parliament if it intends to scrutinise any of this properly within a very short timeframe. A lot of this law is very important, a lot is very complicated, and quite a lot of it is both, so one should not underestimate the resource implications. Obviously, if you have a longer timeframe—until 2026, say—that resource could be spread over a longer period, and perhaps more efficiently.

There are other, wider concerns about the Bill and how it amends the application of some EU rules to retained EU law as it continues to operate, and about Ministers’ power to revoke and replace. Those are separate from the sunset clause concerns, but the sunset clause does interrelate with the question of Minister’s powers. One of the problems with the effectiveness of parliamentary scrutiny is that although one hears that Parliament has powers—in some cases via the negative or affirmative resolution procedures—the background against which it is being asked to approve legislation means that if it votes against that legislation, the sunset clause will apply and regulations disappear completely, rather weakening Parliament’s ability to do anything.

To take an example, if Ministers decided to keep the working time rules but rewrite them to make them less favourable to employees, and came up with the new regulations in November 2023, those rewritten regulations would probably be introduced under the affirmative procedure. However, when the House of Commons voted on them, Ministers would say, “You may not like these revised regulations very much, but if you do not vote for them, the alternative is that we will not have any regulations at all.” That weakens Parliament’s ability to control the exercise of ministerial power.

Q I will put this question to you, George, as it is something of a follow-up. You just gave a qualitative response about the sunset-clausing, but this is more of a quantitative question. I was not aware until Catherine Barnard and Professor Young pointed it out earlier that 1,400 additional pieces of legislation have been found. I have now found the article in the Financial Times, which states that

“A plan…to review or repeal all EU laws on the UK statute book by the end of 2023 has suffered another setback after the discovery of 1,400 additional pieces of legislation.”

We were aware of 2,100 pieces of legislation, but that is another 1,400, so we are now seemingly aware of 3,500, with a sunset clause at the end of 2023. Is that the end of it? Will it be 3,500 pieces of legislation or could there be more? How are we going to find and define all these pieces of legislation so that we know what law we are acting under? You have just described qualitatively how pieces of legislation will fall under the negative resolution procedure because they are going to be sunset-claused out. Quantitively, where do you think we are going to end up by December 2023?

George Peretz: One does not know. On your point about the legislation being discovered, like you I have read the story in the Financial Times. I do not know the background to it, but we drew attention in the Bar Council paper to the risk of things simply being forgotten. As that story shows, that is not a hypothetical risk. That is one reason why we suggested as a possible amendment to the Bill that the Government add a schedule that simply lists all the regulations that are going to be affected and if it is not on the list, it does not fall. It is very difficult to see the argument against that. Presumably, the Government want to know what is being repealed. One does not want to repeal things one does not know about. What would be the good of not evaluating the risk? It is very difficult to see why there would be an objection to listing everything out. Then everyone would know precisely what goes and what stays. That was one suggestion we put forward.

It is very undesirable to have the sunset clause—for all the work that is going to have to be done to be done effectively with a gun pointed at everybody’s head saying, “Unless you’ve done all this analysis within a very restricted time period, the rules will fall.” There is just endless room for mistakes.

One of the points we discovered when we were rewriting a lot of EU rules for the purposes of the withdrawal Act—which Eleanor knows very well about and can speak about in more detail—was that, as the legislation was being rewritten, it was discovered that there were problems with it. If we look down any of the lists of amended rules, as one might experience in practice, one normally finds that over the 2018 and 2019 period there were frequent amendments. As one version was done, it was found that there was a problem with it or something needed to be added, and another amendment was made. There just is not time within the process of this Bill for that amendment process.

There is also a technical problem. It is not clear that there is the power once a regulation has been rewritten for Ministers then to say, “Oh dear—we realise that this regulation contains the following defects; we would quite like to amend it now.” I am not actually sure that the Bill contains a power for Ministers to do that. That is a bit of a problem.

Mark Fenhalls: I agree with what George just said. You will know far better than we do the stresses and strains on you as individual constituency MPs attempting to deal with those issues, and what in truth MPs can do as individuals scrutinising material like this. Ministers will know how pressured their civil servants are. I know from my dealings with civil servants how afraid they are of the possible forthcoming cuts. It is very difficult as an outsider to contemplate how the civil service can begin to cope with an assessment of what all this law involves.

The concluding point would be that if you have the list that George spoke to, that is a foundation for a proper ministerial division of responsibility as to who is doing what—which regulations affect which ministries and therefore what should our plan be? By the time we get through the end of next year, we might have dealt with financial services, perhaps, and with regeneration and levelling up, perhaps, because that covers environment and habitat and planning, but with that list and that firm foundation, you can make sensible evidence-based decisions about what to do. The frightening thing about the FT story—again, I know nothing about where it has come from—is the thought as to the unintended consequences, which nobody can possibly want, of not knowing what is out there. That is why, in a sense, a framework Bill is so flawed in its approach, because we do not know what we are dealing with.

I have three questions to get in before 11.25 am, so let us have quick questions and quick answers, please.

Q Is it not the case that the people of the UK have given Ministers the responsibility to sort this legislation out now, in this Parliament? Are you not simply trying to frustrate that because you never voted for Brexit in the first place and you hate it with every fibre of your beings?

Mark Fenhalls: That is a political accusation that could not be more unfair. That is not the case at all. The short answer to your question is no. Parliament, rather than Ministers, should be making the decisions. That is the democratic point, if I were to engage with you on a democratic level. It does not matter what I did or did not want; I have said to you, and I mean it, that I have no difficulty with change—absolutely none whatsoever.

Q You just do not want it to happen now.

Mark Fenhalls: I want it to happen on the basis of evidence and—

Marcus, you have asked a question and now you are interrupting Mr Fenhalls. Let him finish.

Mark Fenhalls: I want it to happen on the basis of evidence and with better proposals coming. What I do not want is to be lost in a world of uncertainty when we do not know what is coming, because, out of uncertainty, clients and people will stop doing business and they will not know where we stand.

Q I want to come back to Ms Duhs on her point about the supremacy of retained EU law. As a consequence of the referendum in 2016 and all the legislation that has been introduced since then, this country has recovered its sovereignty. Do you not think it repugnant to that sovereignty to have a state of affairs whereby the laws enunciated by a foreign jurisdiction and applied by a foreign court continue to have supremacy in this country?

Eleonor Duhs: Retained EU law is domestic law. We domesticated the statute book, and we did that to provide certainty for businesses, for individuals, for the Government and for users of the law, so that they would know what the law was. That was a policy of maximum certainty. Of course, it is now for Parliament—this was in the White Paper on the European Union (Withdrawal) Act 2018—to look at the law and to decide how it should change. We should absolutely make the most of the opportunities that we have, but it must be done in a thoughtful way. It must not be done in a rush and in a way that gives rise to legal uncertainty, because this is our domestic statute book and it needs to work for all of us. It needs high standards, it needs to enable trade and it needs to be the best post-Brexit outcome that we could have.

George Peretz: I can add something to that. It is slightly unfortunate that the EU withdrawal Act chose to continue what was called the principle of supremacy of EU law, because it is something of a misnomer. As Professor Barnard explained, it is actually a conflict-of-laws rule that gives priority to retained EU law over pre-Brexit statutes. You have to remember that pre-Brexit statutes were passed by Parliament, or made by Ministers, against an understood background that EU law was supreme, so you could say that when Parliament passed a pre-Brexit statute, it expected that statute to be inferior to EU law. It was the sea in which we were all swimming at that point, so I do not accept that there is anything constitutionally objectionable about having the conflict-of-laws rule.

Before you change the conflict-of-laws rule, you also have to think very carefully about its effect. One of the disappointments I have is that nobody in the Government or outside has produced any analysis at all of the concrete effect of removing the conflict-of-laws rule. I have likened it to pushing a very large button that says, “We do not know what happens if you push this button.” That is not a wise legislative technique.

Q I will just say that we are all free to take advice from competing lawyers, but I do not think we are free in this place to treat our witnesses with contempt, regardless of whether we agree or disagree with what they have written.

All the lawyers have talked this morning about the approach of working with businesses and whether a regulatory burden could be created, which clause 15(5) is designed to avoid. We do not have any business witnesses coming forward, but we have heard that businesses are talking about risk being a drag on growth. Can you give us some examples of where you have worked with businesses with legal uncertainty? You have all talked about uncertainty, but can you explain what it could do to your clients?

I am afraid we have 40 seconds left.

Mark Fenhalls: In 10 seconds, an organisation such as TheCityUK, which represents a range of financial services, accountancy, law and consultancy firms, will tell you that all its international clients are saying, “We don’t know what the rules are going to be; therefore, we are troubled.” There are business organisations out there from which you may choose to try to take evidence, and they may be useful to the Committee.

Eleonor Duhs: That is exactly what I am hearing too. They want to invest, but you cannot invest if you do not know what the law is going to be.

George Peretz: This is not my area of practice, but colleagues of mine at the Bar have made that point. If you are involved in a large development project—

Forgive me, Mr Peretz, but I have to cut you off because we have reached 11.25 am. It is an existing law that we have to honour. Thank you to our three excellent witnesses. We appreciate your time and thank you for being here in person and for contributing online. Colleagues, we will meet again at two o’clock this afternoon for more fun.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.

Economic Crime and Corporate Transparency Bill (Ninth sitting)

The Committee consisted of the following Members:

Chairs: Mr Laurence Robertson, † Hannah Bardell, Julie Elliott, Sir Christopher Chope

† Anderson, Lee (Ashfield) (Con)

Ansell, Caroline (Eastbourne) (Con)

† Byrne, Liam (Birmingham, Hodge Hill) (Lab)

† Crosbie, Virginia (Ynys Môn) (Con)

† Daly, James (Bury North) (Con)

† Hodge, Dame Margaret (Barking) (Lab)

† Hollinrake, Kevin (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Hughes, Eddie (Walsall North) (Con)

† Hunt, Jane (Loughborough) (Con)

† Kinnock, Stephen (Aberavon) (Lab)

† Malhotra, Seema (Feltham and Heston) (Lab/Co-op)

† Mann, Scott (Lord Commissioner of His Majesty's Treasury)

† Morden, Jessica (Newport East) (Lab)

† Newlands, Gavin (Paisley and Renfrewshire North) (SNP)

† Stevenson, Jane (Wolverhampton North East) (Con)

† Thewliss, Alison (Glasgow Central) (SNP)

† Tugendhat, Tom (Minister for Security)

Kevin Maddison, Anne-Marie Griffiths, Committee Clerks

† attended the Committee

Public Bill Committee

Tuesday 8 November 2022


[Hannah Bardell in the Chair]

Economic Crime and Corporate Transparency Bill

Before we begin, I have a few preliminary reminders for the Committee. Please switch electronic devices to silent. No food or drink is permitted except the water provided.

Clause 65

Exemption from identity verification: national security grounds

I beg to move amendment 9, in clause 65, page 55, line 3, at end insert

“and section 167M(2) does not impose any obligation on a company in relation to the person”.

This amendment ensures that where a company director is exempt on national security grounds etc from being a person whose ID is verified, the company can also be relieved from the obligation to ensure that the director is ID verified.

With this it will be convenient to discuss amendment 101, in clause 65, page 55, line 22, at end insert—

“(4) The Secretary of State must report any use of the identity verification exemption on national security grounds as provided for by this section to the Intelligence and Security Committee of Parliament. Each report—

(a) made under subsection (4) must include the name of the person and company exempt from identity verification.

(b) must include the Secretary of State’s reason for granting exemption on national security grounds.”

This amendment would place a requirement on the Secretary of State to report any use of the identity verification exemption on national security grounds to the Intelligence and Security Committee.

It is a pleasure to serve with you in the Chair, Ms Bardell.

Amendment 9 is a technical amendment. Clause 65 enables the Secretary of State to exempt a person from identity verification requirements by written notice, if necessary in the interests of national security or to prevent or detect serious crime. The consequence of someone being subject to such a written notice is that they will not be obliged to observe certain rules. For example, an unverified individual benefiting from an exemption will not need to refrain from acting as a director and will not be liable for an offence for acting as such.

The amendment clarifies that companies whose directors are exempt from the prohibition to act when unverified are relieved of their duty to ensure that such a director has their identity verified. Therefore, they will not be criminally liable for failing to comply with that duty in relation to the exempted person. Relieving companies of the duty meets the original policy intention and is a logical consequence of the exemption granted to individuals on these grounds. I hope that my explanation has provided further clarity on why that is needed.

On amendment 101, any proposed use of the national security exemption in clause 65 will be carefully considered by the Secretary of State. A duty to report to Parliament’s Intelligence and Security Committee on the use of that exemption is unnecessary. The ISC’s oversight functions are clearly set out in the Justice and Security Act 2013 and the accompanying memorandum of understanding. It is inappropriate to include a specific oversight role for the ISC in relation to the deployment of this exemption. The amendment is therefore not necessary, and I ask hon. Members not to press it.

It is a pleasure to serve under your chairship, Ms Bardell. I thank the Minister for his opening remarks. I recognise that clause 65 gives the Secretary of State the power to provide written notice to exempt someone from identity requirements if necessary in the interests of national security or for preventing or detecting crime. The Opposition recognises the importance of protecting national security, but the Minister will know from previous debates that we seek greater clarity about where exemptions may be granted, and the transparency and accountability around the use of those powers. The Government have tabled amendment 9, which is consequential to clause 65. If the clause is agreed to, the amendment makes sense.

Amendment 101, which my hon. Friend the Member for Aberavon and I tabled, comes back to scrutiny of the use of the exemption powers. I will probably say a few times today that the title of the Bill includes is the Economic Crime and Corporate Transparency Bill. Where there are questions about a potential lack of or reduced transparency and possible serious impacts, there should be accountability, even from the Secretary of State. We live in a democracy where the Government should be and are accountable for actions of the Secretary of State.

The amendment simply states that there should be a process by which any use of the identity verification exemption on national security grounds provided by the clause should be subject to some scrutiny. The Minister may have better ideas on how to deal with that question if the Intelligence and Security Committee is not the right place. We have used the ISC because it is a parliamentary Committee that deals with national security matters, is on Privy Council terms, and will have the confidence of Parliament and the Government in reviewing these matters and raising any questions. All the amendment does is provide scrutiny for the exemption process by referring a report to the Intelligence and Security Committee, which ensures that the information remains privileged and not publicly accessible. If the Minister is, as he intimated, unable to support the amendment, I urge him to give us confidence about how he would provide assurances.

Perhaps I could give the hon. Lady some examples of the kinds of individuals the exemption might apply to. We expect the exemption to be used on very rare occasions, for individuals including, but not limited to, those working for the UK intelligence community or law enforcement agencies. She should bear in mind that the Secretary of State is introducing the provisions. I hope that she will be reassured that the powers will be used sparingly but wisely.

I thank the Minister for his intervention. The issue is not what we assume and hope might happen, but having some checks and balances on the use of powers. It is part of our responsibility on the Committee to think that through.

That is always the case. Perhaps the Minister will reflect that Usmanov was a case in point. He exploited an exemption to hide some of the information around his ownership. It is worth all of us reflecting on that. Obviously the provision has to be there for good people, but it may become yet another opportunity for bad people. The Usmanov case was a classic one. I think Fedotov was another, if my memory serves me right. Apologies if I have this wrong, but Fedotov was another one who managed to get an exemption in some way. If these things are not done properly, and are not then properly monitored, they can go wrong.

May I speak to that case very quickly? The Usmanov case was entirely different. A Secretary of State did not introduce legislation providing for a Russian oligarch to move, in that case, billions of pounds-worth of assets to his sister, I think. What we are talking about here is the Secretary of State using a power to remove somebody whose identity is sensitive from a public register—not allowing an oligarch to subvert the regulations.

I think the Minister is right about Usmanov, but on Fedotov I think it was something different. I cannot quite remember the details, but he managed to use an exemption to hide his identity. We raised it last week, and I think that officials were going to come back with a response. They may not have had time to read the letter yet, but that is more the case that one would think of.

Order. For the benefit of those following our proceedings, I remind Members of the flow of debate: the Minister will respond to the shadow spokesperson, and the right hon. Member for Barking will have an opportunity to intervene on him then.

Thank you, Ms Bardell. I thank my right hon. Friend for her intervention. To wrap up my remarks on this point, the Minister makes a valid point in relation to the types of cases and the circumstances under which people might be given exemptions, identified on national security grounds. My right hon. Friend makes a good point as well about where things might come through the system inadvertently. That is partly why we have checks and balances.

I take the Minister’s point about individuals who may be working for the intelligence and security community, but he could give us some reassurance by saying that every single Secretary of State in whose hands this power lies in future will consider every case carefully so we need have no cause for concern about that, given the transparency and accountability. We set up systems such that there are ways in which the decisions of Secretaries of State and Ministers have controls, checks and balances around them.

In circumstances in which a Secretary of State might say that a name is too secret to divulge, even knowing whether there has been use of the power—the number of times used and the categories for which it has been used—could still be important information. For example, what if suddenly in future the Secretary of State was determining 10 a month—I am not saying that they would? The Minister and I have no idea who the Secretary of State might be in five or 10 years’ time, so we have no idea whether there might be an abuse of the power. However, sometimes even having the number can be a red flag, because ordinarily we might expect one every three months, so why do we have five a month coming through?

There are therefore ways in which we can have such controls without putting someone’s identity or security—or the nation’s security—at risk. Having some controls over those powers is a big and important theme of the report. I ask the Minister to consider that and to say: “Look, we will consider whether we can have, without it being too onerous a job, some mechanism for controls and reporting on use of the powers, such as through Privy Council routes.” I would then be happy not to press my amendment.

I am happy to reflect on that and have further discussion. As the hon. Lady and other Members know, I am keen for Parliament to have scrutiny of any measures that we introduce. We will take it away to consider.

I appreciate the opportunity. I therefore will not press amendment 10.

Amendment 9 agreed to.

Clause 65, as amended, ordered to stand part of the Bill.

Clause 66

Allocation of unique identifiers

I beg to move amendment 102, in clause 66, page 55, line 36, leave out “power” and insert “a duty”.

This amendment would ensure that all directors would be issued with a unique director identifier to be used for all their directorships regardless of whether they or an ACSP form the company.

With this it will be convenient to discuss amendment 103, in clause 66, page 55, line 37, at end insert—

“which the registrar must make publicly available on the registrar’s website”.

This amendment would make all unique director identifiers available on the registrar’s website.

The clause expands the existing powers of the Secretary of State to allocate individuals who have had their identity verified with unique identifiers, which are reference numbers used by the registrar to help to identify people. That is of course a welcome step but, following an earlier debate in Committee, there are three key issues that we touched on which I want to explore further: can we have confirmation, first, that each director will have a unique identifier; secondly, that that will be public, whether published as it is or in proxy form, so something is searchable as a unique identifier published for a director; and, thirdly, that all directorships for one person will be searchable under their unique ID?

Amendments 102 and 103 were tabled by my hon. Friend the Member for Aberavon and me. We first made reference to them in the debate on the SNP’s amendments 68 to 70 to schedule 2. Our amendments would amend clause 66. Amendment 102 would ensure that all directors would be issued with a unique director identifier to be used for all their directorships, regardless of whether they or a member of the Association of Corporate Service Providers forms the company, and regardless of other factors. It explicitly seeks to amend the legislation to make it a duty to give a unique ID, not a power. It is possible that the drafting of my amendment does not fully do that, based on this being underlying legislation as well, but that is certainly our intention. The Minister has previously said that he expects that a unique identifier will be given to all directors for all their directorships, but I do not fully understand whether the Minister is guaranteeing that.

Amendment 103 would make those unique IDs publicly available on the registrar’s website, allowing for greater transparency for the general public. Thom Townsend of Open Ownership said that we need to

“think long and hard about how we are using an identity, once verified, persistently in a lifelong way. Australia, New Zealand and India issue unique identifiers to directors—and, in Australia’s case, to beneficial owners—for life, which makes the investigation process much more straightforward.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 62, Q133.]

These amendments, I believe, do just what Mr Townsend recommends: provide unique identifiers, so that any investigation process can be much more straightforward.

I want to go into this issue a little further in light of the Minister’s previous comments. Section 1082 of the Companies Act 2006 states:

“The Secretary of State may make provision for the use…of reference numbers (‘unique identifiers’)”

It is a power, rather than a duty, and the amendments to section 1082 of the Companies Act contained in clause 66 would not change that. The Minister has said that the SNP amendments that we previously debated

“will be redundant once the expanded power under section 1082 is exercised”.––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 3 November 2022; c. 250.]

However, I cannot see where the Bill states that those amendments will effectively be redundant when it comes into force, so I would be grateful if he could come back on that point.

The explanatory notes say that the reason for unique identifiers not being publicly available is “to protect personal information” and to guard against

“the fraudulent use of unique identifiers.”

None of us wants to see the fraudulent use of unique identifiers, and I do take that point, if the argument is about whether those specific unique identifiers are the only solution to this issue. Sometimes, it depends on how unique identifiers are used: if they are used as part of log-on information or something like that, you could argue that there is potential for fraudulent use, but they could also be identifiers that do not really pose any kind of security or other risk to personal information. What we need, if we cut all the way through this, is a reference that would allow someone to link already public information to a single individual.

If having a public unique identifier were a problem for any reason, depending on how the new Companies House systems are put together and what that unique identifier gives access to, there could be other, very easy ways to achieve the same result. I might suggest different options, such as a function allowing people to check what other offices someone held. That already exists on the Charity Commission website, for example, where we can look up trustees of a charity and see what other trusteeships they hold—the entries are linked, and that link is done for the reader. Companies House already seems to try to do that, but cannot do it properly because it does not have the data to link people who are directors of different companies. For example, that is why, as I think the hon. Member for Glasgow Central noted, she had one appointment that came up three times—or was it the other way around?

Right, her name is registered three times, rather than having one entry noting that she has three directorships. With identity verification and the issuance of unique identifiers, Companies House will know exactly how many directorships an individual has. Companies House may plan to update pages showing people’s total directorships once it issues unique identifiers, but that certainly is not clear.

An alternative is to have some form of proxy ID, which is becoming increasingly common. That is a unique ID linked to the director’s unique ID, which can keep the director’s ID itself private, but has a unique public identifier that is searchable and uniquely linked to the underlying identifier. That happens increasingly for email addresses, for example, when someone may not want their email address to be public, so a pseudo or proxy address is created so that the one that someone might publicly enter and others might publicly see is not the underlying email address, but is uniquely linked to it. There are ways in which technology can be used simply and easily. That is not a high-cost option and it can be built in to have what we need for public purposes—a unique identifier for a director that links all their directorships, if published, and is searchable.

I hope that those constructive suggestions and the way we laid out our reply when the Minister asked in a previous debate what we were not fully happy with in clause 66 mean that things are perhaps clearer. I look forward to the Minister’s response.

I support the excellent amendments tabled by the hon. Member for Feltham and Heston. It is incredibly important that clarification is given through the register, for a number of reasons. A unique identifier that follows a person through their whole life as a company director is important. I mentioned before that I appear in the register three separate times. It would make sense for that to be consolidated in one entry so that people could see the course of that.

The identifier should go through all of the directorships that people have. We know—it has been raised previously in Committee—that some directors have many hundreds, or even thousands, of directorships to their name. It seems sensible to have clarity to ensure that they are the same person. A name such as mine is reasonably unusual—it is quite easy to find—but if a John Smith is on the register, it is much more difficult to establish that they are the right John Smith, the one who is the director of a company. Therefore the identifier becomes all the more important, particularly if that person changes their name. If Jane Smith becomes Jane Jones through marriage, it becomes more difficult to chase her through the register. It would therefore make sense, particularly for women, who are most likely to change their name, but also for other people who may change their names for a variety of reasons—perfectly honest ones, or, in some cases, to divert attention from their previous directorships, perhaps, or any previous misbehaviour—that that person’s ID should follow them around. Anybody doing due diligence on that person as a director could then find them on the register quite easily.

That goes to the point made by my hon. Friend the Member for Paisley and Renfrewshire North about phoenixing. If a company director has been involved in many phoenix companies, it would make sense for people to know that, and to know that they might well carry out that behaviour in future. It would enhance the clarity of the register against such fraud and poor behaviour. The example that the hon. Member for Feltham and Heston gave, of the Charity Commission register, was a good and relevant one, because it is about somebody’s appropriateness and that wider sense of understanding somebody’s behaviour through the register.

It is very important to make the change from “power” to “duty”. A person can have the power to do lots of things, but if they have no obligation to do them, that is quite a different scenario. Lots of the issues that the Companies House register has got itself into are down to those duties not having existed. It is important that those duties exist, and that we set them down in the Bill. I am not hugely confident that what we are talking about will happen if the duties and responsibilities are not set down in law. Future Ministers may decide not to bother with them. I am sure that the Minister would; future Ministers might not.

It is incredibly important that we do everything we can to make the Bill as tight as possible, and that we take all precautions against the abuse of the register. We must get rid of those abuses. We must make a better register, and better legislation, to ensure the integrity of the register in the future.

I think that we are trying to achieve the same thing, just in different ways. We discussed this issue at length in previous sittings. Companies House is already actively working on unique identifiers. It is not credible to think that, having legislated for them, we will not implement them. A basic principle of the Bill is to be able properly to link individuals on the Companies House register, so that company directors have a better experience and so that it is easier for the public to identify the connection between directors, including persons of significant control, and companies.

I accept that great progress has been made in the Bill, but addresses and personal details are also important. We know the way in which addresses are exploited: people put 3,000 companies into one address. That is relevant information that Companies House needs to have.

Addresses are not covered by the amendment, although we discussed the verification of addresses at length the other day. We think we have struck a fair balance in terms of a company address. The shadow Minister seems to be saying that she wants the unique identifier to be searchable; we think that the person’s name should be public and searchable. I did not quite understand her point about people hiding their email addresses or names, and searching by unique identifier, rather than the other way around. We think that the searchable entity should be the person’s name, and the Bill would then make it easier to see the connections between a director’s name and the different companies with which that person is connected.

The example was given of the number of John Smiths there might be. There might even be a number of Seema Malhotras, but I do not know that there are as many.

I think I found three. For the most part, the Minister’s arguments are very strong, but he is on very weak ground here. Is he seriously saying that if someone genuinely wants to see Mr John Smith’s directorships, they will have to spend three hours going through all the John Smiths? Would that be enough time to de-duplicate and link the right ones together? That is crazy. There is a much simpler solution. It would do the job, and bring us in line with other countries.

I am not aware of the countries to which the hon. Lady refers. How would someone know the unique identifier so as to be able to search by that record? What someone will recognise is the name of the person, whether it is Usmanov or another name. That is likely to be the search term that people use, so we think that, for the public view, the most important link is the name. That would also have some implications in terms of potential fraud.

The unique identifier is there to do exactly what the hon. Lady and the hon. Member for Glasgow Central want it to do: it creates a connection behind the scenes, in Companies House, so that a simple search can reveal the connection between a person and all the different companies. That is how it works: we search by the names. We think that is the best way around. She wants to search by the unique identifier.

May I kindly suggest that the Minister ask his officials more about how the unique IDs that are used in Australia, New Zealand and India are working, and whether there is something we might learn from them? If he has not been briefed on that already, it might be a useful step for him to take.

On the Minister’s second point, he is absolutely right that we usually start with a name. We might start with “Mr Kevin Hollinrake, Thirsk and Malton”, but we would then find his unique identifier and be able to use it to link him with the hundreds of other entries for Kevin Hollinrakes—perhaps some of them even live in Feltham and Heston—and see whether they are the same person.

If the Minister is unclear about what I referred to as a proxy identifier, I am happy to take that offline. It is a simple measure used for security reasons, and it is basically like having a “known as” name. Everyone might know the Minister by a nickname, but people will always be able to identify him, because the unique identifier is linked solely to the underlying email address or ID. It is not publicly the same, but it is uniquely linked, so that someone who uses one will access the data of the other.

I am happy to look at the international examples that the hon. Lady mentions, and at the generic name issue. I think that is a fair point, and I have already asked officials to look at how that might work in the case of John Smith and the like. I have just done a quick search on one of my previous co-directors, Harry Hill, who has quite a generic name. If we put in “Harry Hill, Hunters, Companies House” it brings up the Harry Hill that is associated with me, not another Harry Hill. There are simple ways to make connections involving names such as John Smith. I will come back to the hon. Lady with an answer on that if I can.

We do not think that changing the power to a duty would have the desired effect of obliging people to have unique identifiers in the first place. That will be achieved by mandatory provisions including the regulations under the power contained in section 1082 of the Companies Act.

I would appreciate it if the Minister came back to me on that point, because I am not clear that section 1082 of the Companies Act, as amended by the Bill, will achieve what he thinks it will. I want a clear answer about whether all directors will have a unique identifier under the new regime. That is question No. 1, and everything else follows from that.

Yes, they will. That is exactly what the Bill provides. It is a mandatory provision, including the regulations under the power contained in section 1082 of the Companies Act. Those two things combined will ensure that Companies House provides a unique identifier for every company director and for every person of significant control. I think that is what the hon. Lady hopes to achieve.

Let me turn to amendment 103. Unique identifiers will be a tool to help Companies House to link an individual’s verified identity across multiple roles and company associations. For example, if an individual is a director for company A and also a person with significant control for company B, Companies House will be able better to link those appointments using the unique identifier. The identifiers should not be made public, in our view. Their purpose is to allow the person who is assigned the identifier to communicate securely and privately with Companies House. Making the unique identifiers public would, in our view, compromise their use, because they could be appropriated and misused by anyone looking at the register, including potentially to commit identify fraud and other crimes. However, Companies House will be making changes to how members of the public view the register, enabled by unique identifiers, so it will be possible accurately to see connections between individuals and entities, including how many companies an individual is a director of, or how many companies a person has significant control over. On that basis, I hope hon. Members will withdraw their amendment.

I thank the Minister for his remarks. The matter is so important that we will want to push the amendment to a vote. It may be that what the Minister has just said on Companies House’s intentions resolves some of the issues in the end. What has been stated will happen, but we need to go further to be clear about when and how that will happen.

Question put, That the amendment be made.

Amendment proposed: 103, in clause 66, page 55, line 37, at end insert ‘which the registrar must make publicly available on the registrar’s website’.—(Seema Malhotra.)

This amendment would make all unique director identifiers available on the registrar’s website.

Question put, That the amendment be made.

Clause 66 ordered to stand part of the Bill.

Clause 67

Identity verification: material unavailable for public inspection

I beg to move amendment 10, in clause 67, page 56, line 3, after “subsection (1)” insert “—

(a) in the words before paragraph (a), after ‘not’ insert ‘, so far as it forms part of the register,’;

(b) ”.

This amendment spells out that section 1087 of the Companies Act 2006 is only concerned with information on the register of companies.

Clause 67 amends section 1087 of the Companies Act 2006 to extend the list of registered material unavailable for public inspection to include

“any statement delivered to the registrar”

to confirm compliance with identity verification requirements, which means that statements delivered to the registrar concerning identity verification will stay private, protecting personal and sensitive information. Government amendment 10 clarifies that section 1087 is only about withholding from public inspection the portion of the registrar’s records concerning companies. Other provisions elsewhere in legislation provide for the withholding from public inspection of the portion of the registrar’s record pertaining to other entities, such as limited liability partnerships and limited partnerships.

We have very few remarks to make. As the Minister has outlined, clause 67 amends the Companies Act to extend the list of material unavailable for public inspection to include

“any statement delivered to the registrar”

under the provisions listed. I make the general comment that we want to have greater clarity on this matter so that we do not inadvertently find ourselves, through the legislation, in a situation whereby director, shareholder or officer information becomes hidden for all the reasons outlined in the Bill. The clue is in the name—it is about corporate transparency. I am making a broad point about concerns of reducing transparency when we are here to increase it.

Amendment 10 agreed to.

Clause 67, as amended, ordered to stand part of the Bill.

Clause 68

Requirements for administrative restoration

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

New clause 45—Striking off a company: identity verification—

“(1) The Companies Act 2006 is amended as follows.

(2) After section 1003 (striking off on application by company) insert—

1003A Striking off on application by company: identity verification

Before striking off a company under section 1003, the registrar must first, in the case of each individual named as a director of the company—

(a) confirm that the individual’s identity is verified (see section 1110A), or

(b) confirm that the individual falls within any exemption specified in regulations made under section 12(2A)(b).’”

This new clause would extend directors’ Identity Verification requirements to dissolving a company in addition to registering a company.

New clause 46—Application for administrative restoration to the register—

“In section 1024 of the Companies Act 2006 (application for administrative restoration to the register), for subsection (3) substitute—

‘(3) An application under this section may only be made by a former director, former member, former creditor or former liquidator of the company.’”

This new clause would make it possible for a creditor or liquidator to apply to restore a company administratively.

Clause 68 amends section 1025 of the Companies Act 2006 to require that outstanding fines or financial penalties must have been paid for a company that has been previously struck off to be restored to the register. I thank the hon. Members for Feltham and Heston and for Aberavon for new clauses 45 and 46.

First, new clause 45 seeks to ensure that before striking off a company, the registrar must check whether the named directors have had their identities verified or do not need to do so because are they are exempt. Secondly, there are two routes by which a dissolved company can be restored to the register: one is an administrative process involving application to the registrar; the other involves applying to the court to order restoration. New clause 46 would expand the categories of persons who can use the administrative route by allowing former creditors and former liquidators to apply to the registrar for a dissolved company to be restored to the register. At present, only former directors or members of the company can apply to the registrar. Creditors of the company at the time of its striking off or dissolution and former liquidators currently have access to the court application route under section 1029 of the Companies Act 2006.

While I appreciate that in comparison to the administrative route, the court route is more cumbersome and potentially costly, it exists for a reason. Where a creditor seeks restoration in an effort to prove a debt outstanding from a company, the court is best placed to determine the validity of the case. Opening the administrative restoration route to creditors would place the registrar in the position of having to judge the legitimacy of a creditor’s interest in a company. That is not and should not be the role of a registrar.

However, liquidators are a matter of public record and in many cases might be the official receiver. I appreciate that there may be instances where their interests in restoring a company might be in the wider interest of others, including potential creditors, and that there may be a case for giving them access to the less cumbersome administrative process. On the basis of our undertaking to consider the matter further, I shall be grateful if hon. Members do not press the new clause.

Although driven by good intentions, we believe that new clause 45 is unnecessary. As the Committee has heard, ID verification requirements will apply to all new and existing registered company directors, as well as to people with significant control and those delivering documents to the registrar. That means that directors and beneficial owners already on the register prior to the reforms coming into force will be covered by the ID verification requirements, although they will have a transition period within which to become compliant.

Directors of companies applying for strike-off under section 1003 of the Companies Act 2006 will therefore not evade verifying their identity before their company is struck off without exposing themselves to criminal liability. Crucially, anyone delivering an application to strike off a company to the registrar will also have to verify their identity. I hope that that explanation is appropriate, and provides such reassurance that hon. Members will consider not pressing the new clauses.

It is a pleasure to serve under your chairship, Ms Bardell.

Clause 68 makes welcome changes to the Companies Act and should make it easier to enforce penalties imposed in response to criminal breaches under it. The circumstances under which an application can be made for a company struck off the register to be restored to it are set out in section 1025 of the Companies Act. Clause 68 amends section 1025 to make it clear that, as a prerequisite for any such application, any outstanding fines imposed on the applicant and relevant company directors in relation to a criminal offence under the Companies Act must be paid in full. That is a positive step toward increasing levels of compliance with companies legislation in the UK.

The Minister may wish to clarify one point in relation to company directors convicted of criminal offences. In previous sittings, the Committee discussed the grounds on which someone can be disqualified from serving as a company director under the Company Directors Disqualification Act 1986 and subsequent amendments. They include the disqualification of individuals guilty of persistent breaches of companies legislation. That appears to leave the door open for someone to serve as a director, even if they have committed a criminal breach of the legislation, provided they have not done so on multiple separate occasions.

Will the Minister tell us whether the Government considered extending the criteria so that anyone with even a single criminal conviction related to companies legislation would be prohibited from serving as a director again? Does he believe that it might send a stronger message were the Government to adopt a zero-tolerance approach to these kinds of crimes? I hope that he will come back on that point. It has some relation to new clauses 45 and 46, and I look forward to the remarks of my hon. Friend the Member for Feltham and Heston on them.

Clause 69 establishes—

Order. We are not there yet. The hon. Member is getting a little ahead of himself.

I am grateful for the opportunity to speak to new clauses 45 and 46, following the remarks of my hon. Friend the Member for Aberavon. He and the Minister highlighted how clause 68 amends the Companies Act and provides that outstanding penalties will need to be paid by applicants or directors for a full strike-off. If I am correct, section 1025, which the clause amends, is about applications for administrative restoration by a former director or member—a shareholder—whereas a creditor would use a separate process under section 1029 to restore a company to the register. That is not being amended by the Bill and does not require payment of outstanding fines.

The Minister has said that a less cumbersome process may be applied for creditors in some circumstances, but it is important and helpful to repeat our arguments in favour of new clause 46 before the Minister reaches a decision. The Minister has also said that he believes new clause 45 to be unnecessary. Under that provision, directors who applied to dissolve a company would be required to have their identities verified by the registrar under the proposed ID requirements. We believe that that closes another loophole and I am not sure that the Minister addressed the issue, but perhaps I misunderstood him. In our view, the provision would deter directors from striking off a company in order to avoid scrutiny of fraudulent activity. I am not clear how those individuals would be caught otherwise.

As I said in my remarks, anyone delivering an application to strike off a company to the registrar would have to verify their identity. I do not see how that is not clear.

I thank the Minister for that intervention. If he means that the aims of the new clause are already included in the proposed operation of the system, that is helpful clarification.

Currently, when companies are struck off the Companies House register, very little is done to check whether fraud has occurred and, in turn, that means that there are few repercussions for the directors of those companies. On average, 400,000 companies are struck off the register each year, so perhaps the Minister could go one step further and clarify whether such ID verification will apply to all directors of companies that are struck off. How will that happen if there are no unique identifiers? If wrongful actions are committed, will the proposed regime go one step further to ensure that red flags and investigations into possible misconduct or fraudulent activity will ensue? At the moment, unscrupulous directors are likely to misappropriate the strike-off process to avoid scrutiny and to rack up debts or to sell company assets ahead of the company dissolution, effectively absconding with the proceeds. Our new clause does not just call for a check on IDs but for red flags in the system to alert authorities to possible fraudulent activity that should be subject to further investigation. The Minister may want to respond to that suggestion later.

As I have outlined, creditors may seek to apply through the courts for a company to be restored, albeit under different legislation. New clause 46 would enable a creditor or a liquidator to apply to restore a company administratively. I believe it would be helpful to the Minister’s considerations to outline our intentions. The introduction of director identity verification may go some way to deterring directors from registering multiple companies fraudulently, but in the case of companies already struck off the register, there is limited opportunity to hold directors accountable for their wrongful actions and for returns to their companies’ creditors.

Members of the insolvency and restructuring trade body, R3, report that director disqualifications have little or no effect on fraudulent directors. It is absolutely shocking that the system has been allowed to continue in that way. There is little or no effect on fraudulent directors, and seriously rogue directors will often go on to commit repeat frauds despite being disqualified.

Those directors who have been disqualified may continue to operate behind the scenes as de facto directors, shadow directors or advisers to a company. We are trying to close some of those options, but there are all sorts of ways in which those who want to get around the system can do so if determined. Hence the need for the legislation to be more belt and braces.

A much more significant deterrent occurs when the company is put through an insolvency process and directors are held to account for the assets that have been misappropriated. If a company has been dissolved and automatically struck off the Companies House register—the company therefore no longer exists, in effect—that process can only take place if the company is first restored. However, if a company’s former creditors or liquidators at the time of the company’s striking off or dissolution wish to apply to restore the company, they must do so through the court.

The court process can clearly deter creditors as it is sometimes a complex procedure, in part due to the costs, which are typically £1,500 to £3,000, and in part due to the huge amount of time involved, which can be 12 to 18 months. Businesses are busy, creditors are busy, and the extra strain has to be weighed up against the cost of doing it. We have to have a solution. I am glad that the Minister has intimated that there ought to be a basis for what I think he described as a “less cumbersome” process. I agree. I hope that we will see some proposals, perhaps in Committee. It would be helpful to strike while the iron is hot.

Directors are all too easily able to create a significant barrier to the investigation of their conduct. Indeed, data from Companies House shows that only 2% of dissolved companies are put through a process to restore them to the register each year. I do not have the data on the number of creditors who might do so were it a less cumbersome process, but I think we can all agree that it would be far more than 2%. Certainly the research suggests that.

Under section 1024 of the Companies Act, former directors or members of a company can apply to restore a company administratively, avoiding a court process. However, that is not an option for a former liquidator or creditor of a company. New clause 46 would amend section 1024 so that a former creditor or liquidator could apply to restore a company administratively, without the need for a potentially lengthy and costly application to court. That would make it simpler for a company to be put through an insolvency process so that the company’s directors can be held to account for the assets that have been misappropriated and incur liability for their actions. Returns to creditors could then be made.

I hope that the Minister will, in his reflections, consider the wording of new clause 46. It might help him on the way to finding a simple solution. There is a real issue here. In the interests of fairness to businesses and creditors that do the right thing but are treated unfairly, it should not be so hard to bring to account those who had clearly planned to be struck off, more quickly, cheaply and easily.

On the hon. Lady’s legitimacy argument, as I said, we can understand that there might be a case about liquidators. We have committed to look at that. It is much more difficult in the case of creditors’ interests. She talked about the misappropriation of funds, but it is not the registrar’s position—the registrar is not deemed capable—to determine whether that is the case. I do not see how a creditor’s interests can be decided on by the registrar. However, I commit to us looking at the liquidator element.

On the issues the hon. Lady has mentioned with respect to Companies House and new clause 45, the requirements under the objective at the start of the Bill make it clear that the registrar’s responsibility is to minimise unlawful activities. On whether a striking-off in certain circumstances is a red flag, there will be a number of ways in which that can be determined, either through automated processes or by human intervention. It is not realistic for the registrar to determine fraud, but it is definitely within her capability to determine whether there is a red flag around fraud. We expect the registrar to put those measures in place; in fact, there is a requirement for her to do that under objective 4— minimise unlawful activities.

We have had debates at length in previous sittings on whether we should dictate to the registrar how she should do that, with myriad conditions and circumstances involved and discussion as to what constitutes a red flag. On this side of the Committee, we believe that we should leave it to Companies House to determine how the registrar minimises unlawful activities and what constitutes a red flag. That, of course, will be shared with relevant enforcement agencies.

I know the Minister is not intending to, and I would not want him to, misrepresent our position, but the difference between our views is generally whether there should be greater tools and provision in legislation to give the registrar teeth that might be helpful in her work. The Minister is right that it would not be for the registrar to determine fraud, but that there should be a red flag system whereby the registrar is uniquely in a position to be able to determine that.

We are in total agreement—violent agreement—which is great.

The hon. Lady made a point about shadow directors. There are all kinds of ways in which a nefarious individual can influence the behaviour of a company, for which we cannot possibly legislate. There is no such thing as, and no legal status of, a shadow director. Therefore, how would we ban somebody from being one? We have to operate within the boundaries of the law. That is what we feel, and we have reached a fair balance here. I hope the hon. Lady will not press her new clauses to a vote later in the proceedings.

Question put and agreed to.

Clause 68 accordingly ordered to stand part of the Bill.

Clause 69

Delivery of documents: identity verification etc

Question proposed, That the clause stand part of the Bill.

The clause introduces identity verification requirements for individuals delivering documents to the registrar. It also requires that when an individual acts on behalf of another, they must confirm that they have the authority to do so. That will enable the registrar to reject documents unless they are accompanied by a true statement that the identity of the individual filing the document is verified and that the person filing the document is authorised to file.

An individual who delivers a document to the registrar on their own behalf must have their identity verified, and the document must be accompanied by a statement confirming their verified status. If an individual is exempt from identity verification requirements under the clause, they must provide a statement to that effect when delivering a document. Documents delivered on behalf of another person must be accompanied by a statement that the filer is authorised to do so. A document delivered by an employee of an authorised corporate service provider must additionally confirm that they are acting in the course of their employment.

Ensuring that individuals are identity verified before they can deliver documents to the registrar and that they are permitted to do so provides greater accountability because the documents will be traceable back to a verified identity.

Clause 70 creates a prohibition on delivery of documents to the registrar by disqualified persons. Clause 71 enables the registrar to reject documents that have been delivered by people who are not within the categories permitted to file documents under clauses 69 and 70.

Clause 69 establishes a requirement for anyone delivering documents to the registrar to have their identity verified, subject to certain exemptions, which may be set out in secondary legislation. However, it is not clear in what circumstances the Government might consider an exemption appropriate. The requirement for any exemption to be set out in secondary legislation subject to the affirmative procedure is welcome, because it enables the relevant changes to be scrutinised by Parliament. Nevertheless, it would be helpful if the Minister could provide an indication of what sort of exemptions might be expected.

Clauses 70 and 71 relate to the delivery of documents to the registrar. Clause 70 stipulates that disqualified individuals may not deliver documents on either their own or someone else’s behalf. As set out in the clauses, individuals delivering documents to the registrar will be required to make a series of statements confirming that they are not subject to any disqualification under companies legislation.

The hon. Gentleman asked me for examples of exemptions. We expect exemptions to be used rarely, but examples might include Government Departments, local authorities and international organisations where the identity and accountability of the organisation delivering the information carries little risk.

I thank the Minister for that clarification. Assessing the meaning of “carrying little risk” is a subjective thought process, but he is right that not everything can be micromanaged in this process. We will probably never get absolute clarity on these issues, but it will be important that Parliament scrutinises the way in which exemptions are implemented so that we get to know what “little risk” means through their implementation. It will also be important for Ministers to keep a close eye on the risk management processes that need to be implemented. As the Minister rightly said, legislation without good implementation is not worth the paper it is written on.

In previous debates, this Committee has discussed issues involving the verification of information provided to Companies House and the enforcement of criminal penalties for those who fail to comply with requirements to provide truthful information. These clauses raise similar questions. For instance, could the Minister explain what actions the registrar will be able to take to verify that, if somebody delivering documents states that they are not acting on behalf of a disqualified individual, that is a true and accurate statement?

The clauses also relate to issues discussed by the Committee on authorised corporate service providers. We all want this Bill to make it much more difficult for the people who own or control companies to hide their identities behind layers of secrecy, which often take the form of corporate service providers or other individuals acting on behalf of those in control. It would be helpful if the Minister could provide more detail about how the Government plan to protect the system against abuse, particularly by third parties acting on behalf of criminal clients. Could he tell us, for instance, whether the Government have considered introducing a more proactive licensing system for corporate service providers—as is used by some other jurisdictions, including Jersey—and what assessment the Government have made of whether the Bill provides adequate safeguards against the submission of false statements to the registrar?

I think the hon. Gentleman asked me to address two points. First, he asked how we will ensure that the documents filed are accurate. That goes back to the risk-based approach that the registrar should take on potential red flags and other such matters. Obviously, that role fits into the registrar’s wider objectives of ensuring that the information is accurate and minimising unlawful activity. It is a red-flag approach in terms of systemised and human intervention.

The hon. Gentleman’s second, wider point was on the penalties for false filing, which are up to two years in jail. I think most people will consider that to be a decent deterrent against abuse of the system.

I thank the Minister for that clarification. Does he have a view on the question of a more proactive licensing system for corporate service providers, along the lines of what is done in Jersey? Have the Government made any assessment of whether the Bill provides adequate safeguards against the submission of false statements to the registrar, particularly by corporate service providers?

I fully recognise the concerns expressed across the Committee about our oversight of corporate service providers. As I say, we should not mix up the many bone fide companies and household name accountants and lawyers, but clearly there are concerns, for example about some company formation agents. We need to ensure that the system that supervises money laundering is much more effective—we know there are deficiencies. The Treasury is looking at that right now. It will report and say exactly what it will do to beef up the system and make sure it is more fit for purpose. I am taking a keen interest in that. I am just as keen as the hon. Gentleman and other Members that the system properly identifies people with shortcomings and identifies wrongdoing, and that we build a much better system of money laundering supervision.

The hon. Gentleman mentioned licensing. Let us see what the Treasury review says and then we can make judgment. In terms of oversight of the money laundering supervision system, I am as concerned as he is and as keen to make sure that that system is fit for purpose.

I thank the Minister for that clarification. Will he assure us that he will encourage his colleagues at the Treasury to consider the option of a licensing system within the terms of reference of the review?

I am keen to make sure that the system works, whether by licensing or by some other means. There are lots of different options for what might be described as a system that is fit for purpose. Of course, in common with all Members of this House, we are keen to avoid unnecessary bureaucracy, but nevertheless we want a system that works and that we have faith in, so, in my view, all options should be on the table.

I have a small query and seek clarification from the Minister. In clause 69(3), proposed new section 1067A(2) states:

“An individual may not deliver documents to the registrar on behalf of another person unless—

(a) the individual’s identity is verified”.

Will the identity of those entitled to deliver documents be added to the register, and will they have to be separately verified? I am not clear on the mechanism.

Yes, of course. I understand that if someone is delivering documents on behalf of themselves, there will be a check to see whether they are verified, but if someone is delivering documents on behalf of somebody else, the Bill seems to say that they also need to be verified. Is that subject to a separate verification list? That person would not be registering to be a company director in their own right; they would be delivering the documents to register somebody else, so is there now going to be a separate list for that?

I think I have understood the hon. Lady’s question. Clearly, all directors and company service providers need to have their identity verified too. If that is what the hon. Lady is referring to, that is absolutely contained in the provisions of the Bill.

I was very interested in what the Minister said about ensuring that the authorised company service providers should be checked and supervised properly. It is really important to ensure that all the details of the individuals on the register can be found with certainty. However, we are all struggling with how to do that in quickest, most cost-efficient and effective way. Does the Minister agree that a suitable mechanism should be presented on Report—unless he would like to suggest one now—that does not waste time, keeps within the timeframe, does not require massive additional resources and enables swift action to be taken? I love the Treasury, but we should do this without having to wait for a Treasury review or reorganisation. Does he accept that that might be a way forward? We all want the same thing, and if we do not get this right there could be a huge flaw in the system we are establishing.

We are on the same page about ensuring that the system is fit for purpose. It is difficult for me to do a review when the Treasury itself is doing one and is probably better placed than I am to do it, given its wider understanding of the system.

Perhaps it might not be as ambitious as me, but it certainly has access to detailed information and the resources to properly conduct the review. The Treasury should be allowed to do that job.

I think that we are all on the same page. I am absolutely committed to ensuring that the system is fit for purpose. It is not a case of just getting the Bill passed; we need to ensure its implementation, as I have said many times in the House and in Committee.

I am sorry to intervene, but the Minister provokes me. A point to take away is that we are now bedevilled by a real problem in this country: responsibility for policing this area is divided between the Minister, the Treasury, the Foreign, Commonwealth and Development Office and the Bank of England. At the moment, as the Foreign Affairs Committee has said repeatedly, there is not an effective gearbox for joining those things together. If one of the Minister’s legacies could be to fix that problem, he would be cheered from all sides.

God forbid that the Government work in silos, whoever is in power, but they do tend to do so at times. I am on the same page as the right hon. Gentleman and other Committee members that we must have a joined-up approach right across Government. The systems of supervision of money laundering must be fit for purpose, tight, verified and checked, and the people who do not do it right must be held to account. We must ensure that we get that right, and I am fully committed to that.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.

Clauses 70 and 71 ordered to stand part of the Bill.

Clause 72

Delivery of documents by electronic means

Question proposed, That the clause stand part of the Bill.

I hope that the clauses are pretty uncontroversial, but let us see. Companies House systems are already enabled to receive digital account submissions. The clauses will help Companies House to become a fully digital organisation by 2025.

Clause 72 transfers the power to require delivery by electronic means from the Secretary of State to the registrar. Filing information digitally is easier, quicker and more secure for filers. The information can be more easily checked for accuracy and compliance, and is less likely to be rejected for basic errors or omissions. That increases transparency. Suspicious activity can be better identified, contributing to our efforts to detect and prevent economic crime.

Clause 73 will require companies to deliver to the registrar a copy of a court order confirming their share capital reduction, rather than the original document itself. Clause 74 does the same in respect of a declaration of solvency. Clause 75 gives the registrar an administrative power to specify, in registrar’s rules, where documents must be delivered together.

Requiring companies to file component parts together will make it easier for Companies House to check that companies are meeting their filing obligations. It will also reduce unnecessary errors. Where filings are made that do not meet the requirements, they can be rejected, helping to improve the integrity of information on the register.

The main purpose of clause 72 is to make it easier for future changes to registrar’s rules to be made by the registrar directly, rather than through the Secretary of State. The Government’s intention is to facilitate the electronic delivery of documents. Using quicker, more efficient electronic systems for delivery should play an important role in wider plans for the transformation of Companies House and the service it provides.

With that in mind, could the Minister say a bit more about how the provisions fit into the ongoing Companies House transformation programme, particularly in relation to the planned new IT system? When might the fully electronic system for the submission and processing of documents submitted to the registrar be in place? We would be grateful for the Minister’s comments, particularly about timing.

Clauses 73 to 75 make further changes involving the format of documents that may be delivered to the registrar—for instance, by enabling copies of a court order, rather than the original order, to be submitted, and by enabling the registrar to require multiple documents in relation to a single filing to be submitted together rather than individually. The Opposition support these proposals. We all want a more streamlined and efficient operation at Companies House as a result of these and related measures. It might be helpful if the Minister could explain, in the context of these provisions, what tools will be available to Companies House to ensure that documents submitted electronically, such as copies of court orders, are authentic, and how the new IT systems will help to reduce the risk of fraudulent filings.

Companies House already has the capability to accept documents filed digitally—89% of companies already do that. Therefore, it is not an IT development requirement; it is just a requirement for companies to file documents digitally rather than using paper. It puts the onus on the companies rather than on Companies House itself.

In relation to authenticity, we are again back to the red-flag approach. Companies House has a requirement, an objective, to oversee the integrity of the register. There is definitely a risk-based approach to that. The aim is to try to put the red flags in place to ensure that we are identifying documents that are not authentic. Also, there are penalties for false filing of documents, which I think we went through previously.

I have a brief point on a technical issue. It was flagged in evidence that some documents submitted electronically or posted on the Companies House website in electronic format were image files rather than searchable documents. I wonder what consideration the Minister has given to mandating the type of files that can be filed electronically, because it would make sense to accept them in a format that can then be searched online.

The hon. Lady makes a good point. I do not know the detail behind that, but I am happy to go away and look at that for her.

Question put and agreed to.

Clause 72 accordingly ordered to stand part of the Bill.

Clauses 73 to 75 ordered to stand part of the Bill.

Clause 76

Power to reject documents for inconsistencies

Question proposed, That the clause stand part of the Bill.

Clauses 76 to 79 support the Bill’s overarching ambition to broaden the powers of the registrar to maintain the integrity of the register. Clause 76 provides a new power to reject documents for discrepancies. Currently, the registrar must accept documents if they have been properly delivered—that is, they meet the requirements as to their contents, form, authentication and manner of delivery, and the other requirements listed in section 1072 of the Companies Act 2006.

Documents containing information that is at odds with information that the registrar holds may none the less meet “proper delivery” requirements in their own right. If so, they must be placed on the register despite the apparent inconsistency. This clause cures that problem by enabling the registrar to reject a document if it appears to be inconsistent with other information that is held by or available to the registrar. The power is available if, due to the inconsistency, the registrar has reasonable grounds to doubt whether the document complies with the requirements as to its contents.

This is a question to aid understanding. This provision sets out the duties of the registrar in relation to documents, but the documents will actually be checked by the company service providers, will they not? That will be outsourced to those providers. I might be wrong—the Minister is looking puzzled—but that is the case if I read the situation correctly. Therefore, is this provision suggesting that there will be a check at Companies House on the work that the company service providers do? Perhaps the Minister can say a little about how that will be implemented. I thought that all that was to be pushed out to the company service providers.

Not at all—quite the opposite. Companies House has a requirement to oversee the integrity of the register, and the clause states exactly that. If the registrar feels there is an error that she is not happy with in the document, or it is inconsistent, she can reject the document whether it is filed by a company service provider or by a director of the company.

For complete clarity, there will be a risk-based system of checks on documents provided as a mechanism for ensuring the accuracy of the documents that are submitted.