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Takeovers: Eu Proposals

Volume 590: debated on Thursday 18 June 1998

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3.15 p.m.

What progress they are making in their negotiations with the European Commission over the latter's proposals for a directive on takeovers.

My Lords, the Commission presented a revised proposal for a directive to the Council in November last year which took into account amendments proposed by the European Parliament. Since then there has been one meeting at Council level which took place last December under the presidency of Luxembourg. At that meeting all member states made clear that the proposal was still being examined and consequently the views expressed were preliminary ones. There have been no meetings under the presidency of the United Kingdom to discuss the directive.

My Lords, I thank the noble Lord for that reply which, I suppose, is as optimistic as he can make it. Since the directive, as drafted, would, among other things, introduce tactical litigation into our excellent system of mergers and acquisitions, does the noble Lord agree that this is yet another example where introspective legislation from Brussels is potentially very damaging to our wider commercial interests? Furthermore, is it not very misguided, even by the standards of the European Commission, to plan a directive of this kind when the various European regimes are so different from our own and from each other and where, for example, bearer shares are common and hostile bids are a rarity?

My Lords, as I implied in my Answer, it is very clear that many of the member states still have objections to the way in which the Commission has put forward this directive, very much taking the point made by the noble Lord that very different circumstances apply to takeover regimes in each country. The objective of protecting shareholders under any takeover regime is important, and that is at the heart of the directive. It is too soon to speculate as to whether all member states are happy with the way in which the directive is currently couched. We should wait for the next stage.

My Lords, does my noble friend agree that the UK takeover code system in the City of London has been operating well and, indeed, progressively better over the past 30 years? Does he further agree that it has served the shareholders of this country extremely well? It has avoided litigation which can lead to delays in what may be desirable in terms of changes in company structure. Does my noble friend agree with me that it is not necessary for there to be a legalised system operating in each country of the European Union just because such may be desirable in some member countries and not in others?

My Lords, I agree with everything that my noble friend has said. I believe that our non-statutory basis has been extremely successful for both shareholders and companies. If we wish to progress to a situation where it would be as easy for our companies to take over European-based companies we shall need to find some common causes. Currently, I believe that it is fair to say that our national system is the envy of all other member states. We are trying to arrive at a system whereby our own companies wishing to make takeovers in Europe will benefit from the same kind of regime. I agree that it would be best if it were non-statutory, but let us see what we can achieve.

My Lords, is the Minister aware of any proposal to bring forward this matter under the Austrian presidency?

My Lords, does my noble friend agree that our system, such as it is, takes insufficient account of the interests of employees and that it should be improved in that direction before it can become an example to anyone else?

My Lords, there has probably always been some misunderstanding about how the interests of employees can be taken into account. Two current directives take account of employees' interests in change of ownership situations and run parallel to the proposed statute. It has always been clear, but misunderstood, that consultation with employees is possible under the existing takeover code. Issues that arise relate to secrecy and the protection of existing shareholders' rights in the run-up to a bid. Our own system does not in any way prevent consultation with employees.

My Lords, does my noble friend recall that Sub-Committee E of the Select Committee on the European Communities considered the matter deeply and that its recommendations were accepted by the previous government? Has there been any substantial change in policy since 1st May last year? If so, perhaps my noble friend could tell us about it.

My Lords, I am not fully aware that the previous government developed a policy on this matter. However, to the extent that we are studying the existing legislation, we are still to be convinced that any directive will improve this country's non-statutory basis for dealing with takeovers. Until we are convinced that that could be improved, we see no reason to move away from our current highly effective and successful system.

My Lords, would the noble Lord the Minister confirm to the House that the Commission intends to bring in any directive under single market legislation, which will therefore be subject to the dreaded qualified majority vote in Brussels? Would he further agree that this might be one of several cases which might provide a good test as to whether the Government's charm offensive is working in Brussels?

My Lords, I do not think that this is exactly a matter of charm, although charm is always helpful. Indeed, I find that in most negotiations the aggressive stance is usually not appropriate when I am with my European colleagues. I have no doubt that a little charm would not be unhelpful, but the debate is really about the substance of the matter. We are still far from getting to the substance of the matter because we do not know what other member states will put on the table when, as the noble Lord, Lord Geddes, predicted, the Austrians raise this question at the next Council, as I am sure that they will. We must wait and see the positions of all other member states. However, I am sure that we shall adopt our usual charming stance.

My Lords, when the noble Lord exercises his undoubted charm, can he tell us whether or not this matter can be dealt with by qualified majority voting?

Yes, my Lords, this matter will be dealt with by qualified majority voting.