Tuesday 19 July 2022
Arrangement of Business
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Remote Observation and Recording (Courts and Tribunals) Regulations 2022
Considered in Grand Committee
My Lords, the statutory instrument before us regulates the remote observation of court and tribunal proceedings across our justice system. Essentially, this instrument builds on the very positive experience of remote observation during the pandemic and extends and makes permanent powers that were originally contained in the emergency coronavirus legislation.
The instrument was made using the “made affirmative” procedure on 28 June 2022. It is fair to point out that the scrutiny committee of this House has been somewhat critical of the use of the “made affirmative” procedure in this case, as distinct from the normal draft affirmative procedure. My understanding of what has happened is that the enabling legislation, which is the Police, Crime, Sentencing and Courts Act 2022, was already delayed in Parliament. The department felt that we should move away from the emergency legislation as soon as possible. The emergency legislation then in force in any event did not cover certain tribunals, including employment tribunals, the Court of Protection and certain other jurisdictions, so the decision was made to press on using the “made affirmative” procedure. None the less, the comments of the scrutiny committee have been duly noted and I have reminded the department of the importance of ensuring full parliamentary scrutiny of all legislation, including legislation such as this.
The Committee will be aware that, at the outset of the pandemic, our courts and tribunals moved swiftly to holding hearings remotely using audio and video technology. I can take this opportunity to pay tribute to HMCTS for its work in enabling that to happen and the principle of open justice to be maintained.
The legislation permitting remote observation was very well received, especially by court reporters, legal bloggers and others who do valiant work in reporting what happens in our justice system. It allowed the courts to offer, in effect, the digital equivalent of the public gallery.
The Government have therefore taken the decision to make remote observation a permanent feature of our justice system and expand it to all our courts and tribunals, save for the Supreme Court and certain devolved courts and tribunals, and to any type of hearing, whether remote, in person or hybrid. The order is made, with the concurrence of the Lord Chief Justice and the Senior President of Tribunals, by the Lord Chancellor.
The overall aim is to strengthen the transparency, openness and accessibility of the justice system. It is hoped that it will also have the incidental effect of strengthening the sometimes struggling profession of court reporting by providing modern, digital solutions, although public galleries of course continue to be available.
Various safeguards are contained in the enabling legislation which prevent participants making unauthorised recordings or transmissions of the proceedings. It is important to note that at the heart of the provisions is the principle of judicial discretion. It will be for judges, magistrates, coroners and tribunal members to decide on a case-by-case basis whether to provide transmissions of proceedings to members of the press and public.
This does not enable indiscriminate broadcasting or live streaming of proceedings, although that occurs in certain jurisdictions, such as the Supreme Court and the Court of Appeal. It enables transmissions of proceedings to be made to individuals who have requested access and have identified themselves to the court or, in certain circumstances, to designated live-streaming premises. There is no obligation on judges to allow transmissions to be made to remote observers during a traditional in-person hearing, but it is hoped and assumed that this technology will greatly facilitate access to justice for many. Around 7,000 hearings a week now rely on audio and video technology. That is one of the reasons why this statutory instrument was brought forward as early as it was. The Government seek to strengthen and support the principle of open justice and to increase the accessibility and transparency of our justice system as part of our wider programme of modernising that system.
My Lords, I am sure this instrument will be widely welcomed. As the noble and learned Lord has explained, this builds on experience, which it is good to do, in two beneficial ways: it is making a temporary arrangement permanent and it is spreading the technological discretion right across the whole system, which is a very good idea. One does not want gaps in an exercise of this kind.
I have a point to raise on the detail of Regulations 3 and 4, simply to try to understand how this system will work. As the noble and learned Lord has explained, this will be an exercise of a discretion. Regulation 3 gives two very sensible matters on which the court must be satisfied, particularly sub-paragraph (b) on technological arrangements and so on, before the discretion is exercised. I have no problems with that, because it is very obvious that this needs to be done. I imagine that, if the court is being invited to exercise a discretion, it would be up to the advocate asking for it to provide the material the court needs to be satisfied with the points set out in Regulation 3.
Regulation 4 is trickier. It is a list of very sensible points which we are told the court must take into account. This is another example of something that has been happening over the years; in the Judicial Review and Courts Bill in particular, there was a list of things that the court must take into account, which caused some concern—some said the word “must” was wrong because it opened the door to criticism of the court if it perhaps failed to take something into account that it should have done. That problem lurks under Regulation 4. How will one be satisfied that the court has taken all these points into account without the court going through the entire list and saying that it has looked at sub-paragraphs (a) to (f)? Have the Government any thoughts on how this will work in practice? Is it simply to be assumed when the court exercises discretion that it has done this, or should it be transparent and laid out in some kind of understandable practice that these points will all be addressed and that the public will be told why and how the court has been satisfied on them?
I raise this not to tease the noble and learned Lord; it is just that somebody, somewhere, might start complaining that, let us say, sub-paragraph (a) has not been taken into account because the magistrate or the judge did not say so. One needs to be a bit careful with these lists to be sure how the thing will actually work in practice. I simply throw that out for the noble and learned Lord to consider. Maybe a definitive answer cannot be given today, but somebody needs to think about it, and maybe guidance needs to be given to those who are exercising the discretion so that they do not fall into a trap.
My Lords, we support these provisions. They will replace and extend the temporary emergency provisions included in the Coronavirus Act 2020 which allow for certain proceedings to be observed remotely and recorded. We believe in the principle of open justice and think this goes a step towards that and should be welcomed for that reason. However, we are aware that sometimes legal proceedings are very sensitive and painful, and attending a court or tribunal can be a difficult experience for people. For that reason, decisions regarding which types of proceedings should be broadcast or available to different people to observe should not be taken lightly. I am very aware that different jurisdictions will have different considerations in that respect.
Just for the record, I sit as a magistrate in the family, youth and adult jurisdictions, and I sat all the way through the coronavirus pandemic. I started off in the family jurisdiction doing court hearings by BT MeetMe and we graduated to MS Teams. We were making extremely difficult decisions which we felt we had no alternative but to make because of the circumstances which we found ourselves working in as a court.
Of course I agree with the objectives behind this statutory instrument, but I wanted to make one substantive point on the level of technology in these courts. It is highly variable between jurisdictions. When one is dealing with litigants in person, it is not unusual for them to be trying to do things on their mobile phones. Sometimes they have poor signal and all sorts of handicaps if they are trying to take part in court proceedings remotely. In my experience, when a court is 100% remote —that is, everybody is remote—it can be made to work. However, it is more difficult when it is hybrid—when some parties are in the room and others are not. Whether it is fair to go ahead with a hearing is ultimately a matter for judicial discretion, but certainly in my experience, hybrid hearings in various jurisdictions can be detrimental to people who are not physically in the room, and the court needs to be aware of that when it is deciding whether to go ahead with a case. Nevertheless, having said that, we welcome this statutory instrument and we will be happy to support it when it is put to a vote.
My Lords, thank you. On the point raised by the noble and learned Lord, Lord Hope of Craighead, I am not sure that I have an answer off the cuff that I am able to give, and I entirely understand the point he makes as to the difference between “must” and “may” or similar expressions. I think the presumption, which I do not have the confidence to reproduce in Latin but which is to the general effect that everything is presumed to be regular unless the contrary is shown, would kick in here, and it would be a matter for the Lord Chief Justice to decide whether some further guidance is made necessary. I hope that those two points will at least accommodate the observation of the noble and learned Lord. However, the overall point is understood.
The points regarding the general broadcasting of legal proceedings, and the sensitivity of particular proceedings, are also fully understood. The statutory instrument does not permit general broadcasting but leaves it to the discretion of the tribunal whether to permit this at all—and it will be a difficult discretion sometimes. Thirdly, as to the level of the technology, its variability and the difficulties faced by people on mobile phones, this is also recognised, in particular by HMCTS. It is expensive and challenging to equip courts to conduct legal proceedings remotely. To an extent it has got better as time has gone on, but we are still in a learning phase. Again, I will take that comment back and see what we can do to improve the efficiency and fairness of hybrid proceedings, in particular, which the noble Lord, Ponsonby, mentioned.
Having made those comments on the points raised, I commend the instrument.
Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022
Considered in Grand Committee
That the Grand Committee do consider the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022.
Relevant documents: Instrument not yet reported by the Joint Committee on Statutory Instruments. 6th Report from the Secondary Legislation Scrutiny Committee.
My Lords, I begin by emphasising that this Government recognise the threat posed by economic crime to the UK, and we will continue to do whatever it takes to combat money laundering and terrorist financing at home and abroad. The UK has played a pivotal role in tackling illicit finance internationally by building political commitments, championing global standards as a founding member of the Financial Action Task Force and pioneering domestic powers, which are being replicated around the world. The international standards set out by the FATF are at the heart of the UK’s approach to fighting money laundering and terrorist financing. We are also clear that global leadership must be underpinned by strong domestic action.
Although our domestic action must be strong, it must also be proportionate to ensure that we minimise the burden on legitimate customers and businesses. In January 2020, we transposed the EU’s fifth money laundering directive, which provided for the addition of art market participants, letting agents and crypto asset businesses to the regulated sector and set out discrepancy reporting requirements to ensure the accuracy of the UK’s beneficial ownership registers. We also made separate changes to the money laundering regulations earlier this year in relation to high-risk countries and trusts. These changes give us the opportunity to debate the latest economic crime risks and help us target strategies to better protect the UK from overseas illicit finance flows.
Despite that progress, we know that there is more work to be done to deter money laundering and terrorist financing actively and effectively in the UK in a way that is proportionate and manages burdens on businesses. As part of that work, we are making further necessary updates to the money laundering regulations through the secondary legislation we are discussing today.
It is vital that AML regulation keeps pace with the rate of technological change so that no part of our financial system is prone to exploitation by criminals. This instrument therefore extends FATF recommendation 16, known as the travel rule, for crypto asset firms. The travel rule requires that information on the identity of the originator and beneficiary of a transfer of funds or assets is sent and recorded by the firms making the transfer. This means that transfers of crypto assets will become subject to the same rigorous AML requirements as bank transfers, allowing money laundering and terrorist financing to be detected and investigated effectively.
We are also closing the gap in the regulations by requiring proposed acquirers of already-registered crypto asset firms to notify the FCA ahead of such acquisitions, allowing it to object to such acquisitions or changes in control before they take place. This will stop unregistered firms gaining access to the UK market, ensuring further robustness of the regulations. We would like to implement this important change at the earliest opportunity, 21 days after the SI is made.
This instrument also makes several other discrete, targeted changes which are intended to ensure that the regulations are aligned with the updated risk assessments and new international standards. I will highlight just a few of them. For example, to ensure we are aligned with FATF standards on proliferation financing, this instrument will introduce a requirement for supervised persons and the private sector to identify and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions related to proliferation financing. Her Majesty’s Treasury will also be required to carry out further national risk assessments of proliferation financing, and financial institutions and relevant persons must complete proliferation financing risk assessments and take steps to mitigate risks identified.
This instrument will go further by strengthening and clarifying how the AML regime operates, and by ensuring that the UK’s AML supervisors have the right powers available to respond to new and emerging threats. That is why the instrument will also expand the requirement in the regulations to report discrepancies between the information gathered by regulated firms and that held at Companies House, both in the course of ongoing business relationships and in respect of entities in scope of the new register of overseas entities. Not only does this change address concerns raised by industry that the discrepancy reporting provision in the regulations provides insufficient clarity but it will enhance the accuracy and integrity of the companies register, closing a clear gap in the current system.
We are also amending the definition of a trust and company service provider, or TCSP, to cover the formation of all business arrangements, not just companies, that are required to register at Companies House and ensure that customer due diligence must be conducted on these business arrangements when they are the customers of TCSPs. This change will support the objectives of BEIS-issued proposals on limited partnership reform and improving the transparency and integrity of the companies register.
It is also important that we improve the information and intelligence-sharing gateway in the regulations, which was an important focus in the first economic crime plan and a key ask from industry. Therefore, we are expanding the information-sharing gateway to allow for reciprocal sharing from relevant authorities, including law enforcement, to supervisors. We are also expanding the list of relevant authorities in the regulations explicitly to include key government agencies, such as Companies House. This instrument also makes several technical and clarificatory changes to the regulations, to ensure that they are up to date and continue to work in the best way possible.
Noble Lords will be aware that the Secondary Legislation Scrutiny Committee raised the regulations as an instrument of interest in its sixth report, published on 30 June. Noble Lords will have hopefully also had sight of the statutory instrument’s impact assessment, published on 14 July. Unfortunately, the impact assessment received a red rating from the Regulatory Policy Committee. Despite this, I support the SI proceeding given the time-sensitive nature of some of these measures and the impact of choosing not to address the loopholes and changes in risk where we have identified them. Her Majesty’s Treasury is undertaking further analysis this summer to improve the data available for future impact assessments.
I thank noble Lords for their examination of this important legislation and hope they will join me in supporting the instrument. I beg to move.
My Lords, I am grateful to the noble Baroness, Lady Penn, for introducing this SI, following last week’s postponement. Let me say from the start that we support these revisions to the money laundering regulations, or MLR. Any proportionate measures that strengthen our hand in the fight against illicit or terrorism financing are a good thing.
It could be argued that some of these measures should have been introduced earlier. In recent months we have discussed the Government’s mixed record in relation to tackling money laundering and fighting financial crime. However, rather than trying to score political points today, I instead wish to ask the Minister a series of questions about the Treasury’s approach.
First, can the Minister tell us about the process underlying the accompanying impact assessment? She very kindly wrote on 14 July to inform me that the assessment had been rated red, or “not fit for purpose”. Nevertheless, the Treasury wanted to push ahead with the debate as planned. Despite that correspondence saying that the IA had been published online, I was unable to find it on the legislation.gov.uk website last Wednesday afternoon. This debate was therefore delayed. This may be a fairly minor concern in the grand scheme of things, but legislative processes are important.
Although we have concerns about the IA achieving a red rating, we will nevertheless support the regulations’ passage. As I said earlier, many of these changes are sensible and technical updates. The technical nature of the money laundering regulations, however, gives rise to another question. The success—or otherwise—of MLRs relies on formal guidance for individual sectors. These documents need to be updated and get final approval from the Treasury before dissemination. When is that process expected to begin and how long is it likely to take?
Turning to other issues, could the Minister go into a little more detail on the Government’s approach to crypto assets. It seems sensible to extend the so-called travel rule, as well as the power of the Financial Conduct Authority in relation to annex 1 companies dealing with crypto assets. Since the Russian invasion of Ukraine, we have seen the exploitation and movement of crypto assets as a means of circumventing international sanctions. We are also seeing more and more criminal funds funnelled into different forms of digital assets, as there is a perception that using such avenues carries significantly less risk of intervention by law enforcers and regulators. If the new measures help to tackle these realities, that is welcome, but does the Minister agree that the need for wider regulation in this area is becoming ever more urgent?
The previous Chancellor was a big supporter of crypto. He stated his ambition for the UK to become a “global hub”—indeed, this will be the subject of a Question on Thursday. Can the Minister confirm that the new Chancellor shares Mr Sunak’s enthusiasm, or are we likely to see a change in both ambition and regulatory direction?
We are, of course, in the midst of a wider review of the UK’s anti-money laundering regime. According to the Explanatory Memorandum, that review is
“intended to shape the UK’s broader direction on AML for the coming years”.
If I am not mistaken, completion of that review was expected in June. Can the Minister confirm that it was completed as planned and, if so, might she be able to commit to a timescale for the publication of its outcomes?
Given the UK’s participation in the Financial Action Task Force, just how much flexibility do the UK Government have? We are free to deviate from the FATF in instances where there is minimal risk, but will the Government want to threaten getting a cleaner bill of health as part of the body’s 2025 UK review?
This SI makes minor changes to the Economic Crime (Transparency and Enforcement) Act to ensure that discrepancies in company records are reported in a timely manner. Can the Minister provide an update on the implementation of the register of overseas entities? Enabling SIs are gradually being laid and debated, but do we have a firm date for enactment?
In addition, do we have an update on what has become known as the economic crime Bill part 2? The noble Lord, Lord Callanan, stated on multiple occasions that the Government aimed to deliver that Bill early in the new Session. I am not aware of its impending publication, but I hope the Minister can set me straight on that. Central to that Bill will be Companies House reform. These regulations do not go that far, but they give that agency and its parent department greater access to information about suspected money laundering. Can the Minister set out exactly what rights Companies House has at present? If these have long been deemed insufficient, why are changes being made only at this point?
I appreciate that I have bombarded the Minister with a variety of questions, so perhaps she could use the early portion of her Summer Recess to write.
My Lords, I thank the noble Lord for his questions. I will attempt to answer them now as best I can so that, hopefully, we can both enjoy a quieter Summer Recess. If I do not manage to, I will write on the outstanding ones.
He asked first about the process underlying the impact assessment. The Treasury sought to collect quantitative data on the costs and impacts of the proposed amendments to the money laundering regulations through extensive stakeholder engagement and the SI’s consultation period, but it did not obtain as much data as anticipated. Further attempts were made by officials to gather urgent evidence to rectify some of the data gaps that were identified, but unfortunately efforts were limited by the need to deploy resource on to pressing issues arising from the Russian invasion of Ukraine.
I am assured that the impact assessment was published on legislation.gov.uk on 14 July and on the GOV.UK page, where the consultation and government consultation response for the instrument were also published. I have not navigated those websites myself, so they are perhaps not as user-friendly—
I will happily do that. Skipping ahead slightly to the money laundering regulations review that the noble Lord referred to, the Government published their review on 24 June, which I will send to the noble Lord along with the impact assessment I referred to. On that review, the report sets out the future direction of anti-money laundering policy, including reforms to the UK’s supervision regime and potential changes to the money laundering regulations to ensure that they remain proportionate and effective.
The noble Lord asked about guidance. The guidance to support firms in their compliance with the money laundering regulations, as he noted, is drafted by sector- specific expert bodies and then approved by the Treasury. Updates to the guidance to reflect the changes brought in by this SI are already under way. The Treasury will commence its approval process to ensure accuracy and consistency once it has received that draft guidance. I do not have an end date for the process but I can reassure the noble Lord that it has already begun.
On crypto, I cannot speak for the new Chancellor, but I can speak for the Government’s position in terms of both being ambitious for the UK as a market for crypto currency but within that making sure that it is well regulated. Those two things go hand in hand. We will see measures in the forthcoming financial services and markets Bill relating specifically to the regulation of stablecoins, which are a form of crypto, as well as further consideration from the Government about the wider regulation needed in that area.
The Financial Action Task Force is the international standards setter for anti-money laundering and counterterrorism financing. Where members do not sufficiently meet their obligations to implement FATF standards, they are publicly identified by the FATF and subject to enhanced monitoring. All FATF members must report three times a year on the measures they are taking to protect against money laundering. As an FATF member, we are committed to maintaining those standards, particularly post EU exit, where the FATF is the international standards setter in this area. As I referred to in my opening speech, some of the measures here address some points from the FATF on proliferation financing.
The noble Lord asked about progress on implementing the economic crime Act part 1 and the register of overseas entities. During the Bill’s passage through Parliament, the Government undertook to deliver the register as soon as practicable. The three UK land registries, together with Companies House, have been working at pace to ensure that we can get the register up and running as quickly as possible and that it works as intended. We had statutory instruments laid before the House in June and further regulations approved by the House last week. The register is planned to begin operating over the summer, with further instruments to underpin the register’s operation made in the autumn.
On the economic crime Bill part 2—to use its unofficial name—I reassure the noble Lord that my noble friend’s commitments still stand, and I believe that we expect to see the Bill introduced to Parliament shortly after the Summer Recess, which I think would still count as “early in the Session”.
The powers of Companies House to investigate are narrowly defined under current legislation. Funding was allocated at the spending review to improve data-sharing capabilities and develop a system to verify identities of directors and deploy machine learning to identify suspicious activity. However, we need to go further through reforms proposed in the new economic crime Bill. That is why noble Lords have pressed us so hard on its introduction.
This is a complex area of law. The Companies House reforms amount to the largest change to our system of setting up and operating companies since the companies register was created more than 170 years ago, so we need to ensure that the proposals are effective and work coherently. As I said, the Government intend to introduce this legislation shortly after the Summer Recess.
I hope that I have addressed the noble Lord’s points. I owe him a letter containing the documents we discussed anyway. If I have not addressed any of his points, I will make sure that they are included there. I commend these regulations.
Merchant Shipping (Additional Safety Measures for Bulk Carriers) Regulations 2022
Considered in Grand Committee
My Lords, these regulations relate to the safety of bulk carriers: ships which are vital in the trading of world commodities. Bulk carriers transport, in bulk, unpackaged cargo such as grain, coal, iron ore and cement.
These regulations will be made under the safety powers conferred by the Merchant Shipping Act 1995. However, they are subject to the enhanced scrutiny procedures under the European Union (Withdrawal) Act 2018, as they will revoke the Merchant Shipping (Additional Safety Measures for Bulk Carriers) Regulations 1999—which I will call “the 1999 regulations”—which were subject to minor amendments made by Section 2(2) of the European Communities Act 1972.
As noted, these regulations will replace the 1999 regulations in order to implement the most up-to-date requirements of chapter XII in the annexe to the International Convention for the Safety of Life at Sea 1974—known as SOLAS—affecting bulk carriers. The regulations will further improve the safety standards for bulk carriers and will enable the UK to enforce these requirements against UK ships wherever they may be in the world, and non-UK ships when they are in UK waters. The amendments bring UK legislation up to date and in line with internationally agreed requirements.
The updated requirements of SOLAS chapter XII, which these regulations seek to implement, introduce restrictions on bulk carriers on sailing with any hold empty. This relates to stability because, should the empty hold flood, the dynamic effects of water in the hold could cause the vessel to capsize. The regulations also set the standards that an owner must meet for the inspection and maintenance of bulk carrier hatch covers, which is critical to ensure the watertight integrity of the ship.
The regulations require bulk carriers that are less than 150 metres in length to be fitted with a loading instrument capable of providing information on the ship’s stability, assessed against the ship’s design limits, to ensure safe loading. This requirement is already in place for bulk carriers of 150 metres or greater in length but is now extended to all bulk carriers.
The regulations require bulk carriers of double-side skin construction to comply with the same damage stability requirements as single-side skin constructed bulk carriers. Previously, and in the current 1999 regulations, there were no set damage stability requirements for double-side skin bulk carriers, as their design was less prevalent than it is now.
The updates also include requiring these double-side skin constructed bulk carriers to comply with requirements to have sufficient strength to withstand flooding of any single cargo hold to the water level outside the ship, as well as providing technical details regarding the construction standards for these ships, and an amendment to the survey reference to recognise the enhanced programme of surveys for bulk carriers.
The regulations also include standards and criteria for side structures for bulk carriers of single-side skin construction. These standards include requirements for the thickness of the side of the ship.
All the updated requirements are important for ensuring the safety and stability of bulk carriers and they increase safety standards to be in line with these international requirements. Introducing the requirements in these regulations will enable the UK to enforce them on bulk carriers that sail within the UK’s waters and do not meet these important safety standards.
The regulations apply to seagoing bulk carriers of 500 gross tonnes or more. They make some direct references to the provisions of SOLAS chapter XII. These references are made ambulatory so future updates to the referenced provisions will be given direct effect in UK law when they enter into force internationally. This assists in keeping UK legislation up to date with international requirements in this area.
To conclude, approval of these regulations would ensure that the UK meets its international obligations. The UK has already agreed to the amendments in the International Maritime Organization and these regulations will ensure that the UK is able to enforce the requirements. Ultimately, the regulations improve the safety standards for bulk carriers. I beg to move.
My Lords, I am grateful to the noble Baroness for introducing this very important instrument. It is quite complex and long. The problem which caused these new regulations to be introduced was the tragic sinking of the MV “Derbyshire” in 1980—the noble Baroness is shaking her head, but I think that is what it says in the briefing—and it is now 42 years later. What has happened in the meantime? I hope this is not another of the potential regulations from the marine section in her department which seem to have been delayed and which we have discussed before. These regulations are very important and I would like to know what has taken so long. I am sure the Brexit negotiations have had something to do with it.
The noble Baroness is absolutely right in what she says about the need for stability, double-skinned vessels and fixed covers. I would be grateful if she could confirm whether the regulations apply to what are generally towed barges—I would call them barges, but I suppose they are vessels, technically—such as those used for disposing the Crossrail spoil down the Thames about five years ago. Because they were moving on the tidal sea, they had to have covers that were strapped down, which was absolutely right, and I am sure they all complied. But there are now people doing business around the south-west who believe they can profitably rescue lithium ore from some of the mines or beaches of Cornwall. One such proposal was to take this in a vessel around Land’s End for processing in one of the ports on the south coast. I trust that that kind of transport is covered by this instrument, because it is pretty rough around there and these are very important safety rules.
I will not go through the whole instrument, because that would take a very long time and be very boring, but Part 4 on enforcement is interesting. It lists 10 different regulations, which are all to do with enforcement and which all, with one exception, apply to the owner and the master. Who does the enforcement? If the owner or master is found guilty, what level of fine would be applicable? I assume there would not be a prison sentence, but perhaps the noble Baroness could confirm that.
I have a slight problem with the way some of these things are enforced. Some years ago, I was a member of the harbour commission in the port of Fowey in Cornwall, which, of course, welcomes china clay ships and exports bulk ships—which are obviously covered by the regulations. It is not one of the cargoes referred to, but it is a dry cargo and a powder, so I am sure it is included.
One day, somebody came in and said, “We’ve just seen a Russian ship come in ready to be loaded with china clay, and we’ve seen a hole about six inches large in the bottom of the hull with a couple of rags stuffed in it.” The tide was wrong, so everybody could see it as they went past. If it had been a different tide, heaven knows what would have happened. The ship probably would not have sunk, although it would not have helped the china clay very much.
On enforcement, it is clear that most of the initial reports will come from the harbours and ports where ships come and go. I have come across this in other parts of harbours legislation. Some ports are, one fears, not very enthusiastic about reporting small defects for fear that the ships or cargo might not come back and they will lose income. Obviously, the MCA deals with it when it reaches it, but it clearly needs to know about it.
It would be interesting to know whether the Minister has any information on how many such incidents have been reported in the past few years, how many were against British-registered ships, of which they probably are not many any more, and how many were against foreign-registered ships. It is terribly important that the regulations, which I thoroughly support, are enforced fairly but comprehensively in every port, big or small, around the country. The regulations are very good, I look forward to the Minister’s answers and I congratulate her on, eventually, bringing this instrument forward.
My Lords, I welcome the legislation being updated to ensure that we meet our international safety obligations for bulk carriers; it is clearly right to do so. There was an eight-week consultation, which elicited only one response, resulting in no changes, so it is good that there was full consultation.
However—the noble Lord, Lord Berkeley, covered this point—there seem to have been no substantive amendments to the regulations since 2004. The 2018 amendments were minor, yet the design of bulk carriers has been transformed since the turn of the century, and ships are much larger, so it is extremely important that our legislation is up to date. We welcome the fact that this SI sensibly establishes a system for keeping us in step with international standards for the future.
The Explanatory Memorandum, at paragraph 3.2, explains the conclusions of the Secondary Legislation Scrutiny Committee, which discovered a massive backlog of EU maritime legislation that had never been incorporated into UK law. This seems to go back more than a decade, which suggests that we have not been internationally compliant, which would be a worrying situation for a maritime nation. I therefore ask the Minister whether what I have just said is true; I should appreciate confirmation.
The noble Lord, Lord Berkeley, made a number of points, one of which was about enforcement. I have two questions on that. As I understand it, there are 28 bulk carriers registered on the UK flag, and they are all, apparently, already compliant. Paragraph 4.2 of the Explanatory Memorandum says that bulk carriers registered under other flags must also comply while in UK waters.
Worldwide, there are many thousands of such bulk carriers. It would be helpful for the Minister to say how many carriers under other flags are entering UK waters, let us say in the course of a year, and what checks have been done and will be done to establish that they comply with the convention. Clearly, in the context of many thousands of bulk carriers across the world, only 28 are registered with a UK flag.
Secondly, the statutory instrument has a long and complex list of exceptions in Regulation 7. Is the Minister convinced that it will be effective given that number of exceptions, and are they all based on international precedent and regulations which are adopted elsewhere? In other words, is that list of exceptions our list that would apply only to this country, or are we establishing exceptions based on what other countries also do?
I welcome generally the statutory instrument—the proposal is absolutely right—but it has raised a number of questions and it would help if they were clarified.
My Lords, I welcome the draft regulations to revoke and replace the Merchant Shipping (Additional Safety Measures for Bulk Carriers) Regulations 1999, to ensure that the International Convention for the Safety of Life at Sea 1974 is fully implemented.
These regulations affect bulk carriers and enforce chapter XII requirements, such as standards and criteria for construction, inspection and maintenance of both UK-flagged and non-UK flagged vessels. On this, can the Minister confirm what discussions the department held with international counterparts to ensure that non-UK flagged vessels are aware of these changes? It is important that these are fully incorporated into domestic statute, in part so that they can be enforced but also to act as a deterrent, which will make bulk carriers safer, including for the benefit of seafarers. On the issue of seafarers’ safety, can the Minister confirm that the department worked with trade union representatives in the development of these regulations?
There are, of course, limitations to the application of the regulations; the requirements for bulk carriers of double-side skin construction cover only those constructed on or after 1 July 2006. Is the Minister able to provide an estimate of what proportion of carriers are therefore covered? I welcome the regulations and I hope that the Minister can provide some clarification.
I know absolutely nothing about bulk carriers; I have to admit that it has really stood in my way in this House. There is a fair old gap on this occasion, so I went to my friendly Google and came away terrified. It seems that these ships face a worrying variety of hazards. We had the “Derbyshire”, which is a story relevant to today. In a sense, the problem with these regulations is that they are about complying with somebody else’s regulations. I feel that to some extent it would be useful if there could be some overview of how safety has improved. In particular, is there anything outstanding? Do we know of risks that are not covered but which ought to be addressed, simply because they have emerged through recent design changes, different cargoes, and so on?
Secondly, can the Minister give a few words of comfort about the many ships which, I assume, were constructed before 1 July 2006? Are those ships safe on the seas and in our ports?
I thank noble Lords for a short but very interesting discussion. As I stand up, I know that I cannot answer all the questions that have been posed and will therefore write. However, I will take a pretty good stab at some of them.
Let us first address the elephant in the room, mentioned by the noble Lords, Lord Berkeley and Lord Shipley—the maritime backlog. The Secondary Legislation Scrutiny Committee is absolutely rightly holding the department’s feet to the fire on this. My colleague in the other place, the Maritime Minister, has had lengthy discussions with the SLSC to reassure it that we are working through the maritime backlog as a priority. Not only Covid but some Ukraine legislation have meant that we have not been able to go as quickly as we would like. Much of it is to bring UK domestic law in line with existing international maritime convention standards. Many of these vessels are international and will therefore comply with them anyway, because they are international standards, but I accept that we need to make sure our UK domestic law is up to date so that we can enforce these standards in our ports at home.
These regulations are one of the 13 outstanding statutory instruments identified as the international backlog. This April, the Maritime Minister updated the SLSC to confirm that there are just nine left. If this is passed, we will be down to eight. We committed to the SLSC that we would be on target to clear the backlog by the end of next year and we are still on target to achieve that. Noble Lords can expect to look forward to many debates like this in future.
I turn to some of the questions raised by noble Lords, starting with a question from the noble Lord, Lord Tunnicliffe. He asked about the discussions we have had with international counterparts to ensure that non-UK flag vessels are aware of the changes. As noble Lords have pointed out, these changes were developed and agreed in the international forum—the International Maritime Organization—over 14 years ago. The UK was fully engaged in those discussions, supported them and helped to shape the standards we now have. Given the international nature of shipping and the discussions that have been going on in the IMO for some time, the Government expect that non-UK flag vessels will be aware of these long-standing measures, and we fully expect them to be compliant.
The noble Lord, Lord Tunnicliffe, asked whether the department works with trade unions on seafarers’ safety. It is absolutely right that we make sure we have connections with the trade unions. The consultation for this document, as the noble Lord, Lord Shipley, pointed out, elicited just one response, from the Law Society of Scotland, to raise a point of clarity around the use of the ambulatory referencing. We did not get a response from any trade unions—and we sent reminder emails out—but I sense they would have felt, “But we already inputted that when they were discussed at the IMO.” The International Transport Workers’ Federation, a non-governmental organisation with observer status at the IMO, was involved in the discussions leading to the development of the policy, so I am content that the views of workers will certainly have been taken on board.
On the requirement for bulk carriers of double-side skin construction covering only those constructed on or after 1 July 2006, as the noble Lord, Lord Shipley, pointed out, there are 28 bulk carriers on the UK flag. Three of these, two of which are of single-side skin construction, were built before the requirements came into force. We believe that the 28 vessels are already compliant with the requirements of the regulations and additionally are all classed with the International Association of Classification Societies, which has already implemented the international requirements within its own rules. So I do not think there are any ships of this type floating around which are not within the standards.
The noble Lord, Lord Berkeley, asked about enforcement. He is absolutely right: the MCA does enforcement. We very much hope that the ports would collaborate with the MCA to ensure the safety, security and well-being of all workers at sea and the vessels they work in. If things are found not to be in accordance with the standards, there are very significant penalties of unlimited fines in England and Wales and fines up to the statutory maximum in Scotland.
The noble Lord also asked how many incidents had been raised so far. We have not enforced this in the past, so we do not have any historic data. However, clearly, we will keep an eye on this to see whether it is a particular problem. I suspect it may not be the biggest issue faced by the MCA, but we will keep an eye on it.
The noble Lord, Lord Shipley, asked a perfectly reasonable question that I am very embarrassed that I do not have the answer to about how many carriers of this type turn up in UK ports every year. I do not know, but I am going to find out. We will also find out how many checks are done and the level of enforcement from the MCA that goes on.
The noble Lord, Lord Berkeley, mentioned the MV “Derbyshire”, which was a very tragic loss that took place a few decades ago. The 1999 regulations implemented the bulk carrier-specific SOLAS requirements made at the International Maritime Organization in 1997. Then, following the publication of the report into the sinking of the MV “Derbyshire” in 1998, the International Maritime Organization’s Maritime Safety Committee initiated a further review of bulk carrier safety and adopted amendments in 2002. These were implemented in 2002 and the UK’s 1999 regulations were amended accordingly. The proposed regulations replace the 1999 regulations by updating the requirements and introducing these further measures.
The noble Lord, Lord Tunnicliffe, suggested that we might have an overview of maritime safety improvements. I am going to take that back to the department, because it might be quite an interesting thing to do; it would give noble Lords an indication of where we are now, both domestically and internationally, and how that fits into the backlog, so that we can see what is coming down the track and where we have come from. I will take that away. I hope noble Lords will forgive me; it may not be before recess. We might need the summer period, but when we come back in September, maybe we could even get some maritime officials together to have a chat about maritime safety. That might be a nice way forward.
I have a couple more points to address. On the exceptions, yes, they are all international exceptions; that is absolutely right. I think I have now dealt with everything, but of course we will go over Hansard. I have in my mind something to do with lithium and Crossrail spoil, so I want to make sure that that is not something I need to respond to.
Chemicals (Health and Safety) Trade and Miscellaneous Amendments Regulations 2022
Considered in Grand Committee
My Lords, this draft statutory instrument was laid before Parliament on 23 June. As part of this Government’s ambitious international trade agenda, the United Kingdom signed a free trade agreement last year with the European Economic Area and European Free Trade Association countries, such as Iceland, Liechtenstein and Norway. This agreement included a chemicals annex as part of the technical barriers to trade provisions, which committed both parties to co-operate in the field of chemicals regulation.
This draft statutory instrument makes a provision for this chemical annex so that the Health and Safety Executive can share information on chemicals it holds, such as individual regulatory substance evaluations and risk assessments, with the authorities in those countries. The SI also allows the UK authorities to make use of information received from EEA/EFTA countries to help to ensure protection in the areas of health and safety, the environment and consumers. This sharing of information will promote greater transparency and understanding of our respective regulatory approaches and of chemicals safety. It will also help to create a greater understanding of the decision-making processes in the UK, which will build trust and confidence with EEA/EFTA countries, enhancing the robustness of decision-making, and thereby reduce regulatory costs for UK businesses wishing to place chemical products on the market in EEA/EFTA countries.
This SI also corrects minor outstanding deficiencies such as references to EU institutions in several pieces of retained chemicals law arising from leaving the EU, to ensure that the relevant chemicals regimes continue to operate effectively. There are no policy changes or changes to duties but, since it is such a technical instrument, I am sure that a brief summary of the changes will be welcomed.
The first of the three retained regulations to be amended is the GB biocidal products regulation, which governs the placing on the market and use of products that contain chemicals that protect humans, animals, materials or articles against harmful organisms such as pests or bacteria. It is in place to ensure these chemicals are safe for humans, animals and the environment while improving the functioning of the biocidal products market. This market covers a wide range of products, such as wood preservatives, insecticides such as wasp spray, or anti-fouling paint to remove barnacles from boats.
The second is the GB classification, labelling and packaging of substances and mixtures regulation, which ensures that the hazardous intrinsic properties of chemicals are properly identified and effectively communicated to those throughout the supply chain, including to the point of use, partly through standardised hazard pictograms and warning phrases associated with specific hazards, such as explosivity, acute toxicity or carcinogenicity.
The third amendment is to the GB prior informed consent regulation, which implements the UK’s obligations under the international Rotterdam convention and requires exports of listed chemicals to be notified to the importing country; for some chemicals, the consent of the importing country must be obtained before export can proceed.
In addition, this SI makes minor technical amendments to several pieces of EU-derived domestic legislation. The provisions for CLP, BP and PIC that I have just mentioned were brought into GB law from EU law but, during this process, some EU references within the legislation were not removed. The SI will ensure that these references are removed so that the CLP, BP and PIC provisions work as domestic legislation in Great Britain.
Finally, the SI will correct and update references related to EU exit in the Plant Protection Product (Fees and Charges) Regulations 2011 and the Biocidal Products and Chemicals (Appointment of Authorities and Enforcement) Regulations 2013. It will also clarify provisions in the Health and Safety and Nuclear (Fees) Regulations 2021 on fees payable for activities carried out by HSE as the competent authority in relation to biocides.
In conclusion, I take this opportunity to reiterate and emphasise that the changes this SI will make to retained and EU-derived chemicals legislation are minor technical amendments and make no changes to either policy or duties. I hope that colleagues of all parties will join me in supporting the draft regulations, and I commend them to the Committee.
My Lords, I thank the Minister very much for her clear introduction to what are at first sight some rather technical and dry regulations. Technical and dry they may be, but they are very important. They deal with matters of considerable import, not least to agriculture, as well as to horticulture, which is also a significant part of our economy. The clear and consistent labelling of chemical products not only to people who import and export them but to consumers across the world is of increasing importance.
I take what the noble Baroness says—that these are simply technical changes consequent on our withdrawal from the EU—but I have a few questions. Do the regulations simply return GB law—I will come back to the difference between GB and UK law in a moment —to the point it was at when we exited the EU? Do they in any way impact on the future convergence of information exchange about labelling standards? The wording of the explanation of the role of the HSE and phrases such as “enabling there to be a pathway” for the HSE are somewhat general for such a tight and specific subject, and I did not find that particularly helpful. Are the regulations simply maintaining the status quo as it was when we exited the EU, or are they the basis for continuing monitoring of our diversions or convergence with EU legislation in this matter?
Secondly, there are specific references to Northern Ireland. The Explanatory Memorandum at paragraph 7 talks about the biocides regulation and makes particular reference to products that would be imported into Great Britain. I think it draws a distinction between products that will be imported into Great Britain and thence into Northern Ireland and, in similar fashion, the other way round. We are back to the vexed and as yet unresolved question of the Northern Ireland protocol and the Northern Ireland border. This is a really important subject because, as we know, agriculture is a significant part of the Northern Ireland economy. If we do not have clarity and consistency with other parts of the EU on biocidal products and chemicals, that must pose a significant risk.
Finally, towards the end of her introduction the Minister referred to cost. Can she say what the estimated cost to UK businesses will be in terms of the increased costs of maintaining regular exports to EEA and EFTA countries, and the estimated increase in import costs for products from those countries? I would be very much obliged if she answered some of those points.
My Lords, I thank the Minister for her introduction to these regulations and for explaining them. I confess that I read both the regulations and the Explanatory Memorandum more than once, and stopped only when I realised that every successive reading was adding nothing to my understanding or indeed knowledge of the subject in question. So, I appreciate her summary.
I thank the noble Baroness, Lady Barker, for some great questions. She is absolutely right that, while they seem dry, questions such as the easily comprehensible labelling of dangerous objects could hardly be more important in terms of protecting life and limb. I will ask some questions, and I apologise in advance if they are basic. However, I trust that the Minister has cavalry behind her who can assist should that be necessary.
As far as I can understand it—I know that the Minister will correct me when she responds if I have got it wrong—the instrument appears to do two main things. First, it provides for the creation of an information- sharing gateway so that the Health and Safety Executive can disclose information that it is required to disclose under the terms of the trade agreement between the UK and the EEA/EFTA. My first question is: what is it? What will the gateway look like? Is it a process or a piece of software? Is it online and is it secure?
The second question is fairly obvious: what will it do? The Explanatory Memorandum says:
“HSE needs a power in order to share information such as individual substance evaluations and risk assessments that it holds on chemicals to assist the UK in meeting its obligations on regulatory co-operation contained in the Chemicals Annex of this trade agreement.”
Can the Minister give me an example—I am a bear of very little brain—of some information that the UK is required to disclose as a result of this trade agreement which is in the gift of the HSE and which it currently does not have the power to disclose but, as a result of this regulation, will then be able to disclose?
Can the Minister also tell us where the information is coming from? She mentioned information coming from EFTA or EEA trade partners, but are we also talking about information that British firms have supplied to the HSE in the ordinary run of business? I am interested in the line of liability and the control of the data. Whose data is it, who controls it and where will it end up?
What are the limits on disclosure? Regulation 3 sets out three “permitted purposes” under which this information can be disclosed:
“to ensure health and safety … to ensure protection of consumers”
“to ensure protection of the environment.”
That is pretty broad. Given that it is that wide-reaching, can the Minister say what the boundaries are for disclosure and whether there will be any monitoring of the HSE’s decision-making in relation to it? Since the received information can be used only for a permitted purpose, what will be in place to monitor the use after the information has been disclosed?
There is a lot of amending and repealing going on here—amending the biocides regulation, amending and repealing two EU directives. How can you amend and repeal things? Do you amend them and then repeal them? I suppose it would not make any sense the other way around, but perhaps the Minister can shed some light on that. There was also amendment of the CLP regulation, the PIC regulation and related retained legislation
“to ensure the regulations continue to operate effectively.”
At this point I had completely lost any sense of which regulations were being enabled to operate effectively.
I am trying to get at what the end state is—the noble Baroness, Lady Barker, put it much more crisply. Where will we land once all this amending and repealing has happened? Are we back where we were before Brexit? Are we in a parallel space to where our EEA/EFTA trade partners are? Are we on some different diverging path? Where will we land? Also, can she assure us that, once all this amending and repealing has happened, the legislation—both retained and secondary—relating to health and safety in chemicals will be fit for purpose?
To give the Minister a bit of time, I will summarise the questions. What is the gateway? What information will go through it? Can we have an example of it? Where does the information come from? What are the limits on the information that can be disclosed, given the very wide-ranging parameters in the regulations? Where will we land once all this has happened? I am very excited to hear her reply.
I thank the eloquent noble Baronesses for their questions. As they say, this is a very technical piece of work, but I will do my best to respond. My cavalry is working very hard to ensure that I can do so with accuracy. I thank both noble Baronesses for contributing to this debate. In closing, I will try to deal with some of the issues. If I do not, noble Lords know that I will go away and do my homework to get the answers they deserve.
The noble Baroness, Lady Barker, asked about the Northern Ireland protocol. This instrument makes no changes in relation to Northern Ireland beyond correcting references in EU-derived domestic legislation to EU law which should reference the Protocol on Ireland/Northern Ireland and ensuring that the definition of “export” in the GB PIC regulation clearly captures the removal of chemicals from Great Britain to Northern Ireland, as intended.
The noble Baroness also asked whether the regulations simply return GB regulations to their state when we left the EU. The CLP regulation has been retained as domestic law and now establishes a GB CLP system that is independent from the EU CLP regulation. It is therefore necessary to ensure our regulations no longer make deficient references to EU institutions or their processes and authority. These proposed changes ensure the last remaining references to the European Commission and its delegated powers to make amendments to specified articles and annexes are removed from the retained GB CLP regulation.
The noble Baroness, Lady Barker, referred to the biocidal products regulation, or BPR. The regulations were brought into GB from EU BPR, but during this process, as I have said, some EU references within the legislation were not removed, so the changes in this SI ensure that GB BPR works as a piece of domestic legislation.
The noble Baroness also asked about estimated costs. There will be no costs to businesses arising from the regulatory information-sharing arrangements in the UK-EEA/EFTA trade agreement. The corrections to the retained chemicals regulations are to address deficiencies and inoperabilities. They allow the regulations to function as originally intended and do not have any financial implications.
The noble Baroness, Lady Sherlock, challenged us on what the information-sharing gateway will look like. It will be mostly regulatory information held by the HSE or parties to agreements, so it will be information on risk assessments—not confidential business info. Trade data will be for the Department for International Trade.
The noble Baroness, Lady Sherlock, raised the issue of disclosure. The GB PIC regulation implements the UK’s international obligations under the Rotterdam convention on the prior informed consent procedure for severely hazardous pesticides. The regulation establishes a system of export notification and information exchange to allow countries to make informed decisions about the chemicals they import. The GB regulation has been retained as domestic law, and now establishes a GB PIC export notification system that is independent from the EU PIC regulation.
The SI amends references to the Taxation (Cross-Border Trade) Act 2018 in the definition of export in GB PIC to ensure that it clearly captures removal of chemicals from Great Britain to Northern Ireland, as intended. Disclosure of information is subject to data protection regulations. Another example of disclosure is regulator-to-regulator information on our approaches to regulating anti-fouling paints, which remove barnacles from boats.
I hope I have covered the questions. If I have not done so to noble Lords’ satisfaction or there are some outstanding, I give my word that I will write with the information. To conclude, this instrument will give HSE—
I shall not press the Minister any further now. She has helpfully described what the regulations are intended to do, but she has not helped laypeople such as the noble Baroness, Lady Barker, and I to understand what the end state will look like as a result of them. For example, she said that through removing deficiencies, we will have an independent GB CLP regulation process. It is great that it will not be deficient any more; I have no idea what it will look like, and I realise I should. If possible, when she writes, given the complexity of the regulations and the question, if she could describe the end state, we would be very grateful.
I am very happy to commit to doing that, subject to agreement from my officials. We are fine.
To conclude, the instrument will give HSE the power it needs to share regulatory information it holds on chemicals to assist the UK in meeting its obligations on regulatory co-operation contained in the chemicals annexe to the free trade agreement with the EEA/EFTA countries. This removes the barrier which was stopping information sharing under the free trade agreement, which would have been detrimental to HSE making informed decisions about the chemicals being imported and exported. By also correcting the outstanding deficiencies related to EU exit, we will ensure that retained and EU-derived domestic chemicals legislation continues to operate effectively. Therefore, I commend the instrument.
Committee adjourned at 5.18 pm.