§ 4.20 p.m.
§ Lord MACKAY of CLASHFERN
My Lords, I beg to move that this Bill be read a second time. I am moving today the Second Reading of a Bill which deals with matters which are of the greatest importance to the interests of the United Kingdom as an international trading nation. The objective of this Bill is to improve the defence of the United Kingdom against attempts by other countries to enforce their economic and commercial policies outside their own territories.
The problem was recognised as long ago as 1964 in relation to international shipping and the Shipping Contracts and Commercial Documents Act of that year introduced a measure of protection in relation to shipping. Since then the problem has spread to many other areas of trade, as I shall show briefly. In theory this is a problem which could arise generally since many countries have policies which they might seek to enforce beyond the normal bounds of national jurisdiction as recognised in international law. However, the practices to which successive United Kingdom Governments have taken exception have arisen almost entirely, I am sorry to say, from the United States of America. That powerful friend and ally has over several decades been developing a policy of enforcing its economic rules outside its own jurisdiction, in a manner which has become even more acutely difficult for us over the last few years.
The Government recognise that the United Kingdom bears a heavy responsibility in the maintenance of the open international trading system in what is an increasingly interdependent trading world. We have to maintain the principle of enterprise and competition between undertakings within individual nations, and between trading nations themselves. At the same time, the increasing volume of international trade, the swiftness of modern communications, the international nature 555 of many enterprises and increasing specialisation on the part of industrial nations mean that, while trading nations are interdependent in a real sense, their economic and commercial policies are bound sometimes to come into conflict.
We recognise this, and we believe that the right way to sort out the resulting differences of policy and approach is by inter-governmental discussion and negotiation through the established international bodies by which trade policy is co-ordinated, as well as in bilateral contacts and negotiations between Governments. Only where the results of discussion and negotiation are unsatisfactory do we have to fall back upon the basic principle limiting the extent to which a country's jurisdiction is recognised in international law.
The United States has over the last three decades shown a tendency increasingly to try to mould the international economic and trading world in its own image. This is an attitude not only of the United States legislature, but it is shared by its courts and its enforcement agencies, all of whom have contributed to the matters to which we take objection. By this I mean that there are certain well-established and deeply held principles in United States economic thought and law which they are well entitled to enforce rigorously within their own jurisdiction, but which, no doubt from the best of motives, they have increasingly sought to impose on their trading partners elsewhere in the world. Pre-eminently this happens in the field of anti-trust, but, as I shall explain later, there are several other areas in which the United States seeks to impose its own law or concept of good practice on others.
I turn first to the anti-trust field, in which our differences with the United States have been wide-ranging and have affected such different and, to us, such important trading interests as oil, platinum and uranium, aviation and book-publishing, as well as shipping. Since this field is perhaps the most important illustration of our difficulties, perhaps your Lordships would hear with me if I concentrate on it for a few minutes.
The basic anti-trust statute is the Sherman Act which, as your Lordships will know, was passed in 1890. That Act 556 is based upon broad policies outlawing restraints of trade in very general terms. It has been amended from time to time—for example, by the Clayton Act in 1914—and has, of course, been considerably developed by the process of judicial interpretation. The legislation provides for criminal offences and also for civil actions for damages, in which the sum awarded is three times the amount of damage suffered in consequence of the breach of the statute. If this legislation was applied only to activities within the United States we could have no reasonable objection, and this was the extent to which the legislation was originally enforced.
By 1945, however, the United States' view of its position in the world had affected the attitude of the United States courts. In a case generally known as the Alcoa case, involving a Canadian and five European aluminium producers who had joined together to allocate the amount of aluminium to be produced, the United States alleged that there had been an effect on the price of aluminium in the United States of America. A quorum of the Supreme Court could not be obtained and, therefore, a special statutory court was set up. In giving the judgment of that court, Judge Learned Hand stated,That any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the State reprehends".This is the "effects doctrine" and it has been applied and extended not only by the United States courts in relation to the granting of court orders, but also by the regulatory authorities in relation to action outside the courts.
In the application of this doctrine, the United States courts and agencies pay comparatively little attention to the interests of foreign states, unless the acts in question are mandatory under the law of those states. Although in some recent cases the United States courts have shown an awareness of the international implications of their claims to jurisdiction, and have expressed a willingness to take into account the domestic policies of other countries, it is highly doubtful whether there is any real change in the rule they apply.
As I have said, the Acts are enforced not only by criminal sanctions in the 557 ordinary way, but they also confer a right to treble damages on parties claiming to be injured by them. We regard these civil actions as being penal in character, rather than compensatory. The United States Government itself, in a note to Her Majesty's Government about the Bill, a copy of which is in your Lordships' Library, has stated that,The private treble damage action acts as a deterrent to illegal activity in the same manner as governmental enforcement and provides an incentive to victims to act as private Attornies General".This possibility of concurrent criminal and civil penal proceedings introduces a clear element of double jeopardy, and in civil proceedings the plaintiff will be acting, as the United States Government has pointed out, not with the quasi-judicial discretion of a prosecuting authority, but in his own financial interest.
These civil proceedings are not subject to any of the limitations we would regard as appropriate to criminal proceedings, whether in the course of the proceedings themselves or to the eventual penalty. For example, the defendant need not be present in the United States. Whether or not he appears, he is subject to wide-ranging discovery of documents. Failure to appear is deemed to involve an admission of the plaintiff's pleaded facts or, in other words, to be an admission of guilt. The United States system of class actions and the contingency fee method of payment to lawyers combine to facilitate the bringing of these actions.
Our objection to excessive United States claims to jurisdiction and to United States practices in this field are long-standing and sustained. In the early 1950s Her Majesty's Government intervened in a case involving the major British oil companies. In 1959 we discussed our differences at a meeting between the two Attorneys-General. This was followed in 1960 by formal discussions in Washington, at which I understand the noble and learned Lord, Lord Wilberforce, was present. Discussions and representations have continued ever since, but to limited effect, although I should like to record with gratitude that the United States Government, bound as it is by the tight rules of its own law, has at least managed to help us in giving advance notice of investigations which might concern us.
558 As I said, this matter first attracted the attention of Parliament in relation to shipping, and shipping continues to be much affected by these difficulties. Only recently two of our shipping lines operating in the North Atlantic were very heavily lined and now face treble damage proceedings arising from the same matters. But, as I said, the problem is by no means confined to shipping. Let me give just one further illustration. This is an illustration only, but an extremely good one. In 1964, when the United States uranium mining industry was threatened by foreign imports, it was afforded long-term protection by means of an effective ban on the import of uranium for use in United States reactors. This had the immediate effect of denying to the non-United States producers about three-quarters of the world market for uranium. During the late 1960s and early 1970s Westinghouse, the USA's biggest power engineering company, concluded a number of contracts relating to the construction of nuclear power stations in which they agreed to supply future quantities of uranium, but did not take the precaution of buying forward to cover those commitments.
Following a large and unexpected increase in the price of uranium after 1973, Westinghouse found themselves in serious difficulties and, in September 1975, they gave notice that their uranium supply contracts had become "commercially impracticable", blaming the large oil price rise in 1973 and the "actions of foreign uranium producing countries and companies that have significantly curtailed international uranium supplies" as the cause. This led to Westinghouse being sued by the public power utilities. The total amount of compensation claimed was in the region of two billion dollars. It was an attempt by Westinghouse to obtain from RTZ evidence in these proceedings which led to the Westinghouse v. RTZ appeal in your Lordships' House in 1977.
Westinghouse, in their turn, took this figure as the basis for a treble damages anti-trust claim against the uranium producers, brought in Illinois. This latter case is still going on. The action of the non-United States uranium producers was in any event fully supported by the Governments of the uranium producing countries involved and was a direct result of the earlier United States pro- 559 tectionist embargo. It appears quite unreasonable that a United States company should now be able to bring United Kingdom and other non-United States companies before a United States court in order to obtain massive damages multiplied threefold, and thus involving considerable enrichment, for activities by non-United States companies outside the United States at a time when they were denied access to the United States market. I hope the House will agree that whether it be shipping, uranium, or any other trading activity that is affected, no Government can stand by and allow companies vital in our trading structure to be threatened in this way when we contest the very basis of the United States action.
But the anti-trust Acts are not the only cause of contention between ourselves and the United States. There are many agencies which have criminal or civil powers in the execution of the duties laid on them by the United States Congress. These powers may lead them on occasion to pursue inquiries or launch proceedings against persons who, according to the conception of international law to which we adhere, are outside the jurisdiction of the United States and in relation to which successive Governments have been obliged to intervene on behalf of our traders. These agencies include the Federal Trade Commission, the Securities and Exchange Commission, the Federal Maritime Commission, and others.
In all these fields the Americans regard it as appropriate that they should exercise unilateral control over any activity which has an effect on United States commerce, whether domestic or foreign, and we have the same objections as we have in relation to the anti-trust Acts. Our objections are not theoretical. For example, we have to take exception to an investigation by the Securities and Exchange Commission relating to the activities outside the United States of a major United Kingdom company. The claimed jurisdictional basis for the inquiry is solely that depositary receipts based on United Kingdom-held shares of the company were being dealt in in the United States. The company itself was in no way a party to these arrangements.
A third objectionable practice on the part of the United States is that it from 560 time to time treats companies in which United States citizens hold a number of shares—not even enough to make the companies subsidiaries of United States companies—as being for that reason subject to United States jurisdiction. An example can be found in regulations made under the Export Administration Act 1979, which treat a non-United States company in which there may be as little as a 25 per cent. United States interest as "controlled in fact", and therefore as an American company for the purpose of the Act. Such companies are required to behave in certain ways, including providing information under the regulations. The requirements could well be prejudicial to the commercial and economic policies of the countries in which these companies arc incorporated and do business, and the United States claim to jurisdiction and control over them is, in our view, entirely unjustified.
Therefore, in the light of the recent intensification of the problems which I have just outlined, we hold strongly that it is time for the United Kingdom to take what action is open to us, not to undermine the legal system of a friendly country, nor to attack the exercise of jurisdiction by the country within its own borders, but to protect the legitimate economic and trading interests of our own country. This will in no way prejudice the friendship and co-operation we enjoy in so many other spheres.
I should observe in passing that the United Kingdom is far from alone in objecting to the approach of the United States in these matters. Over the years and on different occasions some 20 Governments of other countries, including the United Kingdom, have protested to the United States of America about what was seen as the unacceptable exercise of jurisdiction. We know of many countries which have powers to control or block the passing of information to authorities of other countries.
In considering what steps we could and should take in practice, we mainly built on the existing powers in the Shipping Contracts and Commercial Documents Act 1964, to which I have referred. First, it appeared appropriate to have wide power to prohibit compliance by persons in the United Kingdom with objectionable United States and other 561 foreign measures. In this respect, Section 1 of the 1964 Act applied only to shipping in limited circumstances and we propose that it should be re-enacted in a much wider form. In practice, one of the most objectionable aspects of United States regulatory activities has been wide requirements to produce documents.
Section 2 of the 1964 Act has been reasonably effective here but time has shown that it was not wide enough. We have reached the conclusion that we should be able to control the production of documents from the United Kingdom in any circumstances except those in which, if the application were made through our courts, those courts would order production under the Evidence (Proceedings in other Jurisdictions) Act 1975 as a matter of course.
A small amendment is made to that Act which I think I should draw to your Lordships' attention. Clause 4 of the Bill provides that in proceedings under Section 2 of that Act, United Kingdom courts shall not make an order for compliance with a request for evidence by or on behalf of a court or tribunal of an overseas country if it is shown that the request infringes United Kingdom jurisdiction, or is otherwise prejudicial to our sovereignty. A certificate from the Secretary of State to that effect will be treated by the courts as conclusive evidence. Your Lordships' House has already decided in Westinghouse v. RTZ that the courts should in principle follow the executive in cases of this kind. We think that it will save dispute if, as in relation to questions of security, the point is made the subject of an executive certificate rather than judicial decision.
Clauses 5 and 6 contain the amendments to the law we propose in relation to multiple judgments. Not only does the enforcement of such judgments through the machinery of our courts appear to us to be unreasonable, but the existence of the possibility that they might be enforced against assets in this country has a deterrent effect on United Kingdom companies who are defendants in such proceedings appearing in the United States. Clause 5 therefore provides that multiple damage awards are not to be enforceable here. This may be the case at present either on the grounds that such awards are penalties or that enforcement 562 would be contrary to our public policy. I know, however, of no case in which the matter has been discussed in our courts and the well known case of Huntington v. Attrill, 1893, Appeal Cases, throws doubt at least on the former ground. We propose therefore that the point should be put beyond doubt. By its terms, this clause can be extended to other judgments in the field of competition.
My Lords, before the noble and learned Lord moves away from Clause 5, can he explain to us laymen exactly what circumstances obtain when these multiple damage judgments are given?
§ Lord MACKAY of CLASHFERN
My Lords, the circumstances are, principally, in the anti-trust field, in which, as I have sought to explain, the penalty is not only the ordinary penalty of a fine, as in ordinary criminal proceedings, but the penalty exacted by a private attorneygeneral—the individual company which alleges that it has been harmed—of three times the damage which it has suffered.
The remedy we propose in Clause 6 is unusual and in our law unprecedented. I am certain that it is one which your Lordships will wish to discuss. The clause provides that a United Kingdom businessman or company, as defined in subsection (1), who has had to pay multiple damages abroad shall be entitled to recover in our courts the penal element in those damages. This in our view should enable our companies to recover the element of what we see as unjustified enrichment involved in the penal element of multiple damages.
By not attacking the compensatory element in those damages, even where we object on jurisdictional or other grounds to the original proceedings, we are minimising the direct confrontation between court and court and recognise that in normal proceedings for compensation countries are prepared to extend their jurisdiction more widely than might be acceptable in criminal or penal proceedings. Subsections (2) and (3) contain two limitations. The right given by the clause is not to apply if the defendant abroad was an individual resident or company with its principal place of business in the country in question when 567 based on competition laws which have been specified by order made by the Secretary of State shall not be enforceable in the United Kingdom. In my view, this is acceptable and the philosophy behind it is in line with the traditional attitude of our law to the non-enforceability of foreign revenue and similar judgments.
The most important innovation in the Bill is, of course, Clause 6 and its most contentious provision. Both in the context of anti-trust cases and the United States "long arm" jurisdictions, if I may so describe them generally, we have always been troubled by the fact that nothing can be effectively done to protect British assets in the United States. We could prevent the resulting judgments from being enforceable here all right, but that is a very imperfect remedy. It might well deter British commercial organisations from trading in the States so as to commit assets there and so give hostages to fortune. Furthermore, in many cases British assets in the States may be so vast—as is the case with RTZ—that the non-enforceability of United States judgments may be largely academic, because the judgment creditors might easily find sufficient assets on which to levy execution within the United States itself.
Presumably, then, Clause 6 is an attempt to deal with this situation by enabling the judgment debtor to recover or claw back in so far as he can the penal, as opposed to the compensatory, part of the amounts awarded against him. It provides a wholly new weapon for seeking to neutralise the effect, albeit penal, of judgments given under the domestic legislation of a foreign State; additionally in effect in the context of assets within the jurisdiction of the foreign State by seeking to neutralise their recoverability. I must ask the noble and learned Lord the Lord Advocate whether anything of this kind has ever been done before either in this country or in any of the other countries that have been adversely affected? I see without surprise that the noble Lord, Lord Renton, shakes his head, because I myself believe that the answer is in the negative. So we are plunging into deep waters here and taking a road which has not been taken before. But your Lordships are not surprised when I say I am not afraid of novel proposals or dealing 568 especially with old wrongs. Indeed, I have spent most of my political life trying to do so, in circumstances which obviously have not been quite so palatable to noble Lords as my support of what they are seeking to do now may, I hope, be. But they are important proposals in Clause 6 which I think we should examine very carefully indeed. They could, of course, give rise to reprisals.
But there is an important practical question that also arises in regard to Clause 6 which was raised in another place by my learned friend Mr. Jeffrey Thomas and others; namely, will Clause 6 be effective? The claw-back judgments here clearly would not be recognised in the United States, and the United States defendants to such proceedings here would or could easily be able to arrange their affairs so as to have no assets within the jurisdiction here which could be clawed back. This is why at one stage in the consideration of the Bill in another place my learned friend Mr. Thomas moved an amendment providing that, where the party in whose favour judgment for multiple damages was given is a company and an associated or subsidiary company thereof is registered or carries on business in the United Kingdom, the company or person against whom judgment was given shall be entitled to recover back the amount of damages stated in subsection (1) from the associated or subsidiary company.
The learned Attorney General intervened in the debate and expressed his sympathy with my learned friend's amendment and he stressed the harshness of and unacceptability of mandatory triple damages, as indeed the noble and learned Lord has done today. As he pointed out, not only do triple damages have to be awarded but no regard can be paid to the means of the company affected or of the person concerned; each could be made bankrupt. He conceded that Clause 6 as it stands will not be very effective, and he added:…because we do not have the rather draconian powers that United States courts have by which a company merely by virtue of the fact that an associated or subsidiary company is carrying on business in the United States can be made liable and can have jurisdiction asserted over it.He clearly indicated that not only do we no have these draconian powers, as he described it, but that he would indeed be 569 very reluctant to have them or to accept them or to introduce them in the Bill. Under the advice of the Attorney General, my learned friend Mr. Thomas withdrew his amendment. The view taken by the Government was really a political question; how far down the line we could go in this matter. That was the critical issue which faced them.
So it may well be that we should examine this question. For instance, your Lordships may come to the conclusion that Clause 6 was so ineffective that it might be wiser to drop it rather than incur the odium in the United States which would result from having it on the statute book. On the other hand, it may be said that the fact that it remains on the statute book is an indication of the sense of injustice that would be felt in this country if these powers continued to be sought to be exercised in the United States.
That is the situation. We shall look into it carefully. There is a great deal of expertise both in law and in business in your Lordships' House and we shall no doubt be able to consider this matter in depth. Indeed, perhaps my noble friend Lord Mishcon will comment upon this aspect of the Bill, among others, when he intervenes in due course. In the meantime, we on this side of the House shall be happy to support the Bill on Second Reading.
§ 5.2 p.m.
§ Lord LLOYD of KILGERRAN
My Lords, may I presume to congratulate the Government on bringing forward the Bill and congratulate the noble and learned Lord the Lord Advocate on the clear and positive presentation he has made in introducing this important Bill. The Bill is long overdue, directed as it is to an attempt to deal with some of the outrageous instances of interference through foreign courts and agencies with the international trading of United Kingdom firms in so many areas. It has become increasingly intolerable to many British interests that other countries should so often assert their laws outside their own territories so as to enforce their own economic and commercial policies unilaterally in relation to international trade.
As the noble and learned Lord has already indicated, the Bill is really the culmination of bitterness about the policy of the United States—often referred to as 570 the "judicial imperialism of the United States of America"—in enforcing stringent controls, particularly in the field of anti-trust and taxation, affecting the business of foreign firms. However, as the noble and learned Lord the Minister is aware, there are now many other countries apart from the United States of America, which have introduced legislation, particularly as regards tax, which is being exercised extra-territorially against British interests. For example, in the taxation field there is the Canada Act 1971; the West German Taxation Acts of 1972 and the Acts in Japan of 1978. Quite apart from those, there are an increasing number of German and French courts, agencies and authorities who appear to be unwilling to conform with European and EEC court decisions.
Time and time again the Americans have asserted extra-territorial jurisdiction in a wide range of matters. With your Lordships' consent I should like to refer to an article published in the Columbia Law Review of December 1978 dealing primarily with American law regarding taxation of foreign companies. The author, I am privileged to say, is a friend of mine. We are both Fellows of my college at Cambridge. He is a distinguished American lawyer, Professor W. W. Park, now at Boston University in Massachusetts. He analyses in this interesting essay what he calls "the untoward economic and political consequences of the fiscal extra-territorial jurisdiction of the United States of America on international business". He sums up the position generally in this way:Claims of the United States to extra-territorial jurisdiction have been extensive in the area of anti-trust, corporate securities regulation, foreign bribes, profit repatriation by foreign companies, and the embargo of trade with communist countries".There now comes an interesting passage because he says:The only American concession to criticism voiced by governments and scholars"—over a long period—appears to be a recognition that when a person is subject to conflicting directives of different sovereigns, considerations of fairness and commity may argue for moderation of the enforcement, but not prescription, of rules".He goes on in the article to advocate self-restraint in United States practice to limit extra-territorial assertions in the field of taxation of foreign companies, but he mournfully concludes: 575 it is made in the course of civil or criminal proceedings. I am never quite clear whether anti-trust proceedings in America arc civil or criminal proceedings. There is some difficulty in deciding, and I suggest that the word "civil" should be deleted.
I should like to refer to Clause 6. The noble and learned Lord, Lord Elwyn-Jones, has raised points on this clause. He asked rhetorically whether it was academic. Does the noble and learned Lord the Lord Advocate really think that it is legally effective? Is it merely intended to be symbolic in the hope that we can precipitate more international diplomatic discussions on this matter? As I indicated in the article by my friend Professor W. W. Park, these discussions have been going on for a very long time and there have been protests by Governments and by academics on this issue. They have not got very far. Perhaps the noble and learned Lord will be able to assure the House about the effectiveness of this clause for United Kingdom firms.
I conclude by pointing out this: We hope that this Bill can be realistically effective in assisting and protecting United Kingdom firms in their increasing attempts to create wealth, particularly in the context of new technology advances. I feel that this Bill should be made legally effective and not be an attempt for further discussions of a diplomatic nature.
§ 5.20 p.m.
§ Lord RENTON
My Lords, in addressing your Lordships' House for the first time I should first like to thank my noble and learned friend the Lord Advocate and, if I may so call him as he referred to me, my noble and learned friend Lord Elwyn-Jones, for their kind welcome in anticipation of my maiden speech. After the three exceedingly well-informed and full speeches which we have heard, Members of your Lordships' House may wonder what there remains to be said, but I must remind your Lordships that lawyers do not readily concede the last word to any other lawyers. A committee in which I was involved dealing with legislation recommended that there should always be a Scottish law officer serving in your Lordships' House. For that reason, I am so glad to be taking 576 part in a debate on a Second Reading which has been moved by my noble and learned friend the Lord Advocate.
I, too, welcome this Bill. I welcome it not only because of its intrinsic merits but also because it gives further evidence of our refusal as a country to be clobbered by friend or foe, great or small. Although, as the noble Lord, Lord Lloyd of Kilgerran, has said, this Bill is long overdue, there is of course a startling paradox about the motive for it. The United States is our greatest friend and ally. As has been said, the peace of the world depends largely upon our alliance, and yet ironically here we are in Parliament asked by the Government, with the support of both the main Opposition parties, to pass legislation to defend our trading interests against the long-established punitive legislation of Congress enforced for many years by a partly extraterritorial jurisdiction of the American federal courts. It is tempting on an occasion like this to argue with the Americans about their own legislation and the way in which it is enforced, but I do not think that we should concern ourselves with that. What we should do is consider what needs to be done to protect our own people from the quasi-extraterritorial effects of that legislation.
Let us consider what has been the position for many years right back in the common law, certainly well back into the last century, of our own courts. Our own courts have always placed strict limits upon their own power to enforce payment of money due to people within our jursidiction under the judgments of foreign courts. In particular our courts have always refused to enforce payment of fines, taxes, penalties or penal awards of damages by courts overseas, although I must point out in passing that in a case in 1976 the noble and learned Lord, Lord Denning, courageous as always, suggested that it might be feasible for our own courts to support a foreign judgment which awarded exemplary damages. Now exemplary damages are something that our own courts have leaned against, although exceptionally they do grant them, but I must say that I think it would be dangerous to concede the principle (and I hope that the Bill does not concede it) that exemplary damages awarded by the judgment of a foreign court could be enforced in this country.
577 It is of course true that under our own law the Customs and Excise, and indeed the Inland Revenue, are able to exact penalties amounting to triple the amount of Customs duty evaded and of triple the amount of tax. But certainly in the latter case my understanding is that that is not a mandatory provision. It is within the discretion of the court. But we never do try to enforce these triple penalties under our own law by attempting to exercise an extraterritorial jurisdiction, as the Americans attempt to do under their anti-trust law. So that to that extent we are in the clear in this matter. It is only right that we should place on record that we are in the clear. So that situation which I have just described is quite different from what happens under the American anti-trust laws when applied territorially.
What they have been doing for many years, certainly since fairly early in the century but with increasing intensity in recent years, is completely contrary to what under our common law, under our statutes, and under our rules of court, has been considered just and proper in the United Kingdom. That is why the Government are, in my opinion, fully justified in asking for this Bill. However, while accepting the need for it and, in general, accepting the method proposed in it, I would ask your Lordships to consider whether the method proposed is right in all respects.
As the noble and learned Lord, Lord Elwyn-Jones, pointed out, there is of course precedent for Clauses 1 and 2 because they apply generally what was applied to shipping only in the Shipping Contracts and Commercial Documents Act 1964. While bearing in mind the points made by the noble Lord, Lord Lloyd of Kilgerran, about Clauses 1 and 2—and I think they will deserve further consideration in Committee—I really do have serious doubts about the enforcement provisions contained in Clause 3. It is Clause 3 which, by applying the criminal law, is the means of enforcing what is proposed in Clauses 1 and 2.
In Clauses 1 and 2 we give powers to the Secretary of State to make certain orders, and those orders are intended to defend our business people by ordering them to give him notice of the activities of foreign courts which may adversely affect them, and so he can direct them not to comply, 578 for example, with the orders of a foreign court with regard to discovery of documents, or the provision of commercial information. But if our business people fail to do what he orders or directs them to do in their own interest—and which presumably they will want to do for their own protection—they can be made into criminals under Clause 3. Of course, I concede that there must be some way of enforcing the orders and directions of the Secretary of State. There is no doubt about that.
It may be that as a last resort criminal sanctions have to be used, but would it not normally be better to do it by means of a much more simple, more tactful and cheaper process, by going to the High Court, or in Scotland to the Court of Session—in the High Court by way of injunction and in the Court of Session, I understand, by way of interdict—a civil method of enforcement? I think this has an advantage over the criminal procedure. Certainly out of London there are some terrible delays in the hearing of cases by jury in the criminal courts. In the part of East Anglia with which I used to be associated in another place there are now delays of nine months before jury cases are heard. We do not want delays in cases of this kind; we want a much more expeditious method of enforcement.
Therefore, I suggest that between now and the Committee stage my noble and learned friend the Lord Advocate might care to do two things, first to consider how Section 3—which is the equivalent section to Clause 3 of this Bill—of the 1964 Act has worked in practice. Maybe there have not been any criminal prosecutions. I do not know and only the authorities could give us that information. It would be interesting to know how they have worked out, what the costs have been and what delays there have been in using the criminal sanctions to enforce this particular and unusual part of the law. Secondly, I would ask him to consider tabling an amendment enabling those concerned, who would be the Secretary of State or the Attorney General or any interested party, to go by way of injunction in the High Court or interdict in the Court of Session. I could not expect an answer to that today, not having given notice of the question to my noble and learned friend, but I would be grateful if he would consider it.
579 Clause 4 is a nice, neat, concise piece of drafting. Clause 5(1), (2) and (3) have been described as declaratory of the existing law, but the law was already codified in the Foreign Judgments (Reciprocal Enforcement) Act 1933. My understanding of the effect, or one of the effects, of that Act is that it resolved the doubts raised by the case mentioned by my noble and learned friend, that of Huntington v. Attrill towards the end of the last century, and strictly speaking we do not really need to have those doubts any further resolved by those subsections of Clause 5 of this Bill. I think, strictly speaking, that they are unnecessary, and they are unnecessary because our courts would tremble with rage at being asked to enforce a foreign judgment for triple damages, whether or not we pass this Bill. However, sometimes, when you have a Bill with international implications of this kind it may be desirable, some people would think necessary, to have a declaratory clause in it, but I hope it will not be too readily taken as a precedent because declaratory clauses merely confirming and insignificantly altering the previous law, in my respectful opinion, should not be encouraged.
Clause 5(4) is new and I think it is desirable as a long-stop, even though it is to some extent retrospective, but in this case the retrospection is justified because I think no injustice could possibly result from the Secretary of State making an order under it. Clause 6 has been well described already—bold, unprecedented and unpredictable—but I would respectfully doubt whether it is, as the noble and learned Lord, Lord Elwyn-Jones, suggested, necessarily ineffective. To a great extent, it is bound to be effective, but at the same time to a limited extent, an extent limited by various circumstances. It will not, for example, be possible for every aggrieved party to recover the excess of multiple damages if the defendant is out of the jurisdiction and therefore not likely to pay up and if he has no assets within the jurisdiction. But this unusual clause is essential for dealing with the situation created by the way in which the United States courts have reached out to enforce their anti-trust laws.
I wonder whether my noble and learned friend the Lord Advocate, when he replies would care to set the Bill in a European 580 context. There is no mention in the Bill of other EEC countries; they seem to be treated just as all foreign countries are. That is understandable because, unless something has been done since we joined the EEC, not all European countries have reciprocal enforcement agreements with us and therefore it may be necessary to deal with our EEC partners just as though they were any other foreign countries, but it would be helpful to have it put into that context.
In conclusion, I would say that the Bill gives some new, unusual and wide powers to the Secretary of State, and it would be of great help to our business people, to anyone affected and to their advisers if the Secretary of State could, as soon as possible after Royal Assent, which I hope will not he long delayed, indicate the extent of the area in which he envisages using his new powers—and indeed his old powers, which have not been used very much—of making orders and giving directions. It is fortunate that the Bill, which might have been regarded as controversial, has the support of both sides of both Houses. Let us hope it will achieve its purpose.
§ 5.34 p.m.
§ The EARL of INCHCAPE
My Lords, perhaps I may be permitted to comment on the Bill on behalf of the United Kingdom shipping industry. I speak not only as chairman of a major shipping company but also as a past president of the General Council of British Shipping. But before doing so, I am pleased to be the first to congratulate the noble and learned Lord, Lord Renton, on his admirable and very learned maiden speech. I feel I am in a good position to do so, having waited for over 30 years to make my maiden speech, about five years ago. In view of the noble and learned Lord's 30 years' service in another place, and as an eminent barrister, clearly it was not the ordeal for him as it was for me, and we look forward to his future contributions.
While the Bill refers to overseas countries in general, it is of course primarily aimed at certain policies of the United States. This is because, as the noble and learned Lord the Lord Advocate said, of the unfortunate but nevertheless inescapable fact that for many years our relations with the United States on mari- 581 time questions have not been entirely harmonious. There are a number of reasons for that; our basic philosophy on a number of shipping policy questions is markedly different from that of the United States. We and other European nations favour self-regulation by liner conferences which involve close consultation between them and their customers, and shippers. The United States, on the other hand, believes in Government regulation as the quid pro quo for immunity for its anti-trust legislation. But unfortunately the widespread immunity originally afforded under the United States Shipping Act 1916 has been so eroded by a decade of legal cases as to make that immunity uncertain and often ephemeral.
Attempts on the part of the United States to extend its jurisdiction beyond its frontiers have naturally led to counter assertions by other countries, with inevitable conflicts. These have not been confined to legal fields. Conflicts have spilt over into the general field of shipping policy and have adversely affected normal commercial operations in the United States liner trades. As the noble and learned Lord, Lord Elwyn-Jones, said, matters were brought to a head by a lengthy grand jury investigation into certain alleged activities of British and other lines engaged in the North Atlantic trades which resulted in the imposition last year of heavy fines on certain British companies and individuals. Although these were negotiated fines, on the basis that the lines did not accept that they were at fault, let alone that they were guilty criminally, as the noble and learned Lord said, some 34 civil suits have now been filed against the British lines in the United States by shippers seeking treble damage awards against the companies involved.
I should like to stress two points. First, the activities complained of would in no way have been illegal in the United Kingdom, or for that matter in other European countries. Secondly, shipping is an international activity affecting the interests of companies at both ends of the trade. It was a recognition of this intolerable state of affairs which prompted a number of people on this side of the Atlantic, both in Government and in industry, even before the grand jury case, to make repeated efforts to achieve a long term modus vivendi with the United 582 States. Some progress was being made, but much has now been dissipated as a result of the grand jury investigation and later developments.
Perhaps the most significant feature of the investigation was not the extent of the financial burden placed on the companies, alarming though that was, but the fact that the Department of Justice was able throughout to follow its own line, irrespective of the wider consequences. There appears to be little constraint on the activities of that particular Department of the United States Government, which sees its legal duties as paramount, whatever the consequences.
The resentments and the frustrations built up as a result of all this were, I believe, in large measure responsible for the decision of Her Majesty's Government to introduce the Bill now before your Lordships' House. On behalf of the shipping industry I should like to give it a warm welcome. I well understand that there may be some nervousness that some of the provisions of the Bill go further than previous British legislation. Certainly it appears to contain some legal innovations, in particular those embodied in Clause 6, but other noble Lords who have already spoken this afternoon are better qualified than I to comment on that aspect. All I would say is that, from the point of view of the British shipping industry, these new provisions are an integral and valuable part of the Bill and it would be unfortunate if novelty of approach were to be regarded as a ground of opposition.
The important thing is that the Bill should be on the statute book as soon as possible. As the noble and learned Lord Advoate stated, the Bill repeals, and in part re-enacts, the Shipping Contracts and Commercial Documents Act 1964. This was always a useful, if not wholly successful, measure in denying documents to the American authorities in cases where there were infringements of the United Kingdom jurisdiction and where, furthermore, in the view of Her Majesty's Government the companies concerned were fully justified in withholding information.
I believe, therefore, that the Government have done the right thing in strengthening the legislation in this area 583 by making sure that effective safeguards exist in cases where the United States seeks unjustifiably to extend its jurisdiction. Anglo-American differences are not to be taken lightly, and I know that efforts to solve this problem will continue on both sides of the Atlantic. I think it is encouraging that concern over the repercussions of United States antitrust laws in the international field has also been strongly voiced by American commentators. In an editorial on 4th November 1979, which has already been quoted in another place, the Washington Post wrote:American anti-trust law does not travel well … Americans have worked out their rules of competition at home, and are now trying to extend them into international commerce as a sort of afterthought … The Sherman Anti-trust Act is not a suitable instrument for the regulation of world trade. Maintaining international competition is the proper business of diplomats and negotiation, not federal judges and litigation".Unhappily, the line taken by the Washington Post, which seems to me and to many others eminently sensible, does not reflect the present official view of the United States Government.
So we in the shipping industry believe that the need for the Bill is urgent. It may be that when the Bill enters the Committee stage noble Lords will come forward with amendments designed to strengthen and clarify its content; certainly I trust that nothing will be done to weaken it. May I, in conclusion, congratulate the Government on their courage in introducing this much needed, and in part novel, legislation. It is in my view quite properly defensive, and not retaliatory, and should be supported.
§ Lord DAVIES of LEEK
My Lords, I should like to explain to your Lordships why, out of respect to the House, I have withdrawn my name from the list of speakers. I had to leave the Chamber and so missed some of the main speeches. Before I sit down, and in the one minute that I shall take to apologise, may I say how delighted I was to listen to the maiden speech of the noble Lord, Lord Renton, because I had intended to deal with the question of the wide powers that are to be given to the Secretary of State, and I now hope to do this at the Committee stage.
§ 5.45 p.m.
My Lords, may I add my humble, but very sincere, congratulations to those extended to my noble friend Lord Renton upon his excellent and, if he will allow me to say so, mature maiden speech. I learnt a tremendous amount from it, and I look forward to hearing him speak in your Lordships' House in future on these and many other matters.
I am no lawyer, and I will not go into the niceties of the legal aspects of the Bill; and I shall be very brief. Your Lordships may remember that on 21st June last year I had the privilege of introducing in the House a debate on some of the major policy issues affecting the shipping industry in this country and in the other main maritime countries of the West, and in the OECD. Some of the matters we discussed were important issues which were very much to the fore at the time, and still are. There was an issue regarding the United Nations Code for Liner Conferences, and the question of the impact of Third World countries. There was also discussed the effect on shipping of the tremendous downturn in world trade. In particular, there was the question of the unfair competition from Russia and the other COMECON countries. All these were major issues, and it was quite clear that all previous efforts to solve them on any unilateral basis had been unsuccessful. It was felt therefore that it was essential that these sort of issues should be dealt with on a united basis by the main maritime countries of the West; they must work on a concerted basis if they were to have any hope of solving some of them.
At a time of world trade depression it must be possible for all the Western maritime countries to be able to argue in a united way. But how could this be easily done in the face of trouble from across the Atlantic (which we have heard so much about this afternoon) which has soured the points of view of the maritime countries? At the time of the debate to which I referred the grand jury investigations had just taken place. Penal fines had been paid, and since then the situation has developed and there has been an important aftermath, leaving still a very sour taste in the mouths of the main shipping countries. I referred then, and other noble Lords who spoke in that debate agreed, to the 585 fact that some understanding between the United States and Europe on these issues was absolutely essential; some modus vivendi. One hoped that that would emerge; and, of course, we have been told that diplomatic and other discussions have continued. One applauds these discussions very much, but, regrettably, they have seemingly been of no avail.
Therefore, my Lords, I take the view—as does, it seems, the whole House—that this Bill is now both essential and extremely urgent. But, having said that, it does, after all, provide protection—that is its purpose, protection—only for our trading interests; and the need for the maritime countries to continue to try to find a way out, so that they can go on talking together and acting in a united way to deal with these other major problems to which I have referred, still stands. I very much hope, not only that diplomatic and other discussions will go on quite apart from this Bill, but also that my noble and learned friend the Lord Advocate will be proved right in what he said towards the end of his speech; that is, that he hoped (he may have gone further than saying that he hoped, but certainly that he hoped) that these problems would not prejudice the enormous importance of continued friendly relations between ourselves and the United States, which are so essential from every point of view and not least from the shipping point of view. I hope he will be proved right, and that those relations will in no way be prejudiced. Having said that, I strongly support the Bill, and I hope it receives a very rapid passage.
§ 5.52 p.m.
§ Lord MISHCON
My Lords, not for the first time is this House required to bring a cool, calm, analytical mind to the problems which arc faced in this Bill. I say that being able on this occasion—and, indeed, it is a compliment to this House—to quote from what the Secretary of State said in another place on the Second Reading of this Bill. What he said was this:I am not posing as a great expert on these matters. I was hoping that the Bill might start in another place, where there are men of enormous experience who would wish to debate these matters in great depth. It so happens that the Bill came first to this place".If I may have your Lordships' leave, I should also like to quote a rather interest- 586 ing reply that was given by one honourable Member in another place to that observation. The honourable Member said:The Minister has told us that he would have preferred the Bill to go to another place, whose Members are more informed and able to give proper answers. That attitude does not fill me full of confidence".I merely quote these passages in order that your Lordships may realise what I believe to be true; namely, that whereas this measure has in principle the support of all parts of this House, it is a measure which must certainly be looked at very carefully in Committee; and I would also observe that it should be carefully looked at even on Second Reading, so that one is warned in advance of certain matters which might have to be dealt with in Committee or on Report stage.
In regard to the general principles of the Bill, perhaps I may say that I think it would be an irresponsible Government and an irresponsible Opposition which did not link hands on the measure that is before us, and on the necessity for it. It is a Bill which seeks to protect our legitimate trading interests in this country, particularly against what is generally regarded as an abuse of the principles of comity and of the sovereignty of trading nations by the extra-territorial jurisdiction which is exercised by the United States especially under the Sherman Act of 1890 and the Clayton Act of 1914. It has been said before—but it should be repeated—that there can be no possible objection to their legislating for, and enforcing, their own commercial ideology. That was a point that was very clearly and calmly made by the noble Lord, Lord Renton, in what, if I may copy what other noble Lords have said, was such an admirable maiden speech. But it does become unacceptable when this ideology is translated into extra-territorial rights and extra-territorial grasp. Indeed, I believe that the noble and learned Lord the Lord Advocate used the word "unacceptable" in regard to this. I almost thought that he was going on to say that it was the unacceptable face of international capitalism, but he did not.
As I said, there can be no dispute at all about the necessity to take measures against the harmful things that have been done to our trading interests and to our industries. In particular, the shipping industry has been mentioned; and, of 587 course, there was also quoted the quite dreadful case of Rio Tinto Zinc. I am not going to detail to the House what happened in both those cases—that has already been done—but I have observed that, as yet, nobody has said what was the heinous offence of the shipping lines and the individuals concerned, who, I believe, were subjected to the very highest fines that have ever been administered under the Sherman Act. and who are now faced with civil suits for treble damages. The dreadful crime that they committed was that they in fact tried to regulate some of the freight charges on the North Atlantic routes, and they did so without consultation with the relevant American agencies. My Lords, the fines that were administered have been quoted. They were, indeed, terribly substantial, and it is little wonder that one of the officers of, I believe, the Department of Justice, following upon the imposition of the fines of some 6 billion dollars. made this observation:The anti-trust division is well on its way to being a profit centre for the Department of Justice".I am not surprised at that observation. One might almost call it the Sherman Pools of America.
My Lords, I have spoken of the calm observation and analytical mind that this House, with its experts, ought to be exercising in regard to this Bill. It has been said that it might have been hoped that, especially with our ally and friend the United States of America, it would not be necessary to legislate in this form. There is no doubt about the fact that years have passed in which endeavours have been made to seek a peaceful and amicable solution of what are undoubtedly very grave problems. I would have wished it possible to exercise some concerted effort in regard to persuading the United States—not their Government departments, which I understand are endeavouring to be helpful, but their legislature—that there should he some change in their approach to these extra-territorial rights which they claim.
I would have hoped, as I have said, that pressure could be exercised by concerted action, through either the EEC or some of our trading partners who were not necessarily Members of the EEC, but who nevertheless felt as we did in regard to these matters. I have looked at the 588 Second Reading debate in another place when that question was asked. It seemed that very poor efforts had been made in this direction so far and that really the United States—and we are talking particularly about the United States this afternoon—are faced with a multiplicity of reactions in regard to their anti-trust legislation and their other attempts at extra-territorial exercise of rights. I am quoting from the Under-Secretary of State for Trade. Mr. Tebbit, who said:Several other European countries, for example, the Netherlands, Switzerland and Norway, have similar statutes on blocking the passing of information".If I may say this as an interjection into that quotation. obviously, these are matters dealt with in Clauses 1 to 4 of the Bill before us.Australia, Canada, South Africa and some other countries also have similar laws. Australia and South Africa have provisions restricting the enforcement of triple damage judgments but on a rather more limited basis than the provisions in our Bill. We think that at least four other countries—three in Europe and one elsewhere—are considering legislation on the enforcement of judgments. However, we have no firm knowledge about how far they have gone down that road".—[Official Report, Commons, 15/4/79; col. 1583.]I would plead with the noble and learned Lord the Lord Advocate to indicate in his reply, if he could, that the efforts at concerted action by our trading partners and our trading competitors to get some sense into this field will continue if they have been started, or will he started if they have not already commenced. It seems to me to be a so much more effective way, obviously, of bringing influence to bear on the United States rather than by having to deal with measures of this kind.
I promised that the final section of my speech will be dedicated to some, I hope, constructive observations on the Bill itself. In that connection, I shall understand completely if the noble and learned Lord the Lord Advocate wishes time to consider what I am about to say about some of the clauses; because I have not had the opportunity of giving him notice of these points and I believe that I am right in saying that they were not raised in the way in which I am going to raise them, at all events, at the Committee stage or the Report stage of the Bill in another place. Therefore, if he decides that he would like to give consideration to those points, I shall regard it as a courtesy that he is doing so and not as a discourtesy 589 that he is not replying to me directly today.
I turn first to Clause 2 of the Bill where the noble and learned Lord the Lord Advocate in his very lucid introductory speech referred to documents and information required by overseas courts and authorities which the Secretary of State—if I may use shorthand English—would be able to stop being given or accorded if he used his discretion. And in the use of his discretion in regard to inadmissible documents—and that is the only type of information he could deal with under this clause—the inadmissibility must have the requirement, if one looks at subsection (2), that… it infringes the jurisdiction of the United Kingdom or is otherwise prejudicial to the sovereignty of the United Kingdomor, if looking at subsection (2)(b):if compliance with the requirement would be prejudicial to the security … or to the relations of the Government of the United Kingdom with the Government of any other country".We then find that there is a broad further description of what is inadmissible in subsection 3(b), which reads:if it is made wholly or mainly for the purpose of obtaining discovery of documents in any such proceedings".And the words "any such proceedings" refer back to subsection (3)(a); namely, "civil or criminal proceedings". There is nothing in that subsection or in that clause, so far as I can see, that says in what way the Secretary of State's discretion should be exercised. It is there in Clause 2 in regard to the two categories that I have talked about, but not in Clause 3.
The result is that if you get an application to our courts under the Restriction of Evidence (Proceedings in Other Jurisdictions) Act 1975 for help by another court in another country—and this Bill relates not only to the United States—you get a situation where that court might make an order allowing the discovery that is wanted; whereas the Secretary of State, without having any limited discretion and without having any guide to his discretion, decides subsequently, under this Act, that this discovery should not be given.
As I see it, there is a conflict now between the jurisdiction of the courts and of the Secretary of State; and it is 590 not covered by Clause 4—which, I believe, the noble and learned Lord the Lord Advocate indicated was a matter of covering the Restriction of Evidence (Proceedings in Other Jurisdictions) Act—because that is a certificate given by the Secretary of State; but it is purely limited to the other matters I referred to; namely, that it was "prejudicial to the sovereignty" or otherwise interfered with our trade. It may be that the words which are in subsections (2)(a) and (b) ought to be imported into subsection (3) and they have not been so imported.
May I turn now to something very much more important. Everybody has said (and, indeed, Mr. Thomas in another place said it clearly) that without this clause the Bill is like a tigress without claws. Therefore we have to look at Clause 6 very closely indeed. We give this protection of the clawback of the triple damages under this clause (which is the first point I want to mention) under Clause 6(1)(c) to:a person carrying on business in the United Kingdom".That is a very extraordinary gift to somebody who is not, in fact, a British subject, not a British trading company, not somebody who is permanently carrying out business in this country, if he happens to be a foreigner. Any person who carries on business in this country, however small the business may be, can rush over here, it seems to me, having had a triple damages award made against him and can claim the protection of Clause 6 by going to our courts. I just wonder whether that is a very sensible provision.
Next, I deal with another matter under Clause 6 because I know that in another place everybody was extremely keen to try to see that there was no way, in the very novel provisions of Clause 6, that they could allow the United States or its courts to find a way, to put it crudely, of evading our rights in this connection, or the rights given under Clause 6 to the subject or to the person carrying on business here.
In Clause 6, the right is given to recover the triple damages. It says:… so much of the damages paid to or obtained by him under the judgment …".The "him" is the person who in the United States managed to get the benefit 591 of that judgment. I will not bore your Lordships with the quotation, but the Secretary of State made it absolutely clear in another place that this must be an action against the person who was the plaintiff in the other proceedings in the United States by the person who was the defendant. The defendant will bring this action against the plaintiff.
Unless I am being very foolish, there is an easy, simple and clear way of evading the whole of this clause by the American plaintiff, as soon as he has his judgment, assigning the benefit of it to a third party. In those circumstances, when the third party claims the damages against the person over here—if I can use a shorthand phrase—there is no way in which, under this clause as worded, the person over here would be able to claim the punitive part of the award, that is other than the pure compensation, because the person who was the plaintiff has not obtained the money from him and has not obtained payment from him. It would be the assignee of the plaintiff. There again, that is something that we obviously must look at.
If there were time—and if I was not intruding upon the patience which your Lordships always so generously give—I would go into another matter concerning the word "exclusively" in that clause. I shall do that, if I may be so permitted, at the Committee stage. But maybe the Secretary of State was right; maybe this House, as I said, with its usual care in looking at legislation before it, will have to exercise very great care indeed in regard to this Bill, because—and I say this without disrespect…it seems to have been looked at a little quickly and not quite deeply enough, especially in regard to the novel powers under Clause 6, in another place.
My Lords, before the noble Lord sits down, may I ask a point of clarification specifically as a non-lawyer? Surely Clause 6(l)(c)—namely:a person carrying on business in the United Kingdom"—is necessary in order to embrace a body which trades which is an unincorporated legal person?
§ Lord MISHCON
My Lords, I am grateful for any intervention in order that 592 I may try to make clear a point which I did not make before. It would be very valuable if this clause said that anyone who was permanently in business here, principally in business here, or anything of that kind, should have this right. The incorporated company here is clearly covered under the clause. But surely the clause as drawn—and that was the point that I was making—would by implication cover anybody who decided, having a small amount of business over here—be it as a commercial traveller embarking on some business three times a year—to claim the benefit of this right by merely travelling over here and saying: "It is perfectly true, I carry on business here."
§ 6.15 p.m.
§ Lord MACKAY of CLASHFERN
My Lords, may I begin by joining with those of your Lordships who have congratulated the noble Lord, Lord Renton, on his excellent and thought-provoking maiden speech. I am particularly glad that he mentioned the recommendation of the committee (of which he was such a distinguished chairman) on the preparation of legislation some time ago in its recommendation that a Scottish law officer should be a Member of your Lordships' House. I am particularly grateful—at least on this occasion—that that recommendation has been given effect.
Before I attempt to deal with some of the more detailed matters that have been raised, may I say that Her Majesty's Government are of course most anxious to solve these problems, if possible, by negotiation. Everything that can be done to remove these problems in that way will be done. However, as the noble Lord, Lord Lloyd of Kilgerran, said, negotiations have been going on for quite a long time without as much result as one would have hoped. Therefore, it seems right not to abandon our defences but to improve them at the same time as we also seek to pursue these objectives by negotiations.
I am extremely glad that it has been possible for noble Lords in all parts of the House to join, to "link hands"—in the words of the noble Lord, Lord Mishcon—commending the principle of this Bill. The noble Lord made reference to my right honourable friend the Secretary of State for Trade and what he said about 593 himself in another place. That only reflected the genuine humility of the Secretary of State for Trade; but it certainly is not my judgment of his capabilities. He was only making clear the difficulty which his great ability appreciated exists in this particular field. The noble Lord himself pointed out how difficult the field is.
§ Lord MISHCON
My Lords, I am sure that the noble and learned Lord will permit me this intervention. I want to make it perfectly clear that I have every admiration for the Secretary of State and his distinct quality of humility. I was merely trying to pass on a compliment paid to this House so that the House knew about it and realised what was expected of it.
§ Lord MACKAY of CLASHFERN
My Lords, I am greatly obliged, and glad too, that my right honourable friend the Secretary of State, in the exercise of his great abilities, saw fit to pay tribute to this House; and leaving myself out of course, I join in it.
Now if I may turn to some of the more detailed matters, the noble and learned Lord, Lord Elwyn-Jones, asked whether Clause 6 was new. So far as I know, it is new. We are in a novel, difficult field. Therefore, the expertise of this House will be most valuable in seeking a solution to the difficulties posed by going along the Clause 6 road.
The existence of Clause 6 initially poses a problem for a company that has succeeded in a multiple damages suit if that company has assets in this country. That in itself is something useful. The clause is symbolic of our determination to do what can be done effectively to counter this particular policy so far as it is objectionable to us. In so far as it is a symbol it is a symbol of something more than the result it achieves; but I would not agree that it achieves nothing. I consider it achieves something and is a symbol of the area in which we wish to move.
The noble and learned Lord, Lord Elwyn-Jones, raised the question of whether the clause should be opened up in such a way as to permit drawing aside the corporate veil in the case of groups of companies, and possibly enabling the person against 594 whom a multiple damages award had been made to go against the property of a subsidiary or associated company directly. These are matters for consideration in Committee. There are obvious difficulties: it would have a very considerable effect if it were to be looked upon as a general principle on the whole structure of our commercial law, and therefore going in that direction has very obvious problems. However, the Government will give the most careful consideration to any proposals that noble Lords have for improving Clause 6 or, for that matter, any other part of the Bill.
If I could move now to the question raised by the noble Lord, Lord Lloyd of Kilgerran, about commercial documents, the clause which refers to those contains in subsection (6) a fairly general definition for commercial documents. I would think, although the point is perhaps one for more consideration, that the clause would be wide enough to cover the sort of document or record referred to by the noble Lord.
The noble Lord, Lord Renton, raised the question of exemplary damages and whether the Bill did anything to deal with that problem. The answer is that the Bill does not in any way affect that matter. It restricts the enforcement of foreign judgments, but does nothing to extend the scope of that enforcement, for example, to awards of exemplary damages, if they are not covered already.
It was also suggested that the criminal provisions in Clause 3 should be considered. As the noble Lord himself pointed out, this clause is based on the corresponding section of the 1964 Act and my information is that that clause has never required to be put into effect: in other words, the criminal proceedings remain on the statute book as a sanction. It would be unusual and inappropriate to enact an obligation without some sanction. The criminal sanction remains and, as I say, seems to have been effective in that, so far as I know, it has never been activated under the 1964 Act.
§ Lord MISHCON
My Lords, I wonder whether the noble and learned Lord would courteously give way again only for one moment to clear a very important point raised by the noble Lord, Lord Renton. I understood this provision to be in the 595 previous Act and in this Bill because otherwise, unless there were a criminal sanction, the person concerned in the litigation would not in the United States be able to plead the amendment; and that is the reason for the criminal sanction as against the civil one.
§ Lord MACKAY of CLASHFERN
My Lords, I am obliged. I think that that is a reason for the criminal sanction and, as I say, one would not have an effective provision with no sanction at all. So far as civil sanction is concerned, think it is at least doubtful whether an interdict or injunction would be appropriate. Certainly, so far as interdicts are concerned—I speak with great diffidence about injunctions—they are not available once the act complained of has been done. The interdict is to prevent the doing of the act and by the time the obligation had been breached, the act in question would have been done.
§ Lord RENTON
Yes, my Lords; but I think really the point here is that we are using a criminal sanction not after an act has been done, but in order to ensure that it gets done, by putting people in terrorem of the criminal law if they do not perform the act. If that is the position, then an injunction to compel the performance of the act would be just as good as, and much quicker than, the criminal sanction.
§ Lord MACKAY of CLASHFERN
My Lords, I would not want to get involved in too detailed an argument at this moment, but I think that what is provided by Clauses 1 and 2 is in the nature of a prohibition, and Clause 3 is intended to enforce that prohibition. Normally one might not get any intimation in advance that the prohibition was going to be breached until breached it was. However, this is a matter of detail which perhaps we can take up again in Committee.
The noble Lord also asked about the European context. As your Lordships will probably know, the situation is that the EEC have agreed a judgment convention for the mutual enforcement of judgments. There are presently working on the enforcement of provisions in the United Kingdom required for the enforcement of this convention committees, under Mr. 596 Justice Kerr so far as England and Wales are concerned, and under Lord Maxwell so far as Scotland is concerned, to work out the detailed provisions for the implementation of that convention which may be required in our law. However, so far as I can see, the provisions of this Bill will not conflict with that, and any power the Secretary of State had would be exercised in conformity with any restrictions the European Convention would impose upon him.
So far as extentions of the clauses to such things as patents, designs and know-how are concerned, we shall be very happy indeed to examine any proposals the noble Lord has for extensions. I venture to think that the definition of "trade" which is put into the Bill is perhaps wide enough to cover many of these. However, as I say, we shall be happy to see whether there are any other improvements the noble Lord can suggest.
If I might attempt to answer at least one particular point raised by the noble Lord, Lord Mishcon, on Clause 2, my understanding of the situation is that subsection (3) is independent of subsection (2) and that the conditions which are required for the Secretary of State's discretion to be available are that either (2) or (3) is satisfied. If one is dealing with subsection (3), the order that would be in question would be one from a foreign court, tribunal or authority; and it is that kind of requirement that the Secretary of State could block by means of the provisions of subsection (1).
§ Lord MISHCON
My Lords, I promise faithfully that this is the last intervention I shall make. I make it only because the noble and learned Lord—no doubt quite understandably—did not follow my point because I did not make it clear. What I was saying was that there is no fetter to the Secretary of State's discretion in regard to subsection (3) and no guidance as to how he should exercise it, whereas in the completely independent subsection (2), to which the noble and learned Lord the Lord Advocate has referred, there is a limitation and description of his discretion; namely threats to our sovereignty, threats to our trade. There is no guide whatsoever in subsection (3), and I think it may be an omission in draftsmanship and not a matter of policy.
§ Lord MACKAY of CLASHFERN
My Lords, with the greatest respect, I think the situation is that subsection (2) contains a basic requirement for the exercise of the discretion. Subsection (3) contains a different one, and the restrictions are contained in subsections (2) and (3) respectively for the subjects with which they deal. However, this again is a matter we can return to. I am happy to know that the principle of the Bill has such support, and therefore I invite your Lordships to give it a Second Reading.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.