Amendment 61

Digital Markets, Competition and Consumers Bill - Report (1st Day) – in the House of Lords am 7:15 pm ar 11 Mawrth 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Lord Clement-Jones:

Moved by Lord Clement-Jones

61: Clause 126, page 80, leave out lines 4 and 5 and insert—““(1) The Tribunal may award exemplary damages in any collective proceedings.””Member's explanatory statementThis amendment would allow exemplary damages in collective proceedings, which the bill as drafted seeks to prevent.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

My Lords, the Minister gave a disappointing response in Committee to my amendment on exemplary damages in collective proceedings. In explaining the Government’s decision, he said:

“The bar on the availability of exemplary damages in collective actions was one of the many safeguards put in place when the Consumer Rights Act 2015 was enacted, to ensure a balanced system of collective actions before the CAT which will not lead to a culture of undue litigation and US-style class actions”.—[Official Report, 31/1/24; col. GC 371.]

That is not a particularly helpful way of describing a legitimate assertion of consumer rights in a collective fashion, given the imbalance of power that is there so often in these proceedings. We have heard about asymmetry, and this is precisely that kind of area. Why should they be denied exemplary damages when in an individual case they would have been awarded, for instance where the illegal action has been deliberate?

I thank the Minister for his letter of 27 February. In it, he says:

“These safeguards were put in place when the Consumer Rights Act 2015 was taken through the House to ensure a balanced system of collective actions before the CAT. These safeguards ensure that defendants are protected by avoiding vexatious and unmeritorious claims—or fishing expeditions—while allowing legitimate claims for redress to proceed”— this is the point where I took a deep breath—

“without defendants feeling pressured to settle despite the likelihood of a strong defence”.

Let us consider who we are thinking of as defendants: quite often in these circumstances, they will be extremely large companies. Is it not time that we reviewed the Consumer Rights Act 2015 in that respect? Surely, in these circumstances, we are talking about big tech, which has all the market power and the ability to finance litigation till kingdom come. Have the Government engaged in any recent consultation on that? As far as I can see, the last consultation they conducted was 10 years ago. I hope that the Minister has some slightly better answers this time around than both those in his letter and in Committee.

I look forward to hearing from the noble Lord, Lord Tyrie, and I encourage him to retable his Amendment 65 on whistleblowing. The government response in Committee and in their letter of 27 February—in contrast to what I have just said—demonstrated a real interest in expanding the regime set out in the Public Interest Disclosure Act 1998. The Government now say that they are currently reviewing the effectiveness of the whistleblowing framework in meeting its original objectives. I very much hope that the Minister can give us a foretaste of the conclusions of that review. I also look forward to hearing from my noble friend Lady Kramer, who has been a champion of whistleblowing rights.

Without anticipating what the noble and learned Lord, Lord Thomas, may say, I welcome government Amendment 62, but the timescale is crucial. We on these Benches will help to facilitate a Bill putting those rights on the statute book in any way that we can. We have received a letter from the Association of Litigation Funders. Without putting too fine a point on it, it says: “This vital role of litigation funding has been highlighted recently following the increased and long-overdue coverage of the Horizon scandal. Alan Bates, the lead claimant against the Post Office, has said that the backing of litigation funders helped him and his colleagues secure justice, expose the truth and clear their names and reputations”. I cannot think of a better reason to make sure that we get the Bill on the statute book as soon as possible. I beg to move.

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Ceidwadwyr

My Lords, I have Amendment 63 in this group, which is an updated and slightly amended version of Amendment 89A that I tabled in Committee. As the title of the proposed new clause says, the amendment calls for the Government to undertake a review of the third-party litigation funding industry. We discussed my earlier amendment on 31 January, and a lot has happened since. I have been blowing the trumpet since March 2017, and suddenly it appears that the walls of Jericho have fallen down.

I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, who has been kind enough to send me a copy of the draft report by the European Law Institute on the principles that should govern third-party funding. The draft report contained a great deal of intellectual heavy lifting, from which I have benefited greatly.

Most importantly and significantly, I thank my noble friend the Minister and, through him, the Lord Chancellor and the Ministry of Justice for the announcement on 4 March that a review of third-party litigation funding would be undertaken. I am also grateful to my noble friend and his officials for giving me the chance to see some early draft terms of reference and for the opportunity to discuss them with him. I have a handful of points about them that I would like to put on record tonight, and I hope he will be good enough to pass them on to the MoJ, so that they may be taken into consideration as the terms of reference are firmed up.

First, in Committee I explained that I was a very strong supporter of the concept of access to justice, but that we needed to know what sort of justice was being accessed. The noble Lord, Lord Fox—I am sad that he is not in his place, but I did say I was going to mention him this evening—got after me, not entirely unfairly, saying that all my remarks were, as he put it, of second-rate importance and that, without third-party litigation funding, there was no justice at all, to which I reply: up to a point, Lord Copper.

We—and I hope the review—must not forget that the funders are profit-making entities. This in itself is entirely understandable, but a profit-making entity marches to the beat of a different drum. All I am saying is that the plaintiffs—whose interests, after all, the funders are supposed to represent—are entitled to know about the beat of that drum, the waterfall of the distribution of the proceeds, who pays costs, and all those sorts of issues. If obfuscation takes place, there should be a body—the courts, perhaps—that can step in. Equality of arms demands no less.

My second point is that I hope the review will be prepared to get down into the real practical detail of what is happening in the industry today. High-flown legal principles are really important to provide the right structure but, to be effective and worth while, the review will need people with experience of the third-party litigation funding industry and those with a preparedness to get into the detail and turn over all the stones.

Thirdly, I hope the review will examine the consequences of grouping claims together, in the way that they are put together for funding via a single investment pot. In particular, the review will need to consider the position where firms of solicitors are undertaking the grouping. As I explained in Committee, where several cases are included in a single pot, there is a danger of too early a close-out, from a plaintiff’s point of view, of the remaining case or so, when the funder would like to round up the pot and return the money to its investors. By contrast, when matters are not going so well, it may be in the funder’s interest to prolong the proceedings—not in the interests of the plaintiffs—in the hope that a greater result will come from the last few cases, and the result will be a much more satisfactory outcome. The key differentiation is that the plaintiffs have an interest in the outcome of a single case, whereas the funders have an interest in the outcome of a group of cases.

Fourth is any unwitting exposure to costs. Under the opt-in regime, individuals took their chances when they signed in—not so under the opt-out regime. I think I am right in saying that there is nothing to stop my noble friend the Minister, me, or Members of your Lordships’ House suddenly getting communications saying, “Please send us £100 for your share of unfunded costs of bringing this case”. That seems to be not a likely but a possible situation, and not a very satisfactory one.

Fifthly, for those Members of your Lordships’ House who sat through Committee and other stages of the National Security and Investment Act, when we were seeking to achieve a reasonable balance among interested parties, there is a read-across to this review. It is surely not in our national interest to have unknown funders—perhaps backed by foreign Governments—able to press for litigation claims against high-tech UK companies. Such actions can disrupt the management and development of the company or damage its reputation, and could in some cases give access to its technology. An ability for the Government and/or the courts to require disclosure of beneficial ownership could be of great advantage in the future.

Finally, we are promised a preliminary report this summer and a final report in summer 2025. This will presumably mean that the earliest we can accept draft legislation, if there is any, will be in the 2026-27 legislative programme, leading to stuff on the statute book in 2028. That is quite a long way away, and I hope we are not going to see any slippage in that timetable. I hope that I have been over-pessimistic about what might be achieved, and that my noble friend can reassure us on that.

I end as I began, by thanking my noble friend and the Government for this important development. I hope they will feel able to pass these remarks on to the MoJ and I ask whether those of us who have taken a long-standing interest in TPLF can be kept informed as matters develop, and that we shall have the opportunity to give evidence to the review in due course.

Photo of Lord Tyrie Lord Tyrie Chair, Parliamentary Commission on Banking Standards (Joint Committee)

I have tabled Amendments 65 and 153. I declare my interests, as I did in Committee and as I have set out in the register. I also declare an interest in the Bill, since I had a hand in constructing it. I can never make up my mind whether I should be declaring victory and moving on, or flagging up further improvements. I have decided to take the latter course. Unfortunately, as on a previous occasion, it falls to me to come between a number of colleagues and their dinner, so I will do my best to be brief—although there are a number of things I need to say.

I will take Amendment 153 first. It proposes a comprehensive review of the effectiveness of this legislation in five years’ time and every five years thereafter—that is, a review of the whole competition, consumer protection and digital framework. We need that because this is not a minor Bill; it is greatly enhancing the powers of an already powerful body, and one which has a mixed track record of only partial implementation of its current statutory remit, mixed-quality corporate governance, a lack of accountability—which has been referred to many times in the course of scrutiny of the Bill—and a history of timidity at the top. Several of the new powers being granted, especially in the digital area, are completely uncharted territory, and nobody really knows what their effects will be. A review can find that out. Incidentally, we are also granting—although this has been much less scrutinised—enormous additional administrative powers in the field of consumer protection, and that would be occupying a great deal of our time were we not being distracted by the equally very important area of digital.

A second reason we need a review is that we need to know whether this legislation is delivering the goods for the final consumer. When a small group of us were working on the outlines of the legislation at the CMA, that crucial issue was extensively discussed among us. We conceived our proposal, which was published in 2019, as a three-legged stool, with three areas working together: a duty of expedition, a power to implement interim measures and a consumer duty on the regulator. This legislation has left out one of the legs. A review is needed to find out whether this two-legged stool can stand up.

A third reason we need a review is to consider whether, with respect to digital, we have this crucial issue of JR versus merits reviews in the right place. The Government have removed any form of substantive appeal compared to what they said they would do originally, which was a form of JR-plus on the Ofcom model. What also deeply concerns me is that we are likely to be reducing the deterrent effect of fines by providing a merits review of fines, when I think everyone is agreed that fines are too low and need to be higher if they are to be an effective deterrent.

One of the many points I did not make in Committee on this issue is that the UK is seen as a good jurisdiction to locate and transact, precisely because we have demonstrably balanced and reasonable review by the courts of substantive decisions. Those who argue for the pure form of JR—we have heard quite a bit of that today again—may end up prejudicing that very important benefit, and it could turn out to be a profound mistake. We will not get the Government to change their mind just now. I think they will reverse what has just been done here in the Commons shortly, but let us at least look at it again after a few years, and thoroughly. Incidentally, some might argue that we have created a form of review by the back door through the introduction of the word “proportionality”. That may turn out to be the case, but, if so, it is a step into the unknown, whereas using the Ofcom route—the JR-plus route—was at least one on which there is case law.

I want to make one last point on Amendment 153. Perhaps in five years’ time Parliament will already have put in place some meaningful parliamentary oversight anyway, and I strongly agree with what the noble Baroness, Lady Stowell—she is not in her place—had to say on that. I hope we get to better oversight. It is needed for a good number of regulators, not just the CMA, as substandard performance from a number of them is manifest now to all of us. I very much hope that Parliament will get help from the Government to put in place a powerful regulatory oversight body, with adequate, high-quality staffing. Were we to do so, the need for the five-year review I am proposing here in Amendment 153 would probably be less pressing.

The Government may in a moment tell us that there will be some post-legislative review and that that will be put in place in a few years’ time anyway. All I would say to that, on the basis of more than a quarter of a century as a legislator—I do not know exactly how long—is, “Up to a point, Lord Copper”. I have seen some of these reviews and how they can be gutted of any meaningful, genuine, scrutiny, and they are of very variable quality. This proposed new clause would make sure that the review is robust. In any case, of one thing I am absolutely certain: we must have better oversight of these bodies. Where the legislation concerning these regulators is concerned, but particularly in the competition field, “fire and forget” legislation will be of little use. That is why we need to have confidence that a review will take place, which we get with this amendment.

I turn now to whistleblowing and Amendment 65. The UK now needs to review and to reassess its whistleblowing provisions pretty thoroughly and as soon as possible. They are manifestly inadequate. Four points stand out. First, I think most people are agreed that they are defective in the anti-trust field. I have discussed that at considerable length in Committee, which I will not trouble the House with again.

Secondly, the problems with the UK’s whistleblowing provisions are only going to get worse with the growth of digital detriment. It is extremely difficult for regulators to know even where to look to find that detriment and to find the abuse, given the power of algorithms and the asymmetry of arms with respect to them. Regulators are almost certain to need whistleblowers to find it.

A third reason we need more robust whistleblowing provisions is that there is moral hazard everywhere. I will give just two examples, one of which I have raised before. When someone blows the whistle, however ethical their position may be, it may also destroy that person’s livelihood and that of his or her family. As the International Bar Association put it in a review of whistleblowing, whistleblowers must have full compensation, which they certainly do not get now:

“Otherwise, the whistleblower may ‘lose by winning’”.

A second illustration of the moral hazard lies with the CMA itself. On the one hand, the CMA knows that it should do everything possible to encourage whistleblowing; on the other hand, any compensation it pays to them comes out of its own budget—scarcely the sort of encouragement that is appropriate.

Incidentally, I do not know why the Treasury is not more deeply into this. The fines go to the Consolidated Fund, and offering the CMA some proportion of what goes to the Consolidated Fund strikes me as a win-win for everybody—better deterrence, some more money in the Consolidated Fund and the CMA fully compensated for the cost of trying to assist or compensate a whistleblower. I hope that Ministers are looking at this, and I hope that is what I am going to hear in a minute.

Several of us have been pointing this out for years. Given the moral hazard, it is no wonder that the current situation is leading to a thin selection of anti-trust cases coming forward from the CMA. It is scarcely credible that there is so little detriment in the anti-trust field, given how few cases it is bringing. Of course, the truth is that it is very difficult to find out about them, and whistleblowing is probably the only practical way. The losers from all this are the millions of consumers who are left unprotected from collusion by firms, big and small, and particularly the smaller, challenger firms trying to break into markets.

A fourth reason that we need a review of whistleblowing is to seek out and try to emulate best practice in other countries. Several of them do it much better, particularly the United States, where whistleblowers are generously compensated.

Of course, if fines and compensation are both raised a lot, as they should be, a review will also need to look at some of the moral hazard that might come in the other direction —for example, the risk of deliberate provocation from those hoping to profit from the higher compensation, or vexatious claims from discontented employees. These are not easy issues to address. Perhaps we need to go further than we do now to deal with them.

The noble Baroness, Lady Kramer, has been arguing vigorously for years that we need to go much further, that we need an office for whistleblowers—a fully independent oversight regime with a remit well beyond the competition field. I have hesitated before supporting such a proposal but, given where we are now, perhaps she is right. At the very least, we need an immediate review to find out whether she is.

Photo of Lord Kamall Lord Kamall Ceidwadwyr

I thank the noble Baroness. I am afraid that was the opposite of chivalry.

I want to speak to Amendment 153, tabled by the noble Lord, Lord Tyrie. He and I have had a number of conversations about this. I refer noble Lords to my interests as set out in the register. Having written about competition law at EU level and taken part in debates on competition issues in the European Parliament during my many years there, I was very torn between the merits appeal and the judicial review. I was tempted by the idea from my friend in the other place, the right honourable Robert Buckland, of possibly a time-limited merits appeal.

Many of us fell down on the side of judicial review because the small firms, the challenger firms, were asking for it. They believed that it was quicker and more effective. We hope that it will be. That is why many of us have supported this. But we have to ask: what if we are wrong? We do not have perfect information. What if judicial review takes longer than envisaged? Some noble Lords have said to me that the Joint Committee of Parliament that the noble Baroness, Lady Stowell, proposed would be much more effective in holding the CMA to account and ensuring that there is not a repetition of cases being restarted because they lost at JR. That argument has some merit.

However, we must take a step back and realise that, given that none of us has perfect information, we should be aware of the notion of unintended consequences. I have written about this a number of times over the years for think tanks. Often a well-intentioned government intervention that is supposed to make things better, which many people support at the time and that makes sense and looks like it will work does not turn out how it is supposed to but makes things worse.

In that spirit, I have been thinking about how we make better laws. How do we ensure that there are safeguards in place for unintended negative consequences? How do we make some redress to ensure that we change course, having thought that we were on the right course but having made things worse by not recognising the unintended consequences? In Committee, I said that I had considered tabling an amendment for a review after three or five years, or whatever. However, I am concerned that this would be seen as a loophole by the big companies, which would then hold off in order to show that JR was not working so that they could go back to merits appeal.

The noble Lord, Lord Tyrie, has solved that problem in many ways with Amendment 153. It is right that we have a review of all legislation to ensure that it has worked out as was intended and so that where there are unintended, unforeseen consequences, when it did not work as we had envisaged, we have those safeguards. A good way of doing that would be to have reviews of legislation such as the one that the noble Lord proposes here, to ensure that we could change course if it did not turn out how we intended.

I hope it will do. I hope judicial review will work. I hope it will be much quicker and we will have a much more competitive market. I hope the challengers will grow stronger, we will have more competition and see creative disruption and new challengers at every stage and consumers benefiting. Amendment 153 says, “Let’s make sure that we take stock to see whether legislation—particularly a Bill as important as this—works out as we want it to”. That is why I support Amendment 153.

Photo of Lord Thomas of Cwmgiedd Lord Thomas of Cwmgiedd Chair, Consolidation, &c., Bills (Joint Committee), Chair, Consolidation, &c., Bills (Joint Committee), Chair, Arbitration Bill [HL] Special Public Bill Committee, Chair, Arbitration Bill [HL] Special Public Bill Committee

My Lords, I will speak very briefly in relation to the amendments to deal with the problem of litigation funding.

I thank the Lord Chancellor and the Ministers on this Bill for what they have done to facilitate bringing forward comprehensive legislation because it is plainly much better addressed in one simple Bill. I express also my gratitude to the Opposition, particularly the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Bassam and Lord Stevenson of Balmacara, for their help. On the Liberal Democrat Benches I thank the noble Lords, Lord Clement-Jones and Lord Fox. I also thank my colleagues who are not here to support me. This is something where the Lord Chancellor has been right. He has taken the right decision. Our task now is to get it through before any events derail legislation. Any help that I can give, I am more than willing to.

As I am on my feet, I will say one word about Amendment 63, tabled by the noble Lord, Lord Hodgson of Astley Abbotts. The Lord Chancellor has been correct in saying that we must have a review. I have supplied all the documents to which the noble Lord, Lord Hodgson of Astley Abbotts, has referred, to the Lord Chancellor and others, regarding the work that has been done by the European Law Institute and a committee which we have the benefit of being chaired by Mrs Justice Cockerill. It has a very strong perspective from England and Wales.

Litigation funding raises issues that are worldwide. They are very similar, whether in continental Europe, the United States, Singapore or Australia, by way of illustration. These are covered in the report. I very much hope that the Ministry of Justice will find it useful and think of a way to tap into all the knowledge that the group has. What the answer is, what the principles are, I will not take your Lordships’ time up with, except to say that it may not be regulation. Regulation is not a universal success. There are other ways of doing things—maybe codes of conduct, maybe voluntary agreements. It is quite clear that this gives England and Wales, and the UK, an opportunity to show what we have always had: leadership in the law. We are known throughout the world for this. I very much welcome what the Lord Chancellor has done because it shows what a real leader he is.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy) 7:45, 11 Mawrth 2024

My Lords, I very much support Amendment 61 moved by my noble friend and colleague Lord Clement-Jones. I am very much a believer in equality of arms. The issue of exemplary damages speaks exactly to that. I hope very much that the Government will take that on board, because it is a fundamental principle that makes a great deal of practical difference as well when wrong has happened and when people seek redress.

I support the two amendments tabled by the noble Lord, Lord Tyrie. Briefly, on Amendment 153, regarding the five-year review, I had the privilege of serving under the noble Lord’s chairmanship on the Parliamentary Commission on Banking Standards. In many ways that was similar to this Bill, but our proposals were exceedingly radical. They required very substantial change by the financial services industry. We very much wanted them to be reviewed after a period of time. We did not manage to trap that into legislation; it did not happen. Instead, when issues became evident where we had made changes—for example, on presumptions of guilt and in areas where there was intense lobbying on ring-fencing and whatever else—changes happened but not in a coherent and sensible way that benefited from that overarching focus that we had had during the original review. That has been a real weakness. We finally have a new committee in this House, the Financial Services Regulation Committee, providing some accountability to regulators, but that is an issue that we would have picked up on much earlier had we been in the process of doing a comprehensive review. That underscores many of the points that have been made about this issue.

We live in changing times. The idea that things stand still and you can do everything piecemeal is really not appropriate. However, I will speak most on the issue of whistleblowing. I have not otherwise participated on the Bill but, when I see the word “whistleblowing”, I am afraid that I suddenly find myself lured on to the Benches.

I very much ask the Government to take this issue on board, because I agree with the noble Lord, Lord Tyrie, and others: we will never get to grips with wrongdoing in any of the areas covered by the Bill, particularly with all the new complexities and the constant change within the digital and competitive arena, until we have an effective whistleblowing regime. We need a system that leads to the follow-up of valid tips from whistleblowers. Currently, looking at different regulators in many different fields is clearly completely haphazard. Some tips are followed up, some are dismissed and some are ignored. Secondly, and just as importantly, we need a proper arrangement to protect whistleblowers from retaliation, so they will not suffer detriment by coming forward.

Our current system depends on the Public Interest Disclosure Act 1998, which was a Private Member’s Bill that was brought forward then as part of employment law. It was ground-breaking at the time but has long been shown to be utterly inadequate compared with more recent schemes, particularly in the United States. Those US schemes have had an astonishing success rate in disclosing wrongdoing, leading to prosecutions, convictions and financial penalties.

I will use an example not from the anti-trust field but from a field that I know best and with which many will be familiar—the Securities and Exchange Commission. Since it brought in its whistleblowing scheme in 2011 under the then new Dodd-Frank legislation, by the end of fiscal year 2022, it had received over 83,000 tips from whistleblowers and collected in excess of $6 billion in financial penalties. In fact, there has been so much activity in the following years that those numbers would be significantly higher if we brought them up to date.

It is also fair to assume that billions of dollars of wrongdoing have been deterred by the fear of disclosure under such an effective whistleblowing regime. Not just the SEC but a number of entities use whistle- blowing legislation within the financial field; the Commodity Futures Trading CommissionCFTC—is another example that has had the same kind of success as the SEC. I find it rather disturbing that the CFTC is now doing road trips in the UK to encourage whistleblowers who are aware of financial wrongdoing with any US connection to contact it directly. In fact, something close to a quarter of the cases it is currently pursuing have a UK-based whistleblower somewhere within them, because finance is so international. Now the people at the CFTC are very careful not to criticise any UK regulators, but it is not a compliment that they feel it is necessary to be here to get their independent message across to anyone who has come across wrong-doing, with a US connection, in the financial field.

The Public Interest Disclosure Act is inadequate for at least four reasons, some of which were mentioned by the noble Lord, Lord Tyrie. It does not require any follow-up on a tip, even if it is acknowledged to be valid. It covers only employees and not the many others, such as contractors or clients—all kinds of people come forward—who blow the whistle when they see wrongdoing. They are not covered at all and have zero protection at present. All it provides is anonymity for disclosures that are made to a prescribed group of people—basically, the regulators and MPs. Most whistleblowers are not anonymous; they will have raised issues with management, companies, employers, suppliers and clients. When they see something wrong, they do not instinctively think of themselves as whistleblowers in need of protection, and when they do, their identity is then known.

No regulator in the UK has ever acted to protect a whistleblower from retaliation. That retaliation is usually years spent in an employment tribunal or in the courts. For many whistleblowers, it is a loss of career. There is a wide scheme of informal blacklisting—we know of case after case. Many whistleblowers have to use their own resources because there is no legal aid to fight this process, so they run into financial ruin. You can imagine the mental health costs and the frequency with which families break down.

However, I have spoken to pretty much every UK regulator and typically—there are a few exceptions—they regard their own monitoring and supervision as entirely sufficient, with whistleblowing a mere marginal assistance. They also believe that whistleblowers should act out of duty and altruism, and not because there is protection from retaliation available or compensation for harm.

I have talked about the SEC and the CFTC and, prior to the Dodd-Frank legislation in the United States, which put in the strict whistleblowing rules and made them mandatory, US regulators had exactly the same attitude as the current UK regulators and the same failure to create a pattern of whistleblowing and to follow up cases. The change came with legislation.

In the sectors covered by the Bill, the rewards for wrongdoing are a huge temptation and require highly sophisticated expertise and knowledge. We can see why that is tough for a regulator to manage, unless it has a really effective whistleblowing programme. In its recent directive, the EU is now catching up with the United States in recognising whistleblowing as a key tool to expose wrongdoing early and to deter wrongful behaviour. It is time that we did the same.

I hope that the Minister takes back this message to those who are working on the reform of the whistleblowing framework, as it is really important. Sometimes one hears rumours that they are looking just to tweak existing legislation, but what is needed is a radical change that meets the needs and gives us the opportunity that an active whistleblowing community can deliver. I hope the Government will take on board that message.

Photo of Lord Bassam of Brighton Lord Bassam of Brighton Shadow Spokesperson (Science, Innovation and Technology), Shadow Spokesperson (Culture, Media and Sport)

My Lords, I promise that I am not going to stand for too long between this session and people’s desire to have supper. I have a few words to say, but I will try to keep them as brief as I can. This group of amendments deals with the interaction of the courts with regulation and redress, and we obviously support Amendment 61, in the name of the noble Lord, Lord Clement-Jones, on exemplary damages in class action cases. We will listen to the Minister’s explanation carefully and try to understand why the Government are continuing to resist this approach.

We recognise that government Amendment 62 is part of a wider initiative to put right the fallout from the Supreme Court judgment in the PACCAR case, which acted as an inhibition to litigation fee agreements that enable collective actions such as those involving the postmasters and postmistresses. If we have learned anything from Committee, it is that Ministers should live in dread of the experience of the former Lord Chief Justice, at all times. The noble and learned Lord, Lord Thomas, offered us some wise words on that occasion and I am glad—delighted, actually—to see the Government finally acting with some speed to bring forward a Bill from the Ministry of Justice that covers a wider range of cases than the current Clause 127 achieves. If the noble Lord, Lord Clement-Jones, had not quoted Alan Bates, I would have done, because I thought it was a ringing endorsement of what was necessary.

Perhaps I could task the Minister and tire him a little to put a bit more on the record about the detail, nature and extent of the short Bill when he sums up. Can he give us a clue about its introduction date?

The other amendments in this group, tabled by the noble Lord, Lord Hodgson of Astley Abbotts, and the noble Lord, Lord Tyrie, merit our support, not least because they call for a practical review of the operation of third-party funding for cases involving competition and consumer law, and the protection of whistleblowers. In the latter case this involves the need to protect those who are selflessly acting, or attempting to act, in the public interest.

Regarding Amendment 153 tabled by the noble Lord, Lord Tyrie, we want to hear from the Minister how the legislation will be kept under review. We have heard throughout the passage of the Bill of the need to keep abreast of the changes in the market affected by the actions of different platforms and the tech giants. We do not want to be caught short in the way in which we have been in the past, and some notion of a plan to review the legislation would go some way to reassure noble Lords—particularly those who have focused their time and attention on the Bill.

I have not referenced Amendment 66, simply because I do not really understand it. I assume that it is consequential. Perhaps the Minister can give the House that assurance and explain exactly what it means. With that, I am happy to listen to the wisdom of the Minister when he comes to sum up.

Photo of Lord Offord of Garvel Lord Offord of Garvel Parliamentary Under Secretary of State (Department for Business and Trade) 8:00, 11 Mawrth 2024

I thank all noble Lords who have contributed to the final group this evening, group 4.

Amendment 61 tabled by the noble Lord, Lord Clement-Jones, would enable the Competition Appeal Tribunal to award exemplary damages in collective proceedings. He is familiar with the Government’s position on this matter. I have been pleased to have the opportunity to discuss it with him further since Committee, and have written.

The Government consulted before introducing the collective action regime in 2015. The great majority of respondents said that exemplary damages should not be available in collective actions to ensure that firms were not unduly pressured to settle claims due to just the risk of punitive damages. Introducing exemplary damages in collective actions could also act as a disincentive to leniency applications—these are critical to the detection and enforcement of infringements by public regulatory authorities. Without effective leniency programmes and public enforcement, it could be far more difficult for private parties to pursue redress.

This view was shared by both businesses and consumer groups, including the consumer group Which?, which did not consider extending exemplary damages to collective actions to be necessary. I am sure that this will be of particular interest to the noble Lord, Lord Clement-Jones, given his commendable focus on ensuring consumers are at the centre of our thinking. The Government believe the current provisions in the Bill reflect the right approach on this matter.

Government Amendments 62 and 157 relate to litigation funding. The Government have recognised the challenge posed by the PACCAR judgment and the impact on access to justice. Furthermore, it has always been the Government’s intention to address the impact of the PACCAR judgment in full at the earliest opportunity. Since Committee, the Government have announced that it will quickly bring forward a separate Bill to enable this. I am sure that noble Lords across the House will welcome this news.

Clause 127 was introduced previously to mitigate the impact of PACCAR by enabling PACCAR-compliant funding agreements to be applied to opt-out collective actions. This clause will no longer be required, and these amendments effect its removal. I hope that noble Lords will support these amendments, along with government Amendment 66, which is a tidying-up amendment to remove a redundant cross-reference in Schedule 13.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

My Lords, I am sorry to interrupt the Minister but the noble Lord, Lord Bassam, and I would be keen—despite the dinner hour approaching—to know a bit more about the Minister’s plans as regards the short Bill. We want a bit more specific information about timing and what is happening. Is there a period of consultation, or can we go straight to legislation. What is the plan? With the best will in the world, we are delighted to hear what the Minister has to say, but can we have some specifics?

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

My Lords, that is rather better than the ministerial “in due course”. That is all I can say.

Photo of Lord Offord of Garvel Lord Offord of Garvel Parliamentary Under Secretary of State (Department for Business and Trade)

I thought the noble Lord would appreciate that clarity.

Amendment 63 was tabled by my noble friend Lord Hodgson and I thank him and the noble and learned Lord, Lord Thomas, for their contributions to the debate. While the Government recognise the important role that litigation funding can play in facilitating access to justice, we are not blind to some of the challenges and opportunities to reform and improve the funding system. That is why, in recent days, the Lord Chancellor has written to the Civil Justice Council, inviting it to undertake a review of the sector. This work will ensure that claimants can get the best deal and it will expressly consider the need for further regulation or safeguards. Its terms of reference will be announced in the coming days.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

I am sorry my Lords; I regret to keep interrogating the Minister, but there is a clear separation, I assume, between a review as to whether or not regulation is required, in the form that the noble Lord, Lord Hodgson, talked about, and re-establishing the basis for litigation funding following the PACCAR case. I assume there is a clear distinction between the two activities.

Photo of Lord Offord of Garvel Lord Offord of Garvel Parliamentary Under Secretary of State (Department for Business and Trade)

That is correct.

Colleagues from the Ministry of Justice will be following this debate closely and will have heard the points made by my noble friend Lord Hodgson regarding the need for momentum for this review. Therefore, it would not be right to have a statutory review that would duplicate this work.

Amendment 65, tabled by the noble Lord, Lord Tyrie, is about whistleblowing. I thank the noble Lord and the noble Baroness, Lady Kramer, for their passionate contributions on this topic this evening. As I made clear in Committee, the Government recognise how important it is that whistleblowers are supported to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. In 2023, the CMA increased the cap on rewards for illegal cartel whistleblowers from £100,000 to £250,000 to strengthen its enforcement work. Additionally, the Government are undertaking a wider review of the effectiveness of the whistleblowing framework in meeting its original objectives to facilitate whistleblowing, protect whistleblowers against detriment and dismissal, and to facilitate wider cultural change around whistleblowing.

My colleague the Minister for Enterprise, Markets and Small Business has recently mentioned in the other place that the research for the review is near completion. The Government intend to provide an update on this shortly.

Photo of Lord Tyrie Lord Tyrie Chair, Parliamentary Commission on Banking Standards (Joint Committee)

Can the Minister say whether “shortly” is the same as “quickly”, and whether it will be a comprehensive examination of the subjects or just picking off a small number of areas? What exactly is it looking at?

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

Before the Minister stands up, I will add to that. The Minister used the word “research”, which I thought was extraordinary. “Research” is a flabby kind of expression in these circumstances. Do the Government intend to review the current state of whistleblowing with a view to ensuring there is a more comprehensive approach to it, or is this just some nice-to-have academic exercise?

Photo of Lord Offord of Garvel Lord Offord of Garvel Parliamentary Under Secretary of State (Department for Business and Trade)

I thank both noble Lords for that. The update will be provided shortly. I agree with the noble Lord, Lord Clement-Jones, on the beauty of the wording that the “research” for the review is near completion. It does perhaps need some clarification, so let us get the timetable and I will provide that as soon as possible.

The noble Lord’s continued engagement is greatly welcomed as we undertake this important work. However, we do not think it appropriate to place a new and binding obligation for a further review to be conducted within a specific timeframe. I will come back to him with exactly what the timeframe is.

Amendment 153 from the noble Lord, Lord Tyrie, would require the measures in the Bill to be reviewed at five-year intervals by an individual appointed with the consent of the relevant parliamentary Select Committee. I thank the noble Lords, Lord Tyrie and Lord Kamall, and the noble Baroness, Lady Kramer, for their contributions to the debate on this amendment. I commend its intent. However, the Government have already committed to carrying out an evidence-led post-implementation review to assess how the Bill is delivering on its aims. The CMA has also engaged constructively with parliamentary committees to support their scrutiny of its activities. This will continue in the future. Noble Lords will be aware that the CMA is also required to present and lay its annual report in Parliament, covering its operation and effectiveness.

I thank the noble Lords, Lord Clement-Jones and Lord Tyrie, and my noble friend Lord Hodgson for their amendments. I hope that they are sufficiently reassured by what I have said and do not feel the need to press them.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

My Lords, I thank the Minister for that response. Even on an empty stomach, there are things to be taken away from what the Minister said. I score him two and a half out of four as far as this is concerned. What he said on exemplary damages was disappointing. I cannot see why the Government do not understand that using a review that took place in 2013 as a stick to beat us with by saying that we cannot have exemplary damages for collective proceedings seems a bit perverse. Time has moved on. The whistleblowing side is the half—so nul points for exemplary damages and half a point for whistleblowing, but if there had been more than just research it might have been full marks. As regards the other two points, the fact that there will be a post-implementation review is sensible. The Minister did not say much more about the post-PACCAR pledge, but we take a little bit on trust, particularly at this time of day. In the meantime, I beg leave to withdraw Amendment 61.

Amendment 61 withdrawn.

Clause 127: Use of damages-based agreements in opt-out collective proceedings