Clause 12 - The Competition Appeal Tribunal

Enterprise Bill – in a Public Bill Committee am 6:30 pm ar 7 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 6:30, 7 Mai 2002

I beg to move amendment No. 28, in page 6, line 5, leave out 'Secretary of State' and insert 'Lord Chancellor'.

Photo of Mr Nigel Beard Mr Nigel Beard Llafur, Bexleyheath and Crayford

With this it will be convenient to take amendment No. 29, in page 6, line 7, leave out 'Secretary of State' and insert 'Lord Chancellor'.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

We move into the part of the Bill that deals with the establishment of the Competition Appeal Tribunal, which is a wholly separate and specialist tribunal—really a court—within the English legal system. I want briefly to discuss the amendments before discussing the concept of the tribunal in a stand part debate, taking into account the limited time available to discuss the rest of this set of clauses and schedules and the next part of the Bill. That struck me as the most sensible peg on which to hang such a debate in part 2 of the Bill.

The amendments are easy to follow, and would mean that appointments were made by the Lord Chancellor rather than the Secretary of State. Despite the Lord Chancellor's occasional problems in the DIY field, we believe him to be at least nominally more independent than the Secretary of State. The appointments should not only be as independent as possible but should be seen to be. It is a modest amendment, and I hope that it will find favour with the Under-Secretary.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am not clear what the hon. Gentleman thinks that the amendment would do. As hon. Members can see from the clause, the Lord Chancellor has already been given an active involvement in appointments to the CAT in that he

will be responsible for appointing the tribunal's president and panel of chairmen. Previously, the Secretary of State made all appointments to the CAT, or CCAT. She consulted the Lord Chancellor before appointing the president but, otherwise, independently appointed chairmen and ordinary members. The Secretary of State will in future appoint only ordinary members.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

Will the Under-Secretary confirm that hitherto, under the Competition Act 1998, the CAT has not under any circumstances heard appeals from decisions of the Secretary of State, although it has heard them on decisions from the OFT under the chapter 1 and 2 prohibitions? Under the Bill, will the CAT consider appeals on grounds of judicial review from decisions by the Secretary of State?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I can confirm that that is right.

The hon. Gentleman may want to understand why I think that the division of responsibilities between the Lord Chancellor and the Secretary of State is the best approach. The Lord Chancellor makes the appointments requiring legal qualifications when his expertise is at a premium; his involvement should ensure that we attract candidates of the highest calibre to be chairmen. However, the Secretary of State is the person best placed to appoint ordinary members, as they will not necessarily bring with them a specific legal expertise. They will be required to have expertise relevant to competition and will continue to be drawn from a range of backgrounds, such as economics, business, accountancy and law.

The Secretary of State will also continue to finance the tribunal and to monitor its expenditure and cost effectiveness, which is why the Secretary of State should appoint the registrar, who will be the tribunal's senior official and act as accounting officer for both the tribunal and the Competition Service. We have strengthened the measures already in place to ensure that ordinary members, the chairman and president can carry out their duties without external influence being brought to bear. The only grounds for removing any member from office will be incapacity or misbehaviour. Members and chairmen will be appointed for one eight-year term with no reappointment; previously, members were appointed for shorter terms and then reappointed. The president will be appointed on the same terms as a High Court judge—in other words, until he retires.

The system provides a strong set of safeguards that will ensure the integrity of the tribunal's decisions and the best division of responsibilities in order to secure the required level of legal and competition expertise in the tribunal. I hope that I have persuaded the hon. Gentleman to withdraw the amendment. If not, I shall seek to oppose it.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I have already flagged up the fact that this seems to be the most appropriate place in which to have a full stand part debate on the concept of the Competition Appeal Tribunal, why it is provided for, what its function is, and in what way it is supposed to be an improvement on what has gone before. That seems to be our only option, given the guillotine that will fall in 25 minutes or so.

The role of the Competition Appeal Tribunal seems to have changed during the drafting of the Bill. It is a novel concept in the English legal system, so it is important that we consider carefully how it will slot into that system. It will be an important entity, with its own quango to look after its organisation, and it will deal with some important issues. It was originally conceived, as the name suggests, as an appeal tribunal to protect against unfair or unreasonable findings of the Competition Commission. That seems entirely proper. However, it is also being asked to fulfil a different role—that of a court of first instance. It is being asked to adjudicate on claims for damages following a finding by the OFT that a super complaint is justified. What is more, the OFT's findings of fact cannot, apparently, be challenged on that basis. The only safeguard, which seems to us to be inadequate, is that a damages claim cannot be heard until the appeals process is concluded.

Our first major question is whether the CAT is to be an appeals court or a court of first instance. Apparently it is to be a bit of both. That has the potential to be contrary to basic principles of fairness and due process of law. More practically, the two things call for different skills on the part of the judges or those who will be sitting in a quasi-judicial capacity. There is a world of difference between those who sit at first instance in any part of the legal system and those who sit in the appellate courts, as the Court Service and even the Lord Chancellor's Department, if so minded, might tell the Under-Secretary if she asked them. That is reflected not only in the seniority of those who sit in appellate courts as opposed to the courts of first instance, but in their remuneration. I should be grateful if she would expand a little on how the skills are to be provided in the relatively small structure of the CAT.

I am sure that the Under-Secretary will say that those involved will form a highly specialised group of people with expertise that will look on a regular basis at a narrow part of the law. I do not disagree; that is fine. However, that is entirely different, lest she try to elide the two points, from my point about the difference between the skills required—whatever the subject—of judges of first instance and of judges on appeal.

Our view, although we shall not get too excited about it, is that claims for damages ought to be heard in properly constituted, regular courts of law, not least because they are used to dealing with such claims. Although there will be an element of expertise in considering such cases, the fundamental rules in English law on how claims for damages are calculated, how the quantum is arrived at and how questions of remoteness and liability are resolved are pretty

standard and need not overly tax judges in the rest of the legal system. It is clear, however, that as the tribunal is presently set up, it will indeed have the power to award damages to those injured by breaches of either UK or EC competition law. That will place an extra layer on top of the current system because the civil courts already have the power to award damages in those situations.

Again, is it simply because the body is to be specialist that it is thought that it will dispense a better sort of justice? Is it thought that the pressure of cases will be too great for the existing court system? I do not think that anyone could fail to be impressed by the ability of even the most run-of-the-mill, first-instance, High Court judge to grasp in a short space of time the essentials of cases that may be based on a series of different aspects of the law.

Will the Under-Secretary also confirm that there were very few civil claims under the pre-1998 law? She may have the figures at her fingertips, or they may be at somebody's fingertips. The number of claims brought since then has not been significantly higher. Establishing a breach may not be difficult because the claimant can rely on an OFT or European Commission ruling, but proving the loss would be difficult. For example, a retailer who has been charged more than the market price as a result of a cartel may suffer no loss because they have passed on the increase to their customers. The ultimate consumer is the only person likely to be able to demonstrate a loss in such circumstances, but a price increase higher up the distribution chain may be a very small element in the price that they pay. They would therefore have very little incentive to sue.

Another issue, which would have arisen naturally under one of our amendments, is whether a remedy that is readily available in the civil courts—injunctive relief—should be available to the Competition Appeal Tribunal. I think that I am right in saying that it is not currently envisaged that the tribunal should have such a power, but it ought to be able to step in to stop or prevent something happening by issuing an injunction.

We have already had a significant debate about the possibility of importing something like class actions in the United States law into English law, so I do not want to develop that any further at this stage. Suffice it to say, we wonder whether schizophrenia is involved in the role of the CAT, as it will have a function in both the first instance and in an appeal.

On dealing with claims for damages, are we simply reinventing the wheel? Perhaps those matters are best left to the existing court system, which is capable of dealing with them. It does not seem likely that the number of additional cases will be sufficient to put extra strain on the court system as it stands at the moment. Given the complexity and cost of setting up the life-support system for the tribunal in the first place, are the Government going too far in extra cost and resources when they could achieve the same result more cheaply through the existing court system? Those are some of the themes that we would wish to develop, particularly if we had the chance to discuss some of our

other amendments to what is, after all, a very important part of the Bill that deserves thorough scrutiny in Committee.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire 6:45, 7 Mai 2002

I want to say a word or two about the constitution of the Competition Appeal Tribunal as set out in clause 12. The Government have moved from the position under the Competition Act on who appoints the president of the tribunal and the panel of chairmen to direct appointment by the Lord Chancellor, rather than by the Secretary of State—although the Secretary of State will continue to appoint a panel of ordinary members to the tribunal. In making that move, Ministers must have understood that the independence of the tribunal from the Secretary of State had some value, but the logic of that does not appear to have been followed through. If the Lord Chancellor is to determine who has the appropriate legal background to become president of the tribunal, or to act as one of the panel of chairmen, and that person is independent from the Secretary of State, it would be more appropriate for that person to hear appeals on grounds of judicial review against decisions that come to the tribunal under the legislation.

The Committee will recall that the Competition Appeal Tribunal, in addition to the damages hearings referred to by my hon. Friend the Member for Eastbourne, hears appeals against decisions taken under the Competition Act chapter 1 and 2 prohibitions, and hears them under circumstances where it considers the merits of the case. The panel consists of a chairman with legal experience approved by the Lord Chancellor, and ordinary members appointed by the Secretary of State, who have the appropriate knowledge of competition law, practice and, by extension, economic expertise. However, under the Bill, appeals will be heard on grounds of judicial review, rather than the wider grounds of again hearing the merits of the decision. In particular, we will hear appeals on grounds of judicial review against decisions made by the Secretary of State that will not necessarily have been taken by the OFT or the Competition Commission.

The need for those panels to be different should be obvious. The demand for economic expertise is less, the demand for competition law expertise might still apply and the demand for legal qualifications should be manifest. That would seem to point to a panel constructed entirely of those who are qualified to be president or to be in the panel of chairmen. The advantage of going down that route is that one would be constructing a panel consisting entirely of those appointed by the Lord Chancellor rather than by the Secretary of State, so the independence of the panel from the Secretary of State, and the issue of reappointment by the Secretary of State, could not be held to rights.

It would be very strange if a judicial review against a decision of the Secretary of State were heard by a panel whose members were due to come up for reappointment by the Secretary of State at some early

point. There are many people who would regard as substantive the difference between that sort of judicial review and the sort formerly available to a High Court under the Fair Trading Act, where the judge is not susceptible to reappointment by the Secretary of State who took the decision. It is not a very long step from the Bill to a point where it is clear that if hearings are going to go to judicial review, the panel should consist only of a president or those appointed to the panel of chairmen for the tribunal.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

I concur with both my hon. Friends. There will clearly be problems in working out the constitution of the appeal court and the court of first instance.

I would like to discuss the question of the length of the appointment. Eight years has been suggested. I am not entirely sure that that is the right period, or that it will encourage the best people for the job to come forward. As my hon. Friend the Member for South Cambridgeshire just mentioned, and bearing in mind his accurate description of how the system will work, those who come forward will mainly be lawyers. To that extent, one wonders how many barristers will want to take eight years out from their more lucrative practice rather than do what they would normally: become a judge and, in effect, have a permanent job. Eight years seems to be an unusual period for which to attract people to leave their professions, if they are then expected to go back to them. If it is expected that they will not go back to their professions, people of an older age, who might, although not inevitably, be the best people for the job, are likely to be attracted. If they are the best people for the job, it is likely that they are judges anyway. I should like to hear the Under-Secretary's comments on that.

Even if an eight-year period were to attract the right sort of person, I am not entirely convinced that, as other areas of law go, such a period would be best practice. Company directors, under the Companies Act, have a maximum fixed tenure of five years, but best practice recommendations are now normally for one year. The question is how to view such appointments. Will people stay for the long term, or come in to give their experience and then leave, as happens with non-executive directors and, to a greater extent, the Takeover Panel, for which the average stay for those coming from the private sector is between one and three years? I should like to hear the Under-Secretary's views on whether the proposal is likely to attract the best people and whether it fits established best practice in other areas.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

As Opposition Members have recognised, the Competition Appeal Tribunal will be able to hear appeals against decisions made by the Director General of Fair Trading in Competition Act cases. In addition, it will have new functions, and it is probably worth my while running through them.

The Competition Appeal Tribunal will be able to hear claims for damages in competition cases where a breach of competition law has already been established. It will hear applications for the review of decisions taken by the competition authorities in

market investigations and merger cases. It will hear appeals from parties that have been fined by the OFT or the Competition Commission for late provision or non-provision of information.

It is because of those new duties, which include the scrutiny of decisions made by the Competition Commission, that it is so important for the CAT to be independent of the commission. There must be no question of a lack of impartiality on its part. Opposition Members have recognised that. To achieve that impartiality, the existing membership of the Competition Commission will be divided into two distinct groups—one for appeals and one for all the other activities that I mentioned a moment ago.

Members of the appeal tribunal will no longer be members of the Competition Commission, and will work exclusively on appeals, with no involvement in Competition Commission investigations. That is a change from the current situation, under which it is possible to be a member of a Competition Commission reporting panel and of the appeal panel. The change will provide a considerable degree of separation, which I hope reassures Opposition Members that we have in mind, and have addressed, similar concerns to theirs.

On the point made by the hon. Member for Huntingdon, the CAT appointments will be on a part-time basis. Its members will not sit full-time, so they can continue with their day jobs. His point about what it is possible to get lawyers to do is counterbalanced by the presence of many lawyers in this House, who could probably be earning greater sums of money outside it. [Interruption.] The hon. Member for Eastbourne may deny that, but I think that we are all clear that my suggestion is probably correct.

The damages role is to provide a quicker, more accessible route for damages claims. So far, there have been no successful claims in the courts in 30 years, so it is important to accept, bearing in mind the points made by the hon. Member for Eastbourne, that the courts are not really working in that regard. It would not make sense to have provision on the existing basis because that has not facilitated any damages claims being dealt with.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I nearly missed the Under-Secretary's leap in logic. The fact that claims have not been brought for 30 years does not necessarily mean that that is the courts' fault. Perhaps there was no merit to the claims. The courts' job is to hear, within reason, whatever is put in front of them. Surely the Under-Secretary is not suggesting that the courts have somehow discouraged those claims. Is she suggesting the opposite? Having conceded that these chaps will be divided into two groups—the appeal court and the first instance court—will the first instance court be trying to drum up trade?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I made no such suggestion. I said that it is important to provide a quicker, more accessible route. It is not the court's or the existing tribunal's problem that no claims for damages were made during the past 30 years. However, there may be aspects of the

process that make it unattractive to people to bring such claims. We are determined to make it easier for people to bring claims that can be dealt with efficiently through a more accessible system.

The CAT will have a highly qualified president and a legally qualified chairman, and the ordinary members will have competition expertise. There will be detailed rules of procedure, which will be quicker than the courts and more innovative. We hope that a strong track record will be built up in all areas of responsibility. The Lord Chancellor will run a competition for new appointees to serve as chairman with a view to identifying a panel of chairmen in time for commencement of the new regime.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

The Under-Secretary seems to have passed over the points that I made. She either did not understand them or, having understood them, has not addressed them. My point was that, in addition, the Competition Appeal Tribunal may hear appeals against decisions made by the Secretary of State, not just by the Competition Commission. Does she agree that in those circumstances logic demands that the panel for such cases should consist of members appointed by the Lord Chancellor and not by the Secretary of State?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I was coming to that point and I assure the hon. Gentleman that I shall reflect on it. The fact is that there will be a competition for appointees. It will be open to applications from all suitably qualified individuals, and we hope that it will attract candidates of the highest calibre, perhaps including some members of the judiciary. The CAT is a key pillar of the world-class competition regime that we are creating in the Bill. The CAT's rapid and expert involvement in assessing decisions of the competition authorities will ensure the integrity of the whole system. I urge hon. Members not to support the amendment but to support the clause unamended.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I do not want to take up too much time--[Interruption.] Two important points arose in the Under-Secretary's comments, although with respect to her, it was rather like drawing teeth. First, there will be two types of people on the tribunal: the appeal people and the first instance people. Presumably, they will not mix--or mess together as barristers would say--or have any contact, and there may be Chinese walls to ensure that. Secondly, there is a possibility—even a likelihood—that those on the appeal side will have served as judges. So why not allow the judiciary to deal with the matter in the ordinary way? Those two points are new.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I said when commenting on appointments that people could end up sitting on either side of the division that we envisage—and not as the hon. Gentleman said. I can only reiterate that we believe that the process will be shorter and quicker, and meet the requirements for separation and

independence. The right degree of expertise will be available to the Competition Appeal Tribunal, whether it considers appeals or other matters.

Question put and agreed to.

Clause 12 ordered to stand part of the Bill.