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31Clause 18, page 10, line 28, after first 'implemented' insert 'or the appropriate rules'.
32Page 10, line 30, at end insert:
'( ) If, in the case of a company which is a trustee of a trust scheme—
(a) such arrangements as are required by section (Corporate trustees: member-nominated directors)(1) or (Corporate trustees: exceptions)(2) to be made have not been made, or
(b) arrangements required by section (Corporate trustees: member-nominated directors)(1) or (Corporate trustees: exceptions)(2) to be implemented, or the appropriate rules, are not being implemented,
sections 3 and 10 apply to the company.'.
33Page 10, line 31, after 'arrangements' insert 'or rules'.
34Page 10, line 38, leave out 'or 17(2)' and insert & 17(2), (Corporate trustees: member-nominated directors)(1) or (Corporate trustees: exceptions)(2)'.
35Page 10, line 39, leave out paragraph (b) and insert:

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'( ) trustees or directors are required to be selected in pursuance of the appropriate rules'.
36Page 10, line 41, leave out from 'when' to end of line 3 on page 11 and insert 'any approval under the statutory consultation procedure—
( ) of the appropriate rules, or
( ) of arrangements for selecting the trustees of a scheme, or the directors of a company, given on a proposal by the employer.'.
37Page 11, line 5, leave out & 17' and insert 'to (Selection, and eligibility, of member-nominated trustees and directors)'.
38Page 11, line 7, leave out & 17' and insert 'to (Selection, and eligibility, of member-nominated trustees and directors)'.
39Page 11, line 9, at end insert:
'(7) For the purposes of this and those sections—
(a) approval of the appropriate rules, or of arrangements, under the statutory consultation procedure must be given by—
(i) the active and pensioner members of the scheme, and
(ii) if the trustees so determine, such deferred members of the scheme as the trustees may determine,
taken as a whole, and
(b) references to the approval of the appropriate rules, or of arrangements under section 17 or (Corporate trustees: exceptions), by any persons under the statutory consultation procedure are to prescribed conditions in respect of those rules or, as the case may be, arrangements being satisfied in the case of those persons in pursuance of the procedure, and those conditions may relate to the extent to which those persons have either endorsed, or not objected to, the rules or, as the case may be, arrangements.'.

Lord Mackay of Ardbrecknish: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 22 to 39 en bloc. I wish to speak also to Amendments Nos. 46 to 50, 63, 70, 128 and 309 to 312. This group of amendments concerns trustees. The most important changes concern the provisions for member-nominated trustees.

Baroness Hollis of Heigham: My Lords, with the leave of the House and the consent of the Minister, perhaps I may make a suggestion. As he goes through the amendments the Minister gives the number of an amendment and then explains its purpose. It would be very helpful if at the end of each explanation he would repeat the number of the amendment to which he referred. There are so many amendments that by the time we realise which are the significant ones we have forgotten which number they were. The index, however friendly and useful, does not relate to the content of the amendments but merely gives their numbers. I believe that it would help the House if he would do that so that noble Lords can refer quickly to the amendments when so many are moved at once.

Lord Mackay of Ardbrecknish: My Lords, I am happy to try to oblige the noble Baroness. If I forget at any point perhaps she will remind me.

The member-nominated trustee provisions are an integral and vital part of this reform package. We are fully committed to the benefits of appointing member-nominated trustees. Our overriding objective has been to make them a requirement for all schemes.

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However, we recognise that some schemes already have perfectly satisfactory arrangements and we do not want our proposals to force them to abandon those arrangements if scheme members are happy with them. That is why we made provision for schemes to opt out of the requirement, but only with the approval of scheme members.

The reason for the changes which we have brought forward in these provisions is that there was some ambiguity in Clause 16. This left it unclear about which aspects of the member-nominated trustee requirements could be left to the discretion of the existing trustees and which must be approved by members under the statutory consultation procedure.

Our concern was that Clause 16 could be interpreted to mean that the trustees alone might be responsible for determining the detailed composition of the trust board and that members' approval could be restricted to procedural matters concerning the actual nomination and selection of member-nominated trustees. The trustees could have determined, for example, that only active members were eligible to be trustees, leaving the members with the option of accepting or rejecting the proposed mechanics of the nomination and selection process. That is certainly not what we want. Scheme members should be able to say no to rules which are not acceptable to them and to ask their trustees to think again. They must be free to require arrangements which provide for a pensioner trustee if that is what they want. Amendment No. 30 in particular reflects our policy clearly and unambiguously. However, I must make it crystal clear that there is no change in policy.

We have also made it clear that where there are corporate trustees, members should have a right to nominate at least a third of the directors. Scheme members should not be deprived of the right to nominate as directors at least some individuals whose perspective differs from that of the employer. So for these schemes we are providing broadly similar arrangements to those for other schemes through Amendments Nos. 28 and 29. Therefore, Amendments Nos. 28 and 29 refer to corporate trustee members and run in parallel with the considerable discussions we had on trustee board members in ordinary schemes.

Turning to Amendments Nos. 46 and 47, these affect the provisions dealing with decisions taken by trust boards on a majority basis. Concerns were expressed about that in your Lordships' House. We have concluded that it would be wrong for trustees to be able to override scheme rules in all cases, even where, for example, the rules currently provide for unanimity or for a weighted majority in respect of decisions on particular matters.

Therefore, we have now brought forward amendments which ensure that where scheme rules already provide for voting to be other than by majority, those rules would not automatically be overridden. We believe that that will achieve the basic objective of the PLRC recommendation in respect of schemes which do not specify how decisions should be taken and which are at the moment required under trust law to operate only by unanimity. That is achieved in Amendments Nos. 46 and 47.

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We have also brought forward in Amendment No. 63 a new clause to give effect to the recommendation made by Mr. Justice Lindsey in the High Court judgment on the case of Manning v. Drexel Burnham Lambert Holdings Limited. His recommendation referred to the dilemma of a member trustee with a conflict of interest and the general rule of equity that a person in a fiduciary position is not permitted to benefit from his or her position. The recommendation was brought into sharp focus by the requirement to appoint member-nominated trustees.

The Drexel case has been the subject of debate in both your Lordships' House and the other place. It highlighted a number of issues which led us to reconsider. We have listened carefully to the views of pensions experts and others and have brought forward Amendment No. 63. I express my particular gratitude to the Association of Pension Lawyers and to Professor Hayton, of Kings College Law School, for their advice. The new clause in Amendment No. 63 aims to protect member trustees so that they may take discretionary decisions with confidence and at the same time enjoy any incidental benefits that arise from them.

Another change I am pleased to bring forward is Amendment No. 70, which provides protection to pension scheme trustees against victimisation by their employers. It overstates the matter a little to say that I was harried by the noble Baronesses, Lady Turner and Lady Dean of Thornton-le-Fylde. They debated strongly with me about this need.

Baroness Hollis of Heigham: We pressed.

Lord Mackay of Ardbrecknish: The noble Baronesses pressed me strongly on this need. As I indicated, I was reflecting on it and Amendment No. 70 was brought forward in the Commons. It means that pension scheme trustees will be given a right to complain to an industrial tribunal if they are dismissed or are subject to any other adverse treatment in connection with their duties as trustees. This is not subject to any qualifying length of service, hours of work or age threshold. The amendment is in response to the strong arguments put forward in your Lordships' House and in the other place, and we have been persuaded that it is necessary.

We are confident—as I said in the debate—that very few employers indeed will ever be tempted to act in such an irresponsible manner but we also believe that we must ensure that employee trustees can carry out their important duties confident in the knowledge that they have the protection afforded under employment protection legislation. That sketches out the main effect of the group of amendments. I commend the amendments.

Moved, That the House do agree with the Commons in their Amendments Nos. 22 to 39.—(Lord Mackay of Ardbrecknish.)

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