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Lord Kingsland: I thank the Minister and shall read what he said closely in Hansard. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 58:

On Question, amendment agreed to.

[Amendment No. 59 not moved.]

Lord McIntosh of Haringey moved Amendment No. 60:

    Page 27, line 24, after ("Regulations") insert ("(except regulations under paragraph 5)").

The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 61. The amendments provide for the regulation-making power in paragraph 5 of Schedule A1, the power to modify the qualifications for eligibility of a company for a moratorium, to be subject to the affirmative resolution procedure. We have brought forward these amendments after consideration of the recommendations made by the Select Committee on Delegated Powers and Deregulation in its Sixth Report of 16th February. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 61:

    Page 27, line 26, at end insert—

("( ) Regulations under paragraph 5 of this Schedule are to be made by statutory instrument and shall only be made if a draft containing the regulations has been laid before and approved by resolution of each House of Parliament.").

On Question, amendment agreed to.

Baroness Buscombe moved Amendment No. 62:

    Page 27, leave out lines 29 to 37.

The noble Baroness said: With this amendment we are responding to the proposed additional grounds for a winding-up petition in paragraph 6 of Schedule 1, which we believe to be a waste of time. If the company is insolvent, a petitioner can rely upon paragraph (f) in Section 122(1) of the Act. If the company is not insolvent, there is no reason for the ground. Why should a moratorium come to an end with no voluntary arrangement being approved, to give a right to a creditor to wind up a solvent company? I beg to move.

Lord McIntosh of Haringey: Where a company has not been able to reach an accommodation with a creditor, it will almost certainly be in considerable financial difficulty. Cessation of business is probably almost inevitable and liquidation is highly likely—and probably appropriate. In such circumstances, what

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would be the point of requiring a creditor intent on winding up the company to suffer the delay and expense in establishing the company's insolvency to the satisfaction of the court as would otherwise be required of him by Sections 122 and 123 of the Insolvency Act 1986? It is far better to allow that creditor to petition on the grounds that no voluntary arrangement had been agreed when the moratorium ended.

However, even that does not mean that liquidation is inevitable. The court will, of course, retain its discretion on whether or not to make a winding-up order on such an application. If it did not consider it appropriate to exercise its discretion to make a winding-up order, then no order would be made, notwithstanding the fact that the company had failed to secure agreement of a voluntary arrangement following a moratorium.

Baroness Buscombe: I shall read the Minister's response with care. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Sharman moved Amendment No. 63:

    Page 28, line 7, leave out ("of filing") and insert ("on which the arrangement takes effect").

The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 95. Both amendments seek to clarify the position of claims by creditors arising in the case of voluntary arrangements. Paragraph 42(9) provides that the effective date of these claims should be that of filing. There can be a delay between filing and the date on which the arrangement takes place. I believe it is important that the claims of creditors arising in the period between filing and the approval of the arrangements should be included in those arrangements. That is what Amendment No. 63 seeks to achieve.

In the case of Amendment No. 93, paragraph 12 of Schedule 3 deals with the situation where claims arise between an interim order and the approval of a voluntary arrangement. With this amendment I am seeking to ensure that the claims of creditors which arise in the period between that of an interim order, where there is one, and the approval of a voluntary arrangement are included in that arrangement. I beg to move.

Lord McIntosh of Haringey: I hope I can assure the noble Lord, Lord Sharman, on this point. The effect of paragraph 9 of Schedule 1 and paragraph 13 of Schedule 3 will be that when a company voluntary arrangement is approved following a moratorium, the date by reference to which any preferential debts are to be established will be the date of the commencement of the moratorium. In insolvency legislation this reference date is described as the "relevant date".

This proposal will be consistent with a consequential change which we propose to make to the Insolvency Rules 1986. This concerns the calculation of the amount of creditors' claims for the purposes of both

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voting on and being bound by a proposal for a voluntary arrangement involving a moratorium. Under existing rules 1.17, to which I have already referred, and 5.17 creditors' claims are usually calculated as at the date of the meeting. But we believe that, where a moratorium is involved, they should be calculated at the date the moratorium comes into force and we propose to amend the rules accordingly.

As a result, only those creditors for debts outstanding when the moratorium is obtained will be eligible to vote on and be bound by any agreed voluntary arrangement. Those creditors for debts incurred after the start of the moratorium will not be eligible to vote on and will not be bound by the voluntary arrangement and will, once the moratorium comes to an end, be able to pursue the company or debtor for those debts in the normal way. Accordingly, debts arising during a moratorium will be dealt with on a different basis from pre-existing debts.

In non-moratorium cases the date for calculating creditors' claims will remain the date of the meeting to approve the arrangement and that is why the relevant date for calculating preferential debts in those cases will be the date on which the voluntary arrangement takes effect, as provided in Schedule 2 paragraph 11 and Schedule 3 paragraph 13.

If the amendments proposed to paragraph 9 of Schedule 1 and paragraph 13 of Schedule 3 were to be accepted the result would be that preferential creditors would be placed at a disadvantage in relation to other creditors.

Lord Sharman: I am grateful to the Minister for his response and in particular for his assurances on the amendment of the Insolvency Rules. On that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 64 not moved.]

Lord McIntosh of Haringey moved Amendment No. 65:

    Page 28, line 25, leave out ("17(3), 18(3)") and insert ("17(3)(a), 18(3)(a)").

The noble Lord said: The purpose of paragraph 11 of Schedule 1 to the Bill is to amend Section 432(4) of the Insolvency Act 1986. The paragraph has the effect that various offences contained in Schedule A1 to the Bill are to be exceptions to the general rule provided for in Section 432(4). The references in paragraph 11 to paragraphs 17(3) and 18(3) of Schedule A1 are inaccurate as in each case the offence is actually contained in paragraph (a) of sub-paragraph 3 rather than in sub-paragraph (3) as a whole. We have brought forward this amendment to ensure accuracy in the proposed amendment to Section 432(4) of the Insolvency Act. I beg to move.

On Question, amendment agreed to.

Schedule 1, as amended, agreed to.

Clause 2 agreed to.

Schedule 2 [Company voluntary arrangements]:

[Amendments Nos. 66 to 72 not moved.]

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Lord McIntosh of Haringey moved Amendment No. 73:

    Page 31, line 2, leave out ("dividend") and insert ("amount").

On Question, amendment agreed to.

7 p.m.

Lord McIntosh of Haringey moved Amendment No. 74:

    Page 31, line 6, leave out from ("person") to end of line 7 and insert ("the amount payable under the arrangement".").

On Question, amendment agreed to.

[Amendments Nos. 75 to 77 not moved.]

Lord Kingsland moved Amendment No. 78:

    Page 32, line 48, after ("answer") insert ("or obtained by examination of that person under section 133 or section 236 of this Act").

The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 79 to 81 and 101 to 105. As your Lordships are aware Clause 10 amends Section 219 of the 1986 Act by restricting the use of evidence obtained in an investigation under Section 218(5) in criminal proceedings. This amendment is made because of the terms of the Human Rights Act 1998.

In our submission, the same issue arises with respect to evidence obtained under Section 133 and Section 236 of the 1986 Act. Following the decision of the European Court of Justice in the case of Saunders v the United Kingdom, the Secretary of State has developed and applied a policy of not using against an accused in criminal proceedings a transcript of his compelled evidence.

As far as insolvency proceedings are concerned, evidence is compelled from office holders pursuant to the powers contained in Section 236 of the Insolvency Act 1986 or by inspectors appointed under the Companies Act. In a case called ex parte McCormick, a judicial review over the use of compelled evidence failed. However, it was by definition, a case that took place before 2nd October 2000, the date when the Human Rights Act comes into force; and the narrow principles of Wednesbury, unreasonableness and irrationality, are likely to limit the usefulness of this precedent for the future.

There are associated two issues here, issues with which the Minister will by now be extremely familiar as a result of his experiences in taking through your Lordships' House the Financial Services and Markets Bill, now the Act, and the Utilities Bill. The first of these issues concerns whether or not, in effect, the procedures to which I have already referred under the 1986 Act are essentially criminal.

In deciding whether a given charge is criminal under the Human Rights Convention, the first matter to consider is how the offence is described in the domestic system of law. If it is described as criminal that is the end of the matter. If it is not, that is not the end of the matter because then the court must consider the nature of the offence and the degree of severity of the penalty that the person accused is likely to incur.

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In the opinion of the European Commission for Human Rights, it is relevant if the measure complained of affects the general interests of society normally protected by the criminal law. In a recent case called Société Stenuit v France, the European Commission for Human Rights held that a ministerial power to fine a company for anti-competitive practices did, indeed, involve a criminal charge. Although disqualification proceedings are not criminal proceedings according to domestic law, they have many characteristics which would align them to criminal penalties.

The proceedings are undertaken on the initiative of the authorities. The allegations are instituted following a formal investigation undertaken by officials invested with special powers. The penalties are really severe if the party investigated is found to have offended. The investigations involve considerable interference with the freedom of the individual. And the penalties involved impose a heavy costs burden and affect the status of the individual as a consequence.

For all those reasons, I believe there are sound grounds for arguing that, in effect, these offences are criminal offences. If that is so, any individual pursued under them would be entitled to the full protection of Articles 6.1 to 6.3 of the European Convention. It is clear that that protection is not reflected in the Bill.

Even if I am wrong, these offences still attract substantial protection for the individual under Article 6.1; because the protection under Article 6.1 applies to civil as well as criminal offences. The European Court of Human Rights has held in a number of cases that in determining the civil rights of an individual, the principles of "equality of arms" and "fair balance" apply between the parties.

This is not an appropriate moment to develop this point any further. I believe I know what the Minister is going to say in response to what I have said; if I do not then I have cautious grounds for optimism. I look forward with great interest to hearing what he has to say. I beg to move.

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