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Lord McIntosh of Haringey: The admirable aim of Amendment No. 67 is to ensure that transfer schemes do not ignore third party rights. The transfer process is intended to ensure that transfers of property, rights and liabilities required to achieve the necessary reorganisation can occur within the desired timetable and without the delay that transfers under private law may entail, particularly when third parties are involved.

If we were to adopt the amendment, any third party which perceived, rightly or wrongly, its rights to be threatened would be able to hold the Government and NATS to ransom. The situation could jeopardise the PPP timetable and so prejudice the delivery of major projects such as Swanwick and the NSC.

However, that does not mean that the position of third parties has been forgotten. Protection has been provided in paragraphs 19 to 23 of Schedule 6. These paragraphs contain safeguards if there is a reduction in value of any property or right of a third party arising as a consequence of a transfer scheme. There is provision for the payment of compensation to an aggrieved party, and for the appointment of an arbitrator if there is a dispute about how much compensation is payable. A third party has protection--in the context of court proceedings--where the issues in those proceedings depend on the correct identification or definition of any property rights or liabilities which are the subject of a transfer scheme. Where an agreement or instrument made under the schedule might operate unfairly, the Secretary of State has power to intervene. I hope that the noble Lord, Lord Brabazon, agrees that the position of third parties is adequately safeguarded in the Bill.

Amendment No. 89 would enshrine within legislation the information which should be included in a statement to be laid before each House of Parliament by the Secretary of State or the Treasury, as appropriate, in the event that repayment of a sum in fulfilment of a guarantee previously given was not made. I appreciate the desire to make special legislative provision for these details to be included, but I do not believe that it is necessary to make these changes. There are two reasons for the calling of a guarantee: the body in question may be either unwilling or unable to discharge its obligations. In either case the Government expect to be reimbursed in accordance with arrangements made under subsection (8) of this clause.

The amendment seeks to require the Government to lay a statement before the House citing the reasons for the calling of the guarantee. The problem is that as guarantor the Government are not necessarily in a

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position either to know the reasons for the default or, if they do know, for reasons of commercial confidentiality, to disclose them. The only information that the Government are sure to have is the fact that the guarantee is being called and the amount being claimed. It is not possible for the Government to state to Parliament the reasons for the default.

Amendment No. 92 proposes the deletion of Clause 57(4). This subsection seeks to ensure that the CAA has the power to comply with a direction issued to it to release NATS from its indebtedness. In complying with that direction, the CAA is not to be regarded as having failed to comply with its other duties; that is, the general obligation under Clause 2. The subsection is purely technical and is designed to prevent frivolous or vexatious claims that may be made that the CAA is failing in its duties by complying with the direction. There is nothing in it which in any way overrides or prejudices the CAA's responsibilities for safety and other matters. I hope that the noble Lord, Lord Brabazon, will not pursue these amendments.

Lord Brabazon of Tara: I hoped that it was clear that these amendments, like others, are probing amendments to flesh out in a little more detail how the Government might view matters in the event of a transfer. I am grateful for the response of the Minister, which I shall read with great care. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 42 agreed to.

[Amendments Nos. 68 and 69 not moved.]

Clause 43 agreed to.

Clause 44 [Effect of scheme made by CAA]:

[Amendments Nos. 70 to 74 not moved.]

Clause 44 agreed to.

Clause 45 [Transfer schemes made by Secretary of State]:

[Amendments Nos. 75 and 76 not moved.]

Clause 45 agreed to.

Clause 46 agreed to.

Clause 47 [Accounting provisions]:

[Amendment No. 77 not moved.]

Clause 47 agreed to.

Clause 48 [Accounting provisions: interpretation]:

[Amendment No. 78 not moved.]

Clause 48 agreed to.

Clauses 49 and 50 agreed to.

Clause 51 [Crown shareholding]:

[Amendments Nos. 79 to 83 not moved.]

Clause 51 agreed to.

[Amendment No. 84 not moved.]

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Lord Brett moved Amendment No. 85:

    Before Clause 52, insert the following new clause--

Voting rights of Crown shareholder, employee participation, etc

(" .--(1) This section applies if any property, rights or liabilities are transferred under a transfer scheme to a transferee which at the time of the transfer is--
(a) a company which is wholly owned by the Crown;
(b) a company which is wholly owned by the CAA;
(c) a company which is a wholly owned subsidiary of a company falling within paragraph (a) or (b).
(2) The Secretary of State may by order designate such a transferee for the purposes of this section.
(3) The Secretary of State must ensure that, in relation to members' resolutions of the designated company, the proportion of votes exercised by the Crown shareholder, as a proportion of the total votes available to all shareholders, shall be in direct proportion to the proportion of shares in issue held by the Crown shareholder.
(4) The Secretary of State must ensure that the Crown shareholder must appoint a number of Directors to the Board of the designated Company, so that the proportion of its appointees on the Board is equal to the proportion of shares in issue held by the Crown shareholder.
(5) The Secretary of State must ensure that at least 5% of the designated company's issued ordinary share capital shall be held by an Employee Share Trust on behalf of employees.
(6) The Secretary of State must ensure that a representative of the Employee Share Trust is appointed to the Board of Directors of the designated company.").

The noble Lord said: I rise to move Amendment No. 85 which deals with both Crown shareholder responsibility and strength and board representation by employees. It was noteworthy that in winding up at Second Reading my noble friend Lord Whitty paid tribute to the staff of NATS. He said that the success of a NATS PPP depended on staff commitment and involvement. Earlier I spoke in favour of the trust model. However, if there is to be a PPP on the basis of the model described today by Ministers, it is better to have an understanding of the role of the government shareholder nominees and possibly representation by the staff.

In the proposal for the PPP, the Government have stated that 46 per cent of the shares are to be held by a strategic partner in the private sector; 49 per cent will be retained by the Government; and 5 per cent will be made available to employees. The precise method of the distribution of the latter has not yet been agreed. It is clear from the draft strategic partnership agreement that the Government will not vote their 49 per cent share and that operational control will pass to the strategic partner who will appoint all executive directors. If this is to be a true partnership between the public and private sectors, I believe that it must be different from a normal commercial organisation. The partnership must be embedded in a way that clearly indicates that that is the case.

If we have to have this partnership, the Government should not be voting at less than their voting strength--in other words, having one director less than that provided by the strategic partner. We are also concerned that the Bill, as drafted, allows the government interest to be diluted down to 25 per cent

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without any reference back to Parliament. That also underlines the need for the Government to vote their full proportion of shares.

Therefore the amendment proposes that no restriction shall be placed on the voting rights of shares held by the Crown in any PPP; and that voting rights and board representation should be in proportion to shares held. It also ensures that the Crown will appoint as many shareholders to its board as is commensurate with its shareholding. We believe that that is true partnership.

On the employee side, there is already a general understanding that the employees' shares will be gifted and available for purchase and that the 5 per cent collectively will be held in an employee share trust (EST) on behalf of the employees.

We have proposed, so far without success, that a representative of the board of trustees should have a seat on the board of NATS. That would reassure employees that their interests and wider safety concerns would be given serious consideration by the board. We also believe in participation by employees, albeit indirectly. We do not propose that a current employee should be a board member but rather that, in conjunction with government, there should be someone in whom the staff could have confidence. We believe that that is in keeping with the Government's policy on partnership at work.

In tabling an amendment which stipulates that the employees' share should be held in a trust for employees and that a representative of the trust board should have a place on the board of directors we hope to regain the confidence of employees. It has been somewhat undermined by the lack of enthusiasm for the current PPP and preference for a trust model. The Minister's refusal to accept a representative of the staff interest on the board involves the normal commercial problem that on a 10 per cent shareholding one does not find oneself offered a seat on the board. This is not a normal commercial company. We think that it would cement the partnership if at this stage the Government proposed that, despite the shareholding by staff being only 5 per cent, there would be a nominee of the staff on the board. It would be understandable to a strategic partner. It would in no way undermine the Government's responsibility or interests. But it would cement the idea of partnership and that this PPP was different from any privatisation that has gone before. I beg to move.

9.15 p.m.

Lord Lea of Crondall: It is a difficulty that some of these matters are not on the face of the Bill. However, having considered the strategic partnership agreement placed in the Library, it is worth quoting a couple of points in order to achieve some perspective on the subject. That agreement states:

    "The private sector shareholders shall use all reasonable endeavours to ensure that the Directors appointed pursuant to clause 7 constitute a majority of the Directors at all times. If, notwithstanding such reasonable endeavours, such directors do not constitute a majority of the directors at any time, the Private Sector Shareholders shall, as soon as reasonably practicable, appoint such number as is necessary to restore that majority".

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This is a somewhat strange PPP. My noble friend Lord Brett referred to the figures. The Government, with a 49 per cent share, will not be voting their 49 per cent share. Operational control will pass to the strategic partner, which has 46 per cent. This should be a majority of the directors at all times.

The second leg of the amendment gives constructive thought to the third element of the equation; namely, the employees whose interest is self-evidently not necessarily identical with that of the private shareholders. The formula for shareholders is set out in a somewhat singular way, with a 10 per cent threshold before there is any entitlement to appoint a director. The strategic partner with more than 10 per cent will appoint the chairman as long as there is no blackball from the Crown shareholder.

We begin with the position of the Government selling 46 per cent and retaining 49 per cent. The amendment states that no restriction should be placed on the voting rights of shares held by the Crown in this PPP and that both voting rights and board representation should be in proportion to the shares held. It would also ensure that the Crown will appoint as many directors to the board as is commensurate with its shareholding.

As regards the specific employee representation aspect, mentioned by my noble friend, there is an understanding that the employees' shares will be gifted and held in trust on behalf of the employees. Therefore, we propose that the representative of the board of trustees should have a seat on the board of NATS. We believe that that would assure employees that their interests were being taken into consideration together with the wider safety concerns mentioned in an earlier debate.

Perhaps I may conclude on a broader consideration. My noble friend Lord Faulkner of Worcester made what may well be an accurate prediction about the shape of things to come in the single European sky. In the next two or three years there may be massive structural changes in European air traffic control. But, surely, the moral of that is that we must do all we can to reassure all the stakeholders, not least the air traffic controllers, that we can make a soft landing in this brave new world.

If 49 centres in Europe are to be reduced to about six, as my noble friend the Minister speculated in an important intervention, imperialist or otherwise--and there is nothing wrong with a bit of imperialism as it solves the European problem--it will be extremely tricky to sustain trust and confidence.

I accept the prima facie case for structural change in Europe--indeed, I have tabled a Question on that issue which will be debated on 18th July--but we must set out the fences systematically. We must not try to jump the third fence before we have jumped the first because that will only confuse the horse! An important new agenda is emerging. I hope that the Minister will accept that this is a challenging period for all concerned not only in terms of board structure but of the stakeholder council and collective negotiation with

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the trade unions at every level, including the social dialogue associated with the high-level group in Brussels.

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