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Lord Bassam of Brighton: My Lords, for long periods of time over the past hour and 11 minutes I thought that I was listening to a different debate from that organised by way of the amendments on the Marshalled List. Indeed, at one point it seemed to me that we were in the middle of a ferocious argument about whether or not we should be in the European Union. That certainly appeared to be the tenor of some of the contributions made by noble Lords.

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However, from time to time we passed by the subject in hand and some undoubtedly very passionate speeches were made. My noble friend Lord Shore started us off in that vein. His views and clear hostility towards aspects of the European Union are both well known and widely respected; and, occasionally, put on one side. He made clear his hostility at an earlier stage to this piece of legislation and in particular to Clause 52(2)(b)(ii), as it presently stands. We also heard wide-ranging contributions from the Benches opposite, with protestations about the general loathing of donations coming from foreign parts.

I was especially taken by the contribution made by the noble Lord, Lord Tebbit. As I recall, he was a member of a government who, as I understand it, willingly accepted foreign donations not just from Europe but from a wide range of foreign countries such as Singapore and Hong Kong. The noble Lord referred to Asil Nadir. I am not sure whether it was during the noble Lord's time as chairman of the Conservative Party, but I recall that Asil Nadir made contributions to that party in large measure, if newspaper reports were to be believed.

The noble Lord, Lord Lamont, protested his desire to see us freed from the burden of foreign donations. I have waited a long time to hear that. The noble Lord was a member of a government who willingly accepted donations for a long period of time. The noble Viscount, Lord Cranborne, was not exactly innocent in that regard. I recall that he was a member of a government who willingly accepted donations from all parts of the globe. It was interesting to hear these new, fresh protestations of a desire to free us of the terrible curse of foreign donations.

We in government have taken a clear and, I think, principled position. We have made our position known to the Neill committee. We have argued the case. We in government have to deal with the practicalities of being in government. We have to confront the reality that government presents to us all. It is for that reason that we made our honest declaration to the Neill committee. It was through no failure on our part that the Neil committee came to the view that it did. The Neill committee recommended that the definition of a "permissible source" should include companies which are incorporated in the United Kingdom. There is no difference between all of us on that. There is certainly no shame on our part in saying, as our honourable friend Paddy Tipping said in another place, that the Government are firmly persuaded that it would be best to adhere to that principle but that we have to live in the real world. In the real world there is Community law. It is not craven to bow in the face of Community law; that is the reality within which we live. We must be realistic. No doubt many of those noble Lords who have contributed to this evening's debate will have argued in Cabinet, or perhaps within ministries when they were Ministers, that we needed to comply with international laws and also with the rules, as it were, of the club in Europe of which we are part.

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The argument is, briefly, that companies incorporated elsewhere in the European Union must be allowed to carry on business here on the same terms as any company incorporated within the European Union. If the latter are permitted to make donations on the basis that they are entitled to seek to influence the political process in this country, so must the former.

The effect of Amendment No. 90 would be that, in order to qualify as a permissible donor, a company must merely be registered under the Companies Act 1985 and carry on business here. Beyond the undoubted pleasure given to the noble Lord in excising from the Bill any indication that Parliament has deferred to a point of European Union law, I fail to see what sort of a victory this amendment would represent. It would not prevent an EU-incorporated company making a donation to a political party, provided it was registered in the register of overseas companies. But nor, for that matter, would it prevent a company incorporated in the Cayman Islands doing exactly the same.

I remind the House that the Neill committee, of which the noble Lord is an honourable member, considered just such an approach and found it wanting. It is worth quoting what it had to say on the matter at paragraph 5.25 of the Neill report:

    "We have considered whether foreign companies should be brought within the definition of 'permissible source' if they have taken advantage of the provisions of Part XXIII of the Companies Act 1985 by registering in accordance with the requirements there laid down ... We do not consider that companies utilising these statutory provisions are in the same category as those which are incorporated here and are subject to the full statutory regime under the Acts. So we would not extend the definition of 'permissible source' to cover them".

The committee took the view that, if they were to qualify as permissible donors, companies should, as a consequence of their incorporation, be subject to the full regime of the Companies Acts which require that many aspects of their affairs are made public. I might point out that all companies incorporated within the European Union have to comply with EU company law directives which impose requirements in respect of accounting and audit.

I turn to Amendment No. 173. The noble Lord has argued that it cannot be right to allow an EU company to participate in a referendum held in this country. I might, however, point out that the effect of his amendment would also be to prevent a company incorporated in the United Kingdom doing the same. Nevertheless, the Bill provides that an EU-incorporated company may qualify as a permitted participant simply because it would be absurd to provide that such a company could make donations to a political party or a permitted participant but could not express its own views during a referendum campaign. As the noble Lord does not agree with the very premise of that argument, I doubt that it will cut much ice with him when I suggest that he should withdraw these amendments.

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A number of noble Lords asked for specific points to be answered in my response. I shall try to cover some of them. I believe that the noble Lord, Lord Monson, referred to particular aspects of the Bill. He asked about the definition of a "member state". I thought that we had discussed that at an earlier stage of the Bill. "Member state" is defined in Schedule 1 to the European Communities Act by reference to the European Union. This applies by virtue of the Interpretation Act 1978. The noble Lord also asked about reciprocity. If other member states have equivalent rules on donations to political parties from companies, Community law would apply to such states. Their law would need to make equal provision for those incorporated in the European Union. But any breach by another member state is no defence to any breach by the United Kingdom.

The noble Baroness, Lady Park, referred to a couple of issues which I shall try to answer. It is worth reminding your Lordships' House that Article 43 has direct effect. The United Kingdom courts would not enforce provisions of UK law which contravened the article. If sanctions were applied in breach of an article, a defendant could plead the article to defeat any penalties, criminal or otherwise. In the case of permissible donors, a party could accept a donation from an EU-company carrying on business without fear of penalty.

The noble Viscount, Lord Astor, asked what happens in other countries. That is a fair point. However, in listening to his remarks I was somewhat puzzled as he did not give a single comparable example. Had he done so, I would have been somewhat less confused. Apart from that of Germany, the examples given by the noble Viscount, Lord Astor, show that there is no discrimination between EU companies. In France no companies can make the donations that we are discussing. That is a matter for French law. In Spain all companies can make such donations provided there is shareholder consent. However, the noble Viscount's examples did not shed any further light than that. It is for those countries to decide how they wish to--

Viscount Astor: My Lords, I am grateful to the Minister for giving way. I gave the example of Germany where a company has to be more than 50 per cent owned by Germans before it can make a contribution.

Lord Bassam of Brighton: My Lords, I thought that I had acknowledged that point.

This has been a wide-ranging debate and noble Lords have spoken passionately, particularly those on the Benches opposite who have now decided that they dislike foreign donations, particularly if they appear to come from Europe. We are trying to deal practically with a difficult situation in creating a regulatory framework that is effective. We believe that the framework we have set out is effective. We also believe

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that we have to comply with our European obligations and, importantly, with aspects of Community law. That is the Government's case.

Lord Marsh: My Lords, before the noble Lord sits down, he mentioned that he acknowledged the point in regard to Germany. Will he comment on it? I know that he heard it, but I should like to know what he thinks about it.

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