Select Committee on Delegated Powers and Regulatory Reform Fifteenth Report

Letter from the Department for Environment, Food and Rural Affairs to the Clerk

Thank you for your letter of 31 January 2003. The Department's response is below:


The Committee is concerned about protection for activities other than abstraction of water. Section 62(1) of the Transport Act 1962 enables British Waterways, where it has power under a local Act to take water for the purposes of one of its canals, to take water for the purposes of selling, or affording the use of, water from the canal. Section 62(2) requires the Board to adhere to the terms of the local Act and to comply with its obligations, including "any statutory obligation to maintain the canal in a navigable condition." (subsection (2)(b)). Those obligations apply whether or not the power to abstract is derived from general or local enactments.

The primary statutory obligations are contained in sections 104 to 106 of the Transport Act 1968. By s.105(1) British Waterways is required "to maintain the commercial waterways in a suitable condition for use by freight carrying vessels" and "to maintain the cruising waterways in a suitable condition for use by cruising craft…"

"Suitable condition" requires not only adequate maintenance of the structure and equipment necessary to operate a waterway but also the maintenance of an adequate water supply. The statutory provisions prescribe standards by reference to specified vessel dimensions and also provide a mechanism for enforcement of the obligations.

The powers sought by the proposed Order relate to the treatment of water once abstracted from waterways. The power to abstract already exists (and is extensively exercised) by virtue of s.10(3)(d) of the Transport Act 1962 as well as local enactments.

We are not aware of any instance where an enforcement action under s.106 of the Transport Act 1968 has been commenced, or even contemplated, as a consequence of over-abstraction being detrimental to navigation. Nevertheless that safeguard will remain in place.


The advice of Leading Counsel is that, partly as a consequence of the judgements in Credit Suisse v. Allerdale [1995] 1 Lloyds Rep 315; [1996] 4 AllER 129, there is a risk that a Court may interpret the word "activities" in s.50(8) of the Transport Act 1968 as including borrowing.

British Waterways is permitted to borrow up to a statutory maximum of £35m. Thus, so Leading Counsel advised, if the activities of a joint venture company are restricted to "any activities which that Board or new authority have power to carry on" and "activities" include borrowing, any borrowing by the joint venture company could be interpreted as coming within that statutory limit.

The initial advice was given by Lord Lester of Herne Hill QC. Since there nevertheless remained some doubt about the likelihood of such interpretation, advice was also sought from Lord Grabiner QC, assisted by Mr Jonathan Crow, Junior Treasury Counsel.

Although it was generally accepted that a limitation on borrowing by joint ventures was probably not the legislative intent behind s.50(8), all counsel advised that there was sufficient doubt to possibly deter lending institutions and in such circumstances a clarification of the legislation by amendment or supplementary provision was necessary.

The effect of Article 3 of the proposed Order will in practice be limited to non-subsidiary companies primarily due to the provisions of s.25(1)(c) of the Transport Act 1962. By that provision a subsidiary of British Waterways is prevented (without Ministerial consent) from borrowing from any person other than British Waterways.

Whilst, until recently, the use of the term "activities" in s.25(1)(a) had not been regarded as including borrowing (given the separate treatment of that issue in s.25(1)(c)) it is possible that, in the light of Leading Counsels' advice, a Court may apply such an interpretation.


The proposed Order has no implications for the management of the Rivers Tweed and Esk. British Waterways has no responsibility for those rivers or indeed any waterways close to the England/Scotland border.

I hope this response clarifies the position in relation to the points the Committee has raised.

14 February 2003

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