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The Deputy Chairman of Committees (Lord Colwyn): My Lords, welcome to the first day of the Grand Committee's consideration of the Groceries Code Adjudicator Bill. If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Lord Browne of Ladyton: My Lords, I apologise that I was unable to contribute to the Second Reading debate on this important piece of legislation as I was unavailable on that date. I have paid considerable attention to this for one very good reason: for 14 years or thereabouts, I represented the greatest concentration of dairy farmers in any constituency in Scotland. For all that time, I watched them battle, with great frustration and an unequal contracting position, as their livelihoods were strained. I have significant sympathy with the objectives of the Bill and, indeed, of the groceries code.
I hope that this amendment will not detain the Committee for very long; it is not my intention for that to happen, but we all know what happens to the best-laid plans of mice and men. In responding to the Second Reading debate, the Minister said:
As a fan of plain English, I believe that to a degree that objective has been achieved in this Bill. Noble Lords will be relieved to know that it is not my intention in the course of the Bill's consideration to go through every individual part of it in order to see whether they meet the test.
The Bill begins with a statement which, in my view, is a challenge to the objective of plain English. This is an opportunity for the Committee to explore the thinking behind some of the decisions that have been made in the way in which the Bill has been drafted. It
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The purpose of the amendment is merely to explore the thinking behind the construction of the verb that is deployed here. Candidly, I know many people who speak plain English-some plainer than others. I know of nobody who uses this construction in ordinary conversation. I know many people who say, "There will be a bus along in a minute" but very few who say, "There is to be a bus along in a minute". If we are to meet the objective of plain English-language which is understandable and not unnecessarily legalistic-it has to meet at least two objectives. It has to relate to the plain language that speakers speak and not be unnecessarily grandiose. Secondly, it needs to meet the test of consistency. As a lawyer, I can see that at some time in the future, there will be some money to be made for lawyers in saying that there is a difference between the words that have been deployed at the beginning of this particular Bill and the words that have been deployed at the beginning of others. There was a reason behind this. Let us explore that reason.
There is seriousness to this point. It would be helpful to know why the Government chose this particular construction. It may have been presented by a draftsman and accepted by the Executive. I understand that, and I have been in that position, but why is this construction preferable to, "There will be a Groceries Code Adjudicator", or indeed, "There shall be a Groceries Code Adjudicator"?
I want to make a slightly more general point, since we are close to the Title of the Bill. There is something missing in the early part of the Bill: that is, the link with the original Groceries Supply Code of Practice. I know that this will come up again, but I want to raise it right at the beginning. The Competition Commission uses the important phrase about stopping,
by retailers on suppliers, and encouraging compliance. To make that point, I have put down an amendment to Clause 15. I apologise that I missed putting an amendment down to the Long Title. I hope the Minister will find a few minutes, or a few sentences, to answer that point somewhere in the course of the debate.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, we are off to a marvellous start. This is a great level to start at-whether we are doing something in plain English or not. I was in on the beginning of the Plain English Campaign, as, I think, was the Office
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I fully appreciate the sentiment behind this amendment. The Government have committed to writing the Bill in plain English, and we strive to apply this principle to all communication as the Bill goes forward. However, in this case the amendment would change the meaning of the clause. "There will be" is a prediction, whereas "There is to be" indicates that the Bill establishes the Groceries Code Adjudicator. I hope that that clarifies the point for the noble Lord.
Lord Browne of Ladyton: My Lords, I will be more than content to withdraw my amendment, and to go away and reflect on the response of the noble Baroness to my rather small point. I am surprised, I have to say, at the nature of the response, given that I know that at least one piece of legislation has been passed by this House which includes the phrase "there shall be" in its first sentence. I suspect that there are many others, but I shall have to go and do some research now. If it was a prediction that the legislation fulfilled, perhaps that is the proper construction; I am not entirely sure. However, we should not detain the Committee with this point, given that we all need to go away and reflect on it. I am happy to withdraw my amendment, but I give the noble Baroness notice that I am not entirely persuaded by the response she deployed. This is not the most important issue that the Committee will consider this afternoon, but it is important that there should be consistency in legislation. I beg leave to withdraw the amendment.
The Office of Fair Trading is to continue to monitor compliance with The Groceries (Supply Chain Practices) Market Investigation Order 2009."
Viscount Eccles: My Lords, I start by thanking my noble friend for letters that have been deposited in the Library and for the dialogue that we have had. I start with two regrets. The House of Commons Business,
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My second regret is that we have not had a briefing from the Office of Fair Trading, although I asked for one. To be precise, I asked if it thought that the monitoring of the order was going okay and whether it had any concerns. It said that it had done-I think-nine out of 10 compliance reports but that it would take some time to analyse them. Those reports are on the second full year of operation of the order. There has now been more than 24 months of experience of how the GSCOP is working. Perhaps I might suggest to my noble friend that we should have a report from the OFT before Report. The OFT has had this responsibility for more than 24 months and we should know how it thinks the scheme is going.
That led me to believe that the case had not fully been made for the changes proposed in this unusual Bill. As I will explain, I am not against a lot of its intentions, but they are not being sensibly carried through. There is a case for leaving the present regime in place because, as far as I can tell, it is working. All that I will do from now on is probe to find out whether there is a case for what is proposed in the Bill. In so doing, I will explain that in this enormous group of amendments the only thing that really matters is the new clause. If that were to be accepted, Schedule 1 would fall away almost automatically. The rest of the amendments, on which the Public Bill Office kindly advised me, are technical in the sense that one has to replace "adjudicator" with "Office of Fair Trading" if the regime is to stay as it is. Of course, I shall have to be pretty prompt in saying, "Not moved" all the way through the proceedings. I hope that that will at least make sure that I am awake.
After the consequential point, I have to enter a caveat. I have not studied the OFT's existing powers. Someone, probably my noble friend on advice from the Bill team, needs to say that, if we go down that road, we will not need this or that clause because the OFT already has those powers. An example is the collection of information. I am aware that if my scheme is accepted, there would be other consequential amendments.
At Second Reading I referred to the minority opinion in the commission's report put forward by Professor Bruce Lyons. This is set out in detail in paragraph 11.347. He supported the finding of the adverse effect on competition and went on to support very strongly a strengthened code of practice. I am sure that the contents of the present code of practice will be entirely acceptable to Professor Lyons, who went on to say that the OFT was "well placed" to monitor adherence to it because competition was at the heart of its role and its history. I agree with that. If the passing on of excessive risk and unexpected costs is not stopped, it is perfectly sensible to come to the conclusion that there
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Good progress has been made. Now that we are coming to the completion of the second round of compliance reports, it is clear that disputes are regularly being settled. I would like to be guided by someone if I am wrong, but I am not aware that any dispute has yet been referred to arbitration under the code. As we all know, there is a full description in paragraph 11 of Part 5 of the code of practice of how the dispute resolution procedure should lead to arbitration.
Lord Knight of Weymouth: I am most grateful to the noble Viscount for giving way. Has he seen the briefing that has been provided by the National Farmers' Union, particularly the second point in the section on myths and misconceptions? It states:
"Suppliers do already have the right to independent arbitration under the code. However, this requires suppliers to make the details of their grievance known to the retailer they believe has breached the code. The Competition Commission explicitly referred to the climate of fear in this sector preventing small suppliers from complaining about unfair treatment. The current system of arbitration clearly makes no provision for this serious problem".
Viscount Eccles: My Lords, I am grateful for that intervention, and no doubt we shall come on to discuss the climate of fear. The concern of the National Farmers' Union is a pretty difficult issue because very few farmers are direct suppliers to supermarkets and so they are not covered by the code. Indeed, the detriments identified by Professor Lyons, to which I shall come in a moment, include the extended chain of supply to the supermarkets. Perhaps I should say at this point that I owned some cows for a while, but maybe it is not an interest I need to declare on this occasion. It is a difficult issue and we shall come on to it. I do not accept that the problem of indirect suppliers and the question of arbitration so torpedoes the present regime that it is necessary to change it. It may be necessary to do so and I am here to be persuaded, but at the moment I would not change it.
Of course, with regard to farmers, I think that we are going to talk primarily about milk and cheese production. Some 53% of milk finds its way into fresh milk, 27% into cheese and the remaining 20% into manufactured products. While I think we will be talking about that, I do not believe it quite lies within the remit of where Professor Lyons was finding detriments, except on the point of indirect supply.
The first detriment that Professor Lyons worried about was that he thought that the third-party intervention-however that was structured, but at the time the description was "ombudsman"-would be counterproductive. I suppose that was based on "two's company and three's a crowd", or some such version of it. He thought that independent arbitration with the addition of monitoring by the Office of Fair Trading was a better option than the intervention of a third party for the interests of the industry.
Secondly, Professor Lyons worried very much about anonymity. He did not believe that it could be maintained and he cited the German experience. I have no doubt
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Next, Professor Lyons thought that any third party-an ombudsman or now an adjudicator-could be seen to be in support of suppliers, and of them throughout the supply chain. He thought that that itself could become anti-competitive. He saw difficultly in dealing with complaints from suppliers about buyers and at the same time achieving benefits for the public, particularly long-term ones. The successful outcome of intervening in a contract between suppliers and supermarkets would presumably be that the suppliers got better terms. It was difficult to link that to a benefit to the public-that link was pretty weak.
Professor Lyons also saw any third party intervening in this market as being subject to external pressures and to the almost inevitable regulatory creep. Regulatory creep has been a feature of our lives in recent years, as noble Lords have seen in the amendments to secondary legislation which have tended to make legislation more complicated and severe, not lighter or less severe. Finally, Professor Lyons said that this would be a much more expensive system than leaving things as they are.
Quite a lot of these points have been discussed but I submit that they have not really been properly dealt with and therefore, as I am probing and as we go through, I am sure that these subjects will recur. It will be interesting to see where the argument leads us. I very much agree with Professor Lyons. Sometimes, minorities can turn out to be right. His minority report was very good and absolutely on the ball. I am still left with the question: why have we got this Bill? I beg to move.
Lord Borrie: My Lords, perhaps I may intervene at this point. Most Members of the Committee know that I had a connection with the OFT-the Office of Fair Trading-but retired from it 20 years ago, after many years as its director. I no longer have any position of that kind and therefore do not have anything formally to declare.
However, references to the Office of Fair Trading by the noble Viscount led me to consider whether there was a great deal of point in establishing-for a fairly narrow field of anti-competitive complaints from farmers and others who complain about the power of supermarkets-a specially appointed new body created as a corporate sole, with all the debates, complications and so on that are involved in doing so. The subject of the Bill covers a fairly narrow sphere. It does not deal with all complaints against supermarkets, but only those connected with groceries. It does not even apply to all supermarkets, but only the 10 that are especially designated.
There are surely many reasons for thinking that there may not be an adequacy of work for the groceries adjudicator to justify the appointment of an adjudicator and, as one of the schedules states, a deputy adjudicator and all the paraphernalia of an office-although I admit that it is stated that back-office facilities may be provided by the Office of Fair Trading. If back-office facilities can be provided by the Office of Fair Trading, why are these powers not simply given to the OFT to monitor, to check, to listen to complaints and if necessary push those complaints further to the Competition Commission, and so on.
The points made by the noble Viscount are quite convincing but, as the phrase goes, we are where we are. We have given the Bill a Second Reading. We are now at the Committee stage. We can go backwards, of course, but there would then be an emptiness and nothing immediately to take its place because the Office of Fair Trading does not have all the different powers intended for the adjudicator under the Bill. I therefore return to the point that the Bill in front of us will set up a particular body-the groceries code adjudicator-and we have details in front of us to elaborate, consider and change, as a normal Committee does. In summary, it is not worth while continuing with the fundamental points made by the noble Viscount, although there is a lot of value and a lot of point in what he said. However, that would represent a backward step and we would, in effect, be replacing entirely the contents of the Bill with something else.
Lord Razzall: My Lords, perhaps I may respond to the remarks made by the noble Lord, Lord Borrie, by saying that I entirely agree with him. However, given the preliminary comments by noble Lords, one thing ought not to be forgotten-we are not starting here from scratch. This proposal emanated from the previous Government and has been heavily consulted on across all relevant parties. I know that your Lordships tend to take the view that what was in party manifestos does not necessarily bind your Lordships, but all three political parties included the creation of the adjudicator in their manifestos, and we should have that on the record before the debate goes a lot further.
Lord Curry of Kirkharle: My Lords, I very much support the Bill. I should like to pick up on a phrase used by the noble Viscount, Lord Eccles. He said that the current code appears to be working. I should declare that I am a farmer in Northumberland and I do not produce milk. I was also responsible for a report in 2002 in which we recommended that the OFT should monitor the recently introduced voluntary code, which later became the GSCOP.
The OFT has been monitoring the code and, as far as it is concerned, it may well be working because it has not identified any serious abuses of power that could not be resolved by negotiation. The problem is that there are many concerns about abuses of power by suppliers that have not been brought to the notice of the OFT. Many companies in the supply chain are fearful of the consequences of drawing attention to what they believe is a trading relationship which may be terminated if they are open and transparent about
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Lord Knight of Weymouth: My Lords, I am sure that we are all extremely grateful to the noble Viscount, Lord Eccles, for giving us the opportunity to test at this early stage some of the principles behind establishing an adjudicator. He used the phrase, "As far as I can tell, it is working.". The core of this debate is whether having just the rules of the game in place is enough or whether we need a referee alongside the rules at this stage.
My strong view is that we need a referee now in order to enforce the rules and to make sure that everyone who is a part of this market and supply chain understands that if they break the rules, there will be consequences. In preparing for Committee stage I have spoken to a number of suppliers to supermarkets and to people in the supermarket supply chain. The anecdotal evidence I have received is that there are still some considerable problems. If there is a belief that it is working, that may be correct technically in terms of the OFT's analysis, as we have just heard from the noble Lord, Lord Curry, but the reality for people who are trying to operate within this market is that it is not.
As regards notice periods, in some aspects of this business there are no contracts. Thus, the supermarkets often give very short notice-for example, one week for the complete stopping of ordering goods. A minimum of three months' notice should be given for changes. There are short-term changes to forecasts. The current system is that suppliers get the forecast from the retailer, which is not binding, and then receive the order generally on the day of dispatch. The supermarkets then charge a penalty for not supplying the volumes on the order-shorting-even if they are massively different from the forecast. For example, the sale of salads on a hot weekend can go up fourfold or the supermarket can choose to do a promotion and not tell the supplier. If the supplier fails to supply the larger volume, it could get a penalty charge.
On the flip side, if a supermarket decides to cut back its orders massively, the supplier can be left with big stocks to write off because, often, these goods are on the supermarket's own label and cannot be sold elsewhere. Consequently, the supplier loses out. I see the noble Viscount, Lord Eccles, wants to intervene, which will be a pleasure.
Lord Knight of Weymouth: I am grateful to the noble Viscount for his intervention. Clearly, the public are the consumers. I am certainly aware that not every supermarket is guilty of abusing its power. The competition between supermarkets generally has been very good for consumers but that does not mean that they should continue to be able to use that power to exploit their relationship with suppliers.
To give another example, I heard about a company which was developing an innovative low-sugar jam. It took the product to a very large supermarket because, having invested in developing this new product, it needed to get the volume of sales that could be achieved only by using one of the large supermarkets. The supermarket was very interested and said, "Leave it with us. We will give you a call.". It gave the company a call and said, "Do come in. We want to talk to you about the low-sugar jam that you showed us.". The supermarket called the company in just to put on the table its own product which it had developed in response to that company's innovation. Therefore, that investment was a loss for that innovator. Similar stories of abuses of market power by some supermarkets-not all of them-are legion. I referred to the helpful briefing from the National Farmers' Union. We have had similarly helpful briefings from the Country Land and Business Association and the Federation of Small Businesses. All were extremely supportive of the establishment of this adjudicator because they agree that we need a referee.
I know that we will go on to talk about some of these things throughout the proceedings of the Committee. In response to my intervention, the noble Viscount, Lord Eccles, said that not many farmers supply retailers directly. The NFU tells us that some do and, what is more, the Competition Commission has identified an adverse affect on competition whereby grocery retailers pass unexpected costs and excessive risks down the supply chain. Ultimately, those risks, in the form of extra costs, are passed on to producers, even when they do not deal directly with retailers.
Lord Howard of Rising: I must declare an interest as I have a tenant who is a direct supplier to a supermarket. The examples that the noble Lord, Lord Knight, gives us are all those of vested interests that would like to have better commercial arrangements. There is nothing whatever to stop any farmer saying to his supermarket, "I do not like your terms of trade and I will not supply you".
Lord Knight of Weymouth: It is very helpful to have the contribution of the noble Lord, Lord Howard, because he has a particular view that we can leave this all to the market, which is operating perfectly. I disagree. I remember from my economics A-level that you can have perfect markets but you can also have imperfect ones and powerful players within markets who abuse their market position. I believe-as did the Competition Commission in its analysis-that that is the case here. That is where the noble Lord and I will differ as we debate these things. In the end, those suppliers will struggle to find another market. Often, they have worked with a supermarket and built up a relationship where they have been persuaded that it is worth investing in, for example, growing a product. That needs at least a 12-month timeline. The supplier or grower of that product takes on a huge risk because they have invested 12 months in advance but the contract will only give them at best three months' notice of cancellation. They can just be cancelled on and that happens all the time. That is a difficult aspect of that market relationship.
I give another example: I know of an innovator of a new chocolate product using pomegranate dust from Afghanistan. That innovator had to invest significantly in developing the product. It is a fine product but the innovator has to recoup the cost of that investment and needs to get the product out in volumes that are only achievable using large supermarkets. The response from the supermarkets is, "Yes, we like the product. If you want us to stock it then you need to pay us to take it on. If you want a decent shelf position, you need to pay us some more money. If you want point-of-sale merchandising, you need to pay us for that as well". That individual needs to acquire a huge amount of investment to be able to innovate. In the end, a healthy market allows new players to come into it, to innovate and introduce new supply. That is not happening very easily in this particular market because of that power relationship and the structure of how it is set up. I strongly urge the noble Viscount to withdraw his amendment and strongly urge the Committee to support proceeding with the establishment of the adjudicator.
Baroness Wilcox: My Lords, this group of amendments goes to the very heart of the Bill. It concerns whether or not there should even be a groceries code adjudicator, or whether oversight of the code should continue to rest with the Office of Fair Trading. It is therefore only fitting that we should debate it early on, and I thank the noble Viscount, Lord Eccles, for raising it. I also thank him for allowing us to discuss all these amendments in one go. I also thank the noble Lords, Lord Borrie, Lord Razzall, Lord Curry, Lord Knight and Lord Howard, for their contributions to this debate.
I will not repeat all that I said at Second Reading. I know that the majority of us here support this Bill. Suffice it to say that, in its 2008 report on the supply of groceries, the Competition Commission found that the buying power of large supermarkets was potentially a cause for concern. It found that retailers were transferring excessive risks or unexpected costs to their suppliers, a practice that was likely to lessen suppliers' incentives to invest and innovate, and that this would operate to the long-term detriment of consumers.
The Competition Commission therefore made an order that required large retailers to incorporate the Groceries Supply Code of Practice into their contracts with suppliers. It also recommended that an independent groceries code adjudicator be established to enforce the code and ensure that it was effective.
The adverse effect on consumers is not something expected to follow immediately and directly from a specific action by a retailer. Rather, the transfer of excessive risk or unexpected costs lessens incentives for innovation and investment, and the reduction in innovation and investment is what causes consumers harm.
This is a long-term effect and not one that can easily be measured-and not one that we should stop to measure before we have even implemented the measures recommended by the Competition Commission. I ask noble Lords to note that in the pre-legislative scrutiny the BIS Select Committee explicitly considered whether another review should be carried out, but
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On the point from the noble Viscount, Lord Eccles, about the report from the Office of Fair Trading, I will pass his concerns to the OFT. I remind noble Lords that the OFT operates independently of Ministers, but I will pass that on and see if we can get some result for the noble Viscount. He has referred to the fact that the members of the Competition Commission were not unanimous in their view that an independent adjudicator should be established. He cited passages from the report which set out that minority opinion. He is right that one member of the panel did not agree with the rest, and I recognise that not everyone thinks the adjudicator is necessary. However, five out of six of the members did consider that an independent adjudicator should be set up. They concluded that an adjudicator is essential for the effective monitoring and enforcement of the GSCOP. That is why the Government are committed to establishing an independent adjudicator.
The amendments in the name of the noble Viscount, Lord Eccles, would give the powers in this Bill to the Office of Fair Trading, not to an independent adjudicator. However, the Competition Commission recommended an independent adjudicator. There are clear advantages to establishing an independent, dedicated office with industry expertise, which can build working relationships with supplier trade associations and retailers, monitor compliance and promote best practice. The Office of Fair Trading has told us that it fully supports the argument that the GCA should be an independent body, separate from the OFT or any other organisation. Furthermore, on a practical point, it would not be appropriate to give these powers to the OFT while the broader competition regime is undergoing so much reform.
The Government believe that the best way to address the issues in the groceries market identified by the Competition Commission is to establish an independent groceries code adjudicator to enforce the groceries code, not to give more powers to the Office of Fair Trading. This is also the view of the BIS and EFRA Select Committees, of the Office of Fair Trading and of five out of the six panel members of the Competition Commission investigation.
I have listened to all the views that have been expressed and I thank in particular the noble Viscount, Lord Eccles, for taking the time and trouble to explain his differences so clearly. However, at this stage, I would ask him to withdraw his amendment.
Viscount Eccles: My Lords, I am grateful to my noble friend and to all noble Lords who have taken part in this short debate. My father wrote a book called Half-Way to Faith. The noble Lord, Lord Borrie, is halfway there, so we have plenty of time to persuade him to come the rest of the distance.
The climate of fear was mentioned just once by the Competition Commission in its report. If people can find it referred to more often, I would be grateful to know about it. It was not mentioned in the summary
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Lord Curry of Kirkharle: Perhaps I may intervene to say something I should have said earlier. I chair the Leckford Estate for Waitrose, so I have an interest in Waitrose which, uniquely, supports the code and is very much in favour of it. I have certainly never used the phrase, "a climate of fear", and I would not do so. However, I am deeply concerned about trust and confidence within the food supply chain, and I believe that this is an important factor in creating more confidence.
There are all sorts of problems. I used to supply power steering pump casings to Delphi in Strasbourg on a schedule. One week it would be three container loads and the next week it would be one, then suddenly in the middle of the week it would be four, but the following week it would be none. That is the way that just-in-time supply works. There is no escape from it, and it does not matter whether it is the supply of lettuces or steering pump housings, where we were the only people who made them for Delphi.
Viscount Eccles: We did not know how soon Delphi would change its designs because there was a range of power steering pumps. Let me assure the noble Lord that there was no question of storing them. Delphi wanted them to come in and be fitted straight on to the machines. For many years I was a supplier to Marks and Spencer. The schedules changed every two or three days. That is the way of the interaction between suppliers and the retail market, particularly for anything that has a short shelf life. The noble Lord is quite right, if it has a longer shelf life, one can be a little more relaxed.
I do not therefore see that the problems raised by the noble Lord will come at all easily within the purview of the adjudicator. We shall shortly consider the investigations clause, and I am not at all confident, even if they do come within the adjudicator's purview, that any substantial progress will be made from the
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My noble friend is quite right to say that the Competition Commission stated that if there was no satisfactory agreement with the supermarkets it would be necessary to introduce an ombudsman. We should note that we are actually proposing to introduce something quite different to an ombudsman, and we should not therefore pray in aid the Competition Commission without any qualification.
I should add that the decision was, I suppose, made in 2007-it takes quite a long time for these decisions to get into a final published report-which is almost five years ago and the circumstances are different. The high street is under tremendous pressure that is much greater than it was when the report was written. The shares on the London Stock Exchange of the four British-based supermarkets on the list are all languishing near the bottom of their 12-month range.
I therefore feel that anything we do to erode the highly successful competitive model of the supermarkets and their suppliers-including, I may say, Nestlé, Kellogg's, and Unilever and its subsidiaries-is not going to serve the public well. However, at this stage, and I may come back to this matter-
Lord Razzall: Before the noble Viscount sits down, is he prepared to address my point that the proposal was in all three political parties' manifestos? He obviously knows better than all three political parties.
Viscount Eccles: Luckily, I am just a vulnerable ancient Conservative Back-Bencher who does not feel in any way committed to the three parties' manifestos. I should also point out that they were published in 2010 and we are now in 2012, and there is always time for amendment in life. I am just hoping that that still applies. In the mean time, I have much pleasure in withdrawing my amendment.
Lord Knight of Weymouth: My Lords, many of the debates we have had on the Bill, and will no doubt continue to have, are of limited relevance to the legislation before us because they have been about the market practices of the major retailers.
I am in many ways grateful that we have been able to have the debate initiated by the noble Viscount, Lord Eccles, to get some of those matters off our chest in a way that is relevant. However, those debates are on the groceries code itself, not the adjudicator's role as referee to that code. Yet, despite sitting at the heart of the debate, the code has never been subject to any formal parliamentary scrutiny. If noble Lords wish to blame the previous Government who introduced the code for doing it that way, that is fair enough. However, in a slight echo of the noble Viscount, we are where we are and my job relates to 2012, rather than 2010.
"This is an unusual Bill, for its purpose is to provide for enforcement of a Code which no Act of Parliament requires to exist, and which may be altered or revoked without any Parliamentary involvement. The Groceries Code is a Code of Practice set out in Schedule 1 to the Groceries (Supply Chain Practices) Market Investigation Order 2009 which was made by the Competition Commission. The Order is not a statutory instrument and is not subject to a Parliamentary procedure".
The committee is right to point out that it is a bit odd that primary legislation is being used to set up a referee for something that does not exist in any kind of parliamentary statute. In part, what I seek to do with the new clause is to right that. The code is not a statutory instrument but a function, as we have heard, of the Competition Commission's power under the Enterprise Act 2002. While the Act was thoroughly scrutinised by Parliament, the groceries code had no scrutiny by this House. We in the Lords take extremely seriously our responsibilities to scrutinise secondary legislation. While it is right that the Competition Commission has powers to correct the market, surely there is merit in allowing proper oversight and scrutiny of the remedy proposed. It is fundamentally odd that while Parliament is entitled to debate and scrutinise the function and powers of the referee, we are denied the opportunity to give the same scrutiny to the rulebook itself. Amendment 3 introduces a new clause to establish the code as a statutory instrument of Parliament.
I do not want in any way to delay the passing of the Bill and the establishment of the adjudicator. I do not propose that we pause the whole process in order to introduce a new statutory code and then set up an adjudicator because that would delay things considerably. The Committee should consider allowing the adjudicator to go ahead with the established code that came into effect in 2010, but at the same time requiring the Secretary of State to commission a review into the effectiveness of the existing code and the operation of the whole supply chain. When the Competition Commission was commissioned, it was asked to look only at direct supply into supermarkets; it was not asked to look at the operation of the whole supply chain. We now hear a lot of complaint about the operation of intermediaries. What I propose would allow a review to look at how that is working and to see whether any amendment of the code would then be helpful, which could then be introduced to Parliament for approval.
I am extremely grateful to the Minister for her letter of 19 June explaining the government amendments that we will discuss later. The main amendment is to Clause 15. I am also extremely grateful to the many Members of your Lordships' House who thought that the letter had been misdirected to them and chose to send on their copy to me. I have many copies of this letter; clearly they did not see that it was being copied to all Peers. Never mind-it was all entertaining stuff. In the letter, the Minister clarifies that through the amendment the groceries supply order will provide that each designated retailer will ensure that its subsidiaries comply with the order. Therefore, subsidiaries that deal with suppliers should incorporate the code in their supply agreements and then comply with it. That is extremely helpful because it clarifies for us that the code as it is written-and as the adjudicator will then referee it-operates down the supply chain. That is certainly of comfort to those of us who are concerned about that.
Nevertheless, having a review at this point-two years in-that looks at the whole supply chain and makes a judgment about whether some improvement to the code can be made would be helpful so that we can then have a statutory code. That is the basis of the amendment. Placing it in statute is a good opportunity for parliamentary scrutiny and would provide a mechanism for it then to be updated and to remain a living instrument, which is something that the National Farmers Union, for example, is asking for. It would then be capable of responding to changing market forces and would be as durable as the adjudicator whom the Bill sets up in primary legislation to referee it. I beg to move.
Viscount Eccles: Very briefly, I am sure that the noble Lord recognises that in doing this he goes far beyond the recommendations of the Competition Commission. The one thing that the commission did not do was go up the supply chain, as I would call it, but never mind. It declined to do that. The code is between direct suppliers-although I recognise that the Bill includes something about indirect suppliers-and supermarkets. It is based on the supply agreements between the supermarkets and those suppliers. If we go down the road that the noble Lord indicated, we are in for regulatory creep, exactly as the professor predicted.
Lord Grantchester: I support my Front Bench colleague at this stage. As at Second Reading, I declare my interests as a dairy farmer in Cheshire and in having been involved in dairy supply-chains both with farmer co-ops and on behalf of the Royal Association of British Dairy Farmers over many years. In support of the comments made in response to the previous amendment of the noble Viscount, Lord Eccles, there is an extremely delicate relationship between a supplier and the supermarket, and it takes quite some managing. It is not necessarily a question of fear. I am often reminded of the words in the Bible that the lion will lie down with the lamb. When I was in with the supermarkets,
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The noble Viscount said that the groceries code has been in existence for two years. It is eminently sensible that we complete this legislation to get the adjudicator in place and then, two years after that, have the review that the noble Viscount looked for. That would be an excellent time to review whether the code should be extended further up the supply chain to the suppliers of suppliers: the consolidators and the processors that have that direct relationship. I am sure that we will then find that there are lots of parts that the code does not cover, to which my noble friend from the Front Bench has alluded already. For example, I point to the practice of offsetting invoices from the supermarkets to suppliers and the charges that they think are quite acceptable to deduct from the suppliers. Those lead to long, detailed arguments and a very awkward time between a supplier and the supermarket. I am sure that putting that review on a statutory basis would, in two years' time, allow Parliament-it would be wider than just the Competition Commission-to be consulted on the reach of the GSCOP code.
Baroness Wilcox: The noble Lord, Lord Knight, has brought us an interesting amendment, supported by his colleague, the noble Lord, Lord Grantchester. It is perhaps not fully aligned with the subject of the Bill, which is the creation of a groceries code adjudicator. I reassure noble Lords that the groceries code, contained within the Groceries Supply Code of Practice Order 2010, already has full statutory force and the requirement to incorporate it in their supply agreements is binding upon all large supermarket retailers. There is therefore no need for the Secretary of State to establish it by statutory instrument.
Furthermore, the review of the groceries code is the responsibility of the Office of Fair Trading not the Secretary of State. If the OFT considers that a change in the code or the order is needed, it can advise the Competition Commission accordingly. As the code concerns the remedying of practices that are concerned with competition, it is right that oversight of the code rests with the independent competition authorities, which have the necessary expertise and can make decisions based on objective economic criteria.
The noble Lord, Lord Knight, also asked whether it is right that the Competition Commission can make such orders without recourse to Parliament. Noble Lords who wish to discuss the powers of the competition authorities will have to wait until the Enterprise and Regulatory Reform Bill enters this House. However, the Government consider it entirely appropriate for the Competition Commission to make remedies based on the findings of its investigations.
Lord Knight of Weymouth: I am grateful to the noble Baroness on that matter but I am struggling a little. Fundamental to the amendment is whether or not Parliament should have a role in scrutinising the Groceries Supply Code of Practice, which the adjudicator will referee. If the noble Baroness is saying that we will have to wait before we find out how Parliament will then scrutinise the code, we are in a difficult position to legislate. Have I misunderstood?
Baroness Wilcox: No, I do not suppose for one minute that the noble Lord has misunderstood, because I spoke quite slowly and clearly. As to whether it is a question I can answer now, I do not know. Obviously, the noble Lord may feel that the Bill is going to stop at this very moment if I do not answer that question, but perhaps I may have a conversation with him on this matter before we come back on Thursday. As I understand it, the powers of the competition authorities are going to be debated under the Enterprise and Regulatory Reform Bill when it enters this House. Perhaps I may leave it at that for the moment.
I move on to another question on whether the code will apply further up the supply chain. I should emphasise that government amendments that we will discuss later do not extend the code to intermediaries. The amendments ensure that only subsidiaries of the 10 retailers are covered, as they are in the code. I hope that that is clear when noble Lords read it tomorrow in Hansard. It might be a little more cogent. I have no more help from behind me, so perhaps I may ask the noble Lord to withdraw his amendment at this stage.
Lord Knight of Weymouth: I am kind of grateful to the Minister for that. The noble Viscount, Lord Eccles, was in many ways right to say that I sought to go beyond where the Competition Commission had reached and was looking for an opportunity to debate this issue. We are establishing the adjudicator who will referee the code. Plenty of people who have debated the Bill want to ensure that the code is a living code and is regularly reviewed so that changes in market conditions can be accounted for. There are concerns about intermediaries and we are looking for ways in which we might think about whether the code could be extended to cover them. That is worthy of consideration. In response to what the Minister said, I am sure that if the Secretary of State were to ask the Competition Commission or the Office of Fair Trading to have a look at the operation of the whole supply chain, they would do so. I am sure that if the Secretary of State were to then ask them, as a result of that review, to consider whether or not the code should be updated, they would be happy to do so. That is the way things work in government. If the Secretary of State asks these people to do things, there is a very good chance that they will give that serious consideration and try and meet the Minister's wishes.
I understand what the noble Baroness was saying regarding the Enterprise and Regulatory Reform Bill. In the end, I understand that there is nothing technically wrong with the code as it is written. The powers that were used properly to set it up remain until they are changed, subject to Parliament, by the Enterprise and Regulatory Reform Bill. I understand that they are not going to know how that works. For now, I am content for this Bill to be debated in the context of the current environment rather than some speculative future environment that may or may not come about, subject to parliamentary process. We can probably park that convoluted little debate in which we managed to find ourselves.
The fundamental thing remains: if this is not the right mechanism for keeping the code as a living code and something that Parliament can scrutinise, I am
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Lord Browne of Ladyton: My Lords, the purpose of this group of amendments is twofold. It is, first, to explore the nature of the office that is to be created by this legislation and, secondly, to make an important constitutional point about the appropriateness of appointing an individual to an office of this nature in the current constitutional environment as set out in the Bill.
I start my argument by referring to the comments some minutes ago of the noble Viscount, Lord Eccles, when he referred to the recommendation of the Competition Commission for the appointment of an ombudsman. He said that this post was something quite different from an ombudsman, and I respectfully agree with him. I hesitate to do this, but I point out to my noble friend Lord Knight that it is not helpful to refer to this office as the office of a referee. It is something quite different from a referee, too. In fact, when one researches and considers carefully the powers that are being vested in the office of the adjudicator of the groceries code-I direct noble Lords' attention to the Second Reading debate of 22 May at column 275 of the Official Report, when the noble Baroness set out quite extensively the roles of the adjudicator-one finds that at the heart of the many roles that the adjudicator will have, over and above all those other roles, is the role of investigator, arbitrator and the imposer of penalties. I dare say that if I were to ask most people with experience of life, "In whom do we invest those roles?", they would say, "We invest those roles in a judge". That is probably why this particular office has been called the office of the adjudicator. Respectfully, this is, if not a judicial position, a quasi-judicial position. There is no doubt that we are vesting in an individual the sorts of powers that we would expect a judge or magistrate, somebody who investigated and adjudicated on conflicts, to have. In normal parlance, such a person exercises a judicial role.
Since 3 April 2006, as a consequence of the Constitutional Reform Act 2005, all persons appointed to judicial roles in England and Wales-all those listed in Schedule 14 of that Act-are selected for them, if not appointed to them, by the Judicial Appointments Commission. That is simply because Parliament took the view that in the modern world it was inappropriate for persons to be appointed to such roles unless it was done independently of the Executive.
Consequently, I have proposed amendments that deploy those resources. In response, noble Lords may say, "This is something quite different from those judicial appointments listed in Schedule 14 to the Act". They would be partly right, but the Judicial Appointments Commission goes much beyond what we would traditionally refer to as a judge and selects people for roles in a very wide range of tribunals that cover social care to taxation and farming to employment. I do not intend to be exhaustive in my arguments, but those who wish to do so can look at Schedule 14 and see the extensive list of roles in which people make judgments where we now expect there to be an element of independence.
I am reinforced in this view because everything that I have read in preparation for the debates in Committee makes constant reference to the necessity for the adjudicator to be independent. In my view, it is crucial for a person who exercises these sorts of powers to be independent of the Executive, to the extent that there should be some significant independent element in the selection of the person who is suitable for that role. I would argue that that is the constitutional position in England and Wales and that it has been since 3 April 2006, as a result of the 2005 Act.
On the basis of that analysis, I have proposed amendments that would ensure that the appointment by the Secretary of State can only be on the recommendation of the Judicial Appointments Commission. In that way, the independence of the adjudicator will be reinforced, if not preserved. Consequently, the adjudicator and not the Secretary of State will appoint the deputy adjudicator. Given the nature of this role, the Secretary of State would not be able to dismiss the adjudicator or the deputy adjudicator without the consent of the Lord Chief Justice. Certainly, it would not be just in his or her own judgment. Finally, in order to make it clear that this role can be held only by a person who is above reproach, I have added to the requirements of the person who holds this role that he or she should not have been convicted of an offence.
I have very little to add to my argument. With respect, I think that it is clear that independence requires this in the modern world. If the Minister disagrees with that analysis, I invite her to explain why this role, with all these powers, is significantly different from that of a judge or a justice and why it is appropriate to reverse the trend of constitutional change in this country in this way and in this legislation.
Lord Borrie: My Lords, I am reluctant to disagree somewhat with my noble friend, who has argued so eloquently that this is a judicial appointment, but I do not think that it is. It may be close to it, and there is nothing unusual in certain positions being on the borderline of administrative and judicial. However, in examining the role of the adjudicator, we have heard the noble Viscount, Lord Eccles, and others mention that, when this was first introduced, the title given to the man or woman in charge was "ombudsman". There seems to be general agreement that that was not suitable, so we came to "adjudicator".
Because we have adopted-or the Government have adopted-"adjudicator", I strongly sympathise with my noble friend Lord Browne, because "adjudicator" suggests that there are at least two sides and that this is a judicial role. However, one thing that I have noticed, looking at the detail of what the adjudicator can and cannot do, is that he cannot settle or determine or arbitrate on a civil claim made by a particular supplier and a particular supermarket. It is of course typical for a judge, or indeed an arbitrator, to determine civil disputes of that kind, yet the detail of this Bill tells us that this is something that cannot be done by the adjudicator. The word "adjudicator" may not be entirely appropriate and may have led the noble Lord, Lord Browne, along a false path.
Lord Browne of Ladyton: Will my noble friend do two things for me before he sits down? First, will he address with the same certainty the issue of whether this is a quasi-judicial role? With respect, it is not fatal to my argument that this role does not meet the high test for a judicial role that my noble friend has-arbitrarily, I may say-imposed on us. Secondly, will he also address the ability or potential ability of this adjudicator to impose financial penalties? Does that cause him to reflect on whether this is the sort of role that he is describing?
Lord Borrie: With respect to my noble friend, he has not, in his question to me, dealt with the fundamental point that I raised, which is that the adjudicator is unable to determine civil claims between suppliers and supermarkets. The adjudicator has to go to a separate civil claim in the civil courts, or through arbitration. That is fundamental in my argument that this is not a judicial appointment and that involvement of the Judicial Appointments Commission would be inappropriate.
"Quasi-judicial" is a fascinating phrase, and we heard it a lot in the Leveson inquiry. It is amazing how Ministers have got accustomed to defining and knowing what quasi-judicial is, even though they did not always pronounce it the same way. It was a quasi-judicial role that the Minister had in determining whether the bid by Mr Murdoch for BSkyB should go to the Competition Commission. That was determined by everybody who spoke at the Leveson inquiry to be quasi-judicial. In answer to the noble Lord, Lord Browne, I have already admitted that the job of the adjudicator in this Bill is close to being judicial and, if it is close to being judicial, it is certainly close to being quasi-judicial.
The noble Lord, Lord Browne will know that the Judicial Appointments Commission has nothing whatever to do with Ministers and others who have quasi-judicial functions. It does not have that role. The Government must have found it difficult to know whether to call this person an ombudsman, an adjudicator or something else. He or she will be a regulator with powers to fine, like other regulators that are set out in statute. That is what is intended here. Some of us are in favour of this being in the Bill, whereas the Government want it only to follow a new regulation. Be that as it may, the adjudicator is closer to being a regulator than a High Court judge.
Lord Browne of Ladyton: My noble friend set a test for me that he knew I must fail, because the adjudicator does not have the power to impose a decision on a civil dispute-and because I failed this entirely arbitrary test, which he imposed with his customary skill, my argument was apparently nullified. Perhaps I may engage him by referring to another area of life in which there is a separation of powers. We have settled health and safety legislation in this country. Where there is a prosecution for breach of health and safety regulation before a criminal court, the court does not have the power to impose civil compensation, because that is not its function. However, it is a judicial process. Of course, another court can impose a civil remedy by awarding compensation for breach of health and safety regulations as an indication of negligence where somebody is injured, but it cannot impose a criminal penalty, because that is not its function. However, both courts have judicial functions. The fact that one court cannot impose its will on the jurisdiction of another does not nullify the fact that they both have judicial functions. Why does that logic not serve me well in this argument?
Lord Borrie: The only thing that I can say is that it has been the deliberate intention of the Government through their drafting of the Bill to deprive the adjudicator and to deprive anybody else except civil courts-in a completely different process-of the ability to determine a civil claim or something like it. As the noble Lord, Lord Browne, has considered this matter very deeply and carefully, there cannot be a lot between us. We are talking about a matter of title or name. Whatever that is, it does not seem suitable for the Judicial Appointments Commission to be involved in the appointment of this individual in a narrow field of the grocery trade, with the fairly narrow role provided by the Bill.
Lord Browne of Ladyton: The honest answer to the noble Viscount is that we have many adjudicators. We call them judges. However, I am not aware-although the Minister may be-of the use of this term in another set of circumstances that could be instructive to the Committee in analysing the process. I have no doubt that the noble Baroness will quickly leap on the alibi granted to her by the noble Lord, Lord Borrie, that the drafters of the Bill unfortunately came up with this unhelpful title. My argument is that, if it walks like a duck and quacks like a duck, it is a duck. When they created the position and wondered what to call it, they must have said, "It is an adjudicator, so let us call it that", and they were right.
Lord Knight of Weymouth: Before my noble friend Lord Grantchester responds, I will say very briefly to the noble Viscount, Lord Eccles, that there is a schools admissions adjudicator who adjudicates the schools admissions code.
Lord Grantchester: I rise to propose Amendment 5. Far be it from me to come between my two noble friends on Amendment 4, but I reflect that although
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Lord Grantchester: I thank the Deputy Chairman for clarifying that. We have approached it in a simple, straightforward way: that this is, in fact, the role of a regulator. As we have argued and discussed on previous amendments, the role of the regulator is a high-profile one at the moment, with a wide range of powers to effect change in the UK groceries market. It is only appropriate that the Secretary of State should consult with both the relevant Select Committees in the other place to reflect the standing that such a person will have in the business and parliamentary world, so that it is fully transparent to the supply chain that this has been well considered.
Baroness Wilcox: My Lords, these amendments concern the independence of the adjudicator and, in particular, how this may be safeguarded through the appointment and dismissal processes. I fully agree that the independence of the adjudicator is critically important to the successful operation of the role.
I have just been passed a note for the noble Lords, Lord Browne and Lord Borrie, on the name "adjudicator", which I thought might be helpful. The term has been chosen because an ombudsman must deal with consumers rather than businesses. That is the answer to that one.
Before addressing the amendments, I first reassure noble Lords that the Bill provides the adjudicator with full operational independence. There is no question of the Secretary of State telling the adjudicator what to do, who to investigate or what the sanctions should be. It is, however, normal practice that public appointments should be made by Ministers, in accordance with the standard rules and procedures on public appointments. In addressing these amendments I intend to draw parallels with other public bodies in the field of competition.
On the amendments of the noble Lord, Lord Browne of Ladyton, the adjudicator will not be a judge and it is therefore not necessary to involve the Judicial Appointments Commission. Similarly, the panel members of the Competition Commission, who might also be considered to have a similar quasi-judicial role in their rulings on appeals from sectoral regulators, are not appointed or recommended by the Judicial Appointments Commission. It is similarly appropriate that the Secretary of State should appoint both the adjudicator and, if there is one, deputy adjudicator, as both are public
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On dismissal, the Secretary of State may dismiss the adjudicator only if they are satisfied that he or she is unable, unwilling or unfit to perform his or her functions. This is not a judgment that would be made lightly and could be subject to judicial review if made incorrectly. Given these safeguards, I do not consider it necessary to require the Lord Chief Justice's approval, nor to make specific provision for the circumstances of criminal conviction, which the Secretary of State could, in any case, take into account when judging whether the person was appropriate for the role.
Finally, on the amendment tabled by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, I make two points. First, while the Government support the principle of suitable parliamentary oversight of public servants, they believe that pre-appointment hearings by Select Committees are only for those roles where it is vital that the post's independence from government or its importance to the public is of the highest importance. It does not seem clear that the adjudicator, though very important to the groceries sector, would fall within this category.
Secondly, even were the post of adjudicator such a post, it is also not general practice for Select Committee oversight to be set out in primary legislation, but rather for it to be decided by the Secretary of State responsible. I hope that that is helpful and, therefore, ask the noble Lord to withdraw his amendment.
Lord Browne of Ladyton: I am grateful to the Minister for dealing so comprehensively with the constituent elements of my argument. I am not entirely persuaded by all her arguments. I read that the distinction between an ombudsman and an adjudicator is that an ombudsman deals with only consumers and therefore cannot regulate a set of circumstances in which consumers are not involved. I am not entirely sure whether that argument is sustainable but it has been deployed in earlier debates on this legislation for justifying the move from the recommendation for an ombudsman in relation to this role. When I read it in the past I was not convinced and, with respect to the noble Baroness, I am not convinced now. However, I realise that that is the Government's position, which I respect.
I am grateful to my noble friend Lord Borrie for his intervention and I am enormously respectful of his vast experience in the area of consumer protection and competition. I thought that he got almost to the point where he agreed with me but could not break through the cigarette paper that was between us-which I have to say he put there. I am also grateful to him that he thought that there was something in my argument.
There is nothing implicit in any of these arguments that is in any sense critical of the way in which I expect the Secretary of State to behave. I expect the Secretary of State of whatever party is in government in this country to behave in an entirely appropriate way and not to make capricious decisions. I accept also that it may be possible to find other examples-as there were
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I am concerned that perhaps we treat constitutional change now as being of the moment and that we revert to type thereafter. But the 2005 Act was a significant step in creating an element of independence in the role of people who exercise these types of functions. We extended it well beyond what people would normally think of as judges, for instance into tribunals that cover a significant area of public life. I do not believe that competition should be immune from that restraint as regards the constitution. However, despite the fact that I believe quite strongly in this argument, at this stage I am content to withdraw the amendment-before I do so I will give way to my noble friend.
Lord Knight of Weymouth: Before my noble friend withdraws his amendment, I ask his indulgence so that I can come back to the Minister on what she said in respect of Select Committees being involved in a confirmation hearing. I refer her to the coalition agreement, which stated:
"Strengthen the House of Commons to increase accountability. We will increase Parliamentary scrutiny of the budget and of government appointments and give Parliament control over its own agenda so that all bills leaving the Commons have been fully debated".
I now refer the noble Baroness to some of the appointments that have been subject to pre-appointment hearings. From her own department, hearings were held for the chair of the Gas and Electricity Markets Authority, the chair of Ofcom, the chair of the Competition Commission, the chair of the Office of Fair Trading and the chair of the Postal Services Commission. She may argue that those are more major appointments than that of the adjudicator, but we think that it is important, otherwise we would not be here. Does she think that the post of adjudicator is more important than the chair of Oftenant, which is a quango from the Department for Communities and Local Government? I might also mention the chair of the Agricultural Wages Board, the chair of the Gangmasters Licensing Authority and the chairs of the research councils. That is a list of quangos, some of which are now being abolished. However, these are equivalent appointments and it is clearly the policy of
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Lord Browne of Ladyton: I am grateful to my noble friend for expanding my peroration quite significantly. The only point I had left was to refer to the necessity for some element of independence in this appointment. At some stage in Committee we will consider the absence of independence with regard to the dismissal or abolition of this role, which is a wrong step for many reasons, not the least of which is the role of Parliament. It seems to me that as a society we were on a journey towards recognising the need for an element of independence in the appointment of people who exercise certain powers. With respect to my noble friend Lord Borrie, it is not the narrowness of the issue but the nature of the powers that is important. We should be very wary of giving powers of this sort to individuals to exercise in our society without going through the appropriate processes to ensure utter independence from the Executive. That means not just factual independence but independence in law, and we must be consistent so that people go through the same process of selection that has been imposed on others to ensure that they meet the criteria that have been created.
In the mean time, I will study what the noble Baroness said and research whether any of the examples she gave predate the 2005 Act, with the distinct possibility that I will return to this issue at a later stage. I beg leave to withdraw the amendment.
"( ) the Scottish Government;
( ) the Welsh Assembly Government;
( ) the Northern Ireland Executive; and"
Lord Browne of Ladyton: My Lords, I do not seek to dominate the debates in this Committee and I hope that my amendments will soon give way to others. This is a simple but timeless point. In these amendments I seek to ensure that the devolved Executives are included in both the reporting of the accounting process and in the reporting process of this particular office or of the adjudicator.
I expect, and will anticipate in my argument, that the response to that would have been that this is not a devolved matter; it is a reserved matter and the proper accountabilities are therefore restricted to the organs of reserved, UK government. I probably would have deployed that argument when I was a Minister myself. However, only yesterday, those of us who believe in the union came together politically in a campaign called Better Together to persuade the people of Scotland that we are better together than separate. In my political life, this is the most important decision that the people
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In order to address that issue, among others, when I was the Secretary of State for Scotland we set up the Calman commission, which reported in the document Serving Scotland Better in June 2009. I will not take up the Committee's time by reading this, but I commend part 4, pages 141 and 142, particularly recommendation 4.1. It essentially says that part of the future of the United Kingdom is for us to show the degree of respect that we would expect to other parts of the constitutional settlement that we have. This adjudicator, whatever his powers are, will operate in an area which is reserved in competition law, but which will have effects in areas that are devolved. It seems to me that if we really mean that we are better together, and if we have respect, then we should go beyond the legalities and say that it is sensible that this adjudicator should send his reports to the devolved Executives and consult them if necessary on occasion. We should respect the constitutional settlement that we have made: not the law, but the reality of it and the way in which people behave. If we start to do more of that, we will undermine quite significantly the arguments of those who seek to divide us.
I offer the noble Baroness, who I know supports the union, and the coalition Government, who I know support the union, an opportunity today to send a message to Scotland and to other parts of the union through the devolved structures, that we have a mature and relaxed relationship with them and that we will not fight their right to get access to the information which they will need to be able to exercise their devolved powers properly in areas that this will affect. I beg to move.
The Duke of Montrose: I support the noble Lord, Lord Browne of Ladyton. In particular, I will back up his arguments on several of the points, although I must declare some interests as a meat-producing farmer with a 30-month production delay.
The difficulty, as the noble Lord pointed out, is that the subject matter of the Bill is very certainly reserved. The items that it will deal with are heavily devolved, both in terms of agricultural support and meat inspection. Many elements of the supply side are devolved, so there is great concern for devolved Administrations in this whole matter. The noble Lord was making the point quite well that this is not something that will require what we describe as a Sewel motion. It was drummed into us when we were debating the Scotland Bill that there is a convention in place. It would be interesting to know from the Minister if the convention has meant that the subject matter of this Bill has been
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Baroness Randerson: My Lords, I thank the noble Lord for tabling these amendments and concur with the viewpoint of the noble Duke. I am speaking from a Welsh perspective, with experience of the Welsh situation. The noble Duke is correct to acknowledge the significant role of the devolved Administrations in relation to this topic. As has been said by both speakers so far, the devolved Administrations have power over key issues.
The Welsh Government obviously have considerable power over agriculture and agricultural issues. Indeed, that power has grown considerably in the 12 years since devolution. They make the key decisions on agriculture. Even on the economy, many levers are in the hands of the Welsh Government rather than the UK Government. It is really important that the adjudicator, once established, has a regular and close dialogue with the Governments-the Executives-of Scotland, Wales and Northern Ireland, because it is so important to their day-to-day decision-making on policy.
As a member of the Welsh Assembly for 12 years, I sat through more debates on the supermarket ombudsman, and more questions on when the supermarket ombudsman would be set up, than I could possibly recall and count. It is a topic that was very close to the hearts of Assembly Members in Wales, across the board. It would be right for them to be closely involved from now on.
Baroness Wilcox: My Lords, I fully recognise the interests of the devolved Administrations in this Bill: of the noble Duke, the Duke of Montrose, for Scotland and the noble Baroness, Lady Randerson, for Wales.
The Government have kept in close contact with the devolved Administrations through the development of both the policy and the legislation, and we are grateful for the strong support that they have given to this Bill. Officials in my department have discussed this with representatives of all the devolved Administrations on multiple occasions, and continue to do so. We would of course expect the adjudicator to informally interact with the devolved Administrations in the same way.
However, formally speaking, the groceries code is a non-devolved issue, as it is a matter of competition law. The adjudicator therefore has no formal responsibilities to the devolved Administrations. Given this fact, a statutory duty to report to such bodies would therefore be inappropriate, and could make the adjudicator's role less clear. Additionally, it might suggest that the devolved Administrations had responsibility for oversight of the adjudicator, when in fact they do not have powers to control either the code or the adjudicator. However, as I have said, we have worked and will continue to work very closely with the devolved Administrations. It is in all our interests that we do so.
Lord Browne of Ladyton: My Lords, I confess to being disappointed. It would appear that we have resorted to type in relation to the legalities of these issues. I am utterly schooled in making the arguments for them. However, with respect to the noble Baroness, she reassures me to a significant degree when she recounts the degree of interaction and co-operation that there has been between the devolved Administrations and the UK Government. I am reassured by that and would expect nothing less. She suggested that informally the adjudicator will be encouraged to continue that level of co-operation. To that degree she reassured me.
However, the noble Baroness disappoints me because it would appear that in the structures of Whitehall we have not got beyond the strict legalities of these arguments and cannot see how damaging this strict approach is to relations across the union. We need to be much more mature in the way in which we approach these issues, and we need to be much more political in not creating opportunities for grievance or for discussions that are perceived to be beyond power but which create an argument for more power. For example, if the Welsh Assembly sensibly had a debate about the importance of a supermarket ombudsman, in Scotland that would lead almost inevitably to an argument that the Scottish Parliament should have had the power to appoint one because the UK Government were taking a long time to do it. We would then get into a confrontation about the constitution that would be utterly unnecessary if we had an officer who was instructed by the legislation that we passed to set up his office to report to those institutions.
I confidently predict that if the adjudicator role beds in, at some stage a committee of the Scottish Parliament, Welsh Assembly or Northern Ireland Assembly will say, "We are conducting an inquiry into the economic opportunities that relate to a particular part of our society or economy. This officer has a role to play in that. We would like him to come and give evidence to our committee". I also confidently predict that the occupier of this role will go, that the constitution will not melt down and that no great affront will be done to the divisions between devolved and reserved powers. I hope that at some stage we can come off these platforms where we tell the people of the United Kingdom that we are better together and that we respect each other and the settlement that we have, and drive that attitude down through Whitehall so that departments do not define themselves by whether they have reserved or devolved powers.
This is a disappointing response to the issue. I understand why legally it is being done. I am sure that the noble Baroness is aware of the possibility that while she is still in her office, somebody will come to her and say, "This does not go far enough. There is insufficient power for Scotland and it is disrespectful to the Scottish people". I hope that those who provided her with the argument to defeat my simple amendment can provide her with the argument to deal with that when she has to go to Edinburgh to make the argument.
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(a) enter into contracts;
(b) with the consent of the Secretary of State borrow money;
(c) acquire and dispose of land; and
(d) obtain advice or assistance from any person.
Lord Browne of Ladyton: My Lords, this is a probing amendment. This adjudicator is a creature of statute. He can have only the powers that are given to him by statute. Paragraph 8 of Schedule 1 states:
It appears to me that in this statute he deliberately is not given certain other powers that one would expect, even if he is to have a "small, agile staff", as the noble Baroness described his office at Second Reading. Are we to infer from the absence of those powers that others will exercise those necessary powers to create the small infrastructure around the adjudicator that will be necessary? Or are we to infer that there is an expectation that later provisions in this Bill will be enacted before it becomes necessary for the adjudicator to have these powers and that the office will no longer exist? Or is it the plan to embed this office in another existing administration or organisation? Has a decision been made as to what that organisation will be? If so, is the noble Baroness in a position to tell the Committee what organisation that will be and what powers it will have in order to support this person, bearing in mind that the adjudicator is required to carry out investigations?
The adjudicator may have to conduct arbitrations himself or herself. He or she may also have to appoint others to conduct arbitrations and, although we hope not, in the future may have to impose penalties, some of which may not be of a financial nature but some of which may be of a financial nature. He or she may have to account for such money and do all sorts of things-I do not need to go into the detail. Most noble Lords will have an idea of what these sorts of offices will look like, even if they are small and agile. I repeat that this adjudicator is a creature of statute. If he or she does not have these powers, they will not be able to do that. This amendment probes the intention of the Government in relation to the administration that will necessarily support the role of the adjudicator. I beg to move.
Baroness Wilcox: My Lords, I fully recognise the importance of ensuring that the adjudicator has the powers necessary to adequately carry out its functions. However, the powers listed in this amendment are already provided for in the Bill. I refer in particular to paragraph 16 of Schedule 1, which provides:
It is clear that sub-paragraphs (a) and (d) of the amendment are covered by this. The adjudicator could, for example, use this to enter into contracts or to obtain and pay for legal advice. Similarly, it must be the case that the adjudicator has the power to enter into a lease, which is an interest in land. With regards to borrowing, I draw the noble Lord's attention to, for example, provisions such as paragraph 20 of Schedule 2 to the Human Tissue Act 2004. That is exactly like our paragraph 16, except that it ends with the words,
Lord Knight of Weymouth: My noble friend raises an interesting point and I thought that I would wait to hear whether the noble Baroness prayed in aid paragraph 16. I worry about the very broad nature of the power that the adjudicator gets in paragraph 16 to do whatever he or she thinks is appropriate to perform the functions. It seems sensible enough, but I am mindful of what the large retailers are saying to us in respect of them having to pay a levy to fund the operation of the adjudicator and there being very little protection for them as to how much that would cost. Paragraph 16 as it stands seems to give a very wide power that leaves them vulnerable to some considerable costs. I wonder if the Minister needs to reflect on whether there is a way to give some protection to the levy payers to make sure that, were this interpreted by a frivolous adjudicator who thought there were some incidental things to the carrying out of functions, they could not go slightly berserk and incur quite a large cost on those levy payers.
Baroness Wilcox: The noble Lord, Lord Knight, will be pleased to know that we are ahead of him on this. The adjudicator will be able to carry out these acts only if it is to facilitate the carrying out of the adjudicator's functions or if it is conducive or incidental to the carrying out of those functions. This will ensure that the adjudicator's powers are used responsibly and are not abused. For example, it would not be possible for the adjudicator to make investments in land. I hope that that may be of some help. I was about to say that we might add things like, "should not go to Ascot" or this, that and the other, but I am being frivolous. I think that that is broad enough to cover any difficulties there.
Lord Knight of Weymouth: I am grateful to the noble Baroness. It is the "incidental" that would worry me the most were I a levy payer. I will leave it at that because I do not want to labour the point. We need to
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Lord Browne of Ladyton: The noble Baroness asked whether I am reassured. I am. How could I not be, given her explanation that what lay behind "incidental" powers is now on the record and it has been made clear that the adjudicator will have the powers necessary to carry out the functions that will support the role?
I do not expect the noble Baroness to answer this question, but she may reflect upon it: if paragraph 16 is all-encompassing, what is the purpose of paragraph 8? Why is it necessary for paragraph 8 to be in this schedule at all to deal with the issue of the remuneration of the adjudicator and deputy adjudicator if incidental powers cover all those fundamental things? I was misled by the presence of paragraph 8, thinking that "incidental" meant, in plain English, what I would consider to be incidental.
The powers that I put in the amendment are pretty fundamental to the office of the adjudicator. Given that this is the money of those who will support the role and given that, as my noble friend Lord Knight articulated, there is an argument for spelling out in plain English the powers that the Government expect the adjudicator to operate or use, particularly if those powers are relevant to the spending of other people's money, it would be more helpful to spell out the powers that an adjudicator has for spending money than to give an office of this nature incidental powers that are so all-encompassing against a provision such as paragraph 8.
That being said, the matter is now all on the record. It is very clear that there is some restriction on these incidental powers as well as on the exponential expansion of them. To that extent, I am grateful to the noble Baroness. In those circumstances and since the amendment is redundant, I can do nothing but beg leave to withdraw it.
Lord Browne of Ladyton: My Lords, noble Lords will be pleased to hear that I will not be insisting on these amendments. They were tabled for a specific reason, but that has actually been addressed in debate thus far. The answer to them is clear, because they anticipate the Enterprise and Regulatory Reform Bill, which is of course not yet enacted. They are therefore deeply premature, but were intended to initiate another debate, exploring what powers and relationships the adjudicator will have with these offices, but we have already had that debate.
I am conscious, however, because I argued that my amendments should be grouped with others in order to minimise the time, that if I do not move it that will imperil the rest of the grouping. I do not intend to insist upon my amendments because I understand what the Minister's argument would be. I beg to move.
Lord Knight of Weymouth: My Lords, I will speak to Amendments 12, 96, 124 in my name and that of my noble friend Lord Grantchester, which are about the powers to abolish the adjudicator. It is always a little worrying when a Government are thinking about the manner in which they will dispose of a new office before it is even established. Clearly, this is what the Government have done. Clause 16 provides both for the transfer of the adjudicator's functions to another public body and the outright abolition of the adjudicator, something which one or two Members of this Committee would, I am sure, welcome.
The fact that the Government have made such specific provisions rather implies that they already have a good idea about what they expect to happen to the adjudicator after a couple of years. A more cynical person might infer from this that the Government have calculated that they can benefit from a few good headlines now in setting it up, and then quietly merge the office with the Office of Fair Trading, or the new Competition and Markets Authority a couple of years down the line. That would probably feel like a very efficient win-win to the Government; but this is obviously a highly cynical view. The Government could even quietly get rid of the thing altogether with a simple Motion in Parliament.
We have heard how this issue has exercised suppliers to supermarkets for some time. It has been the subject of campaigns for a number of years. I do not believe that the affirmative resolution is in this instance a high enough threshold for Parliament to allow the Secretary of State to abolish this public body so easily. The reason for this goes to the heart of what the adjudicator is there to achieve, and to the arguments on the powers which the adjudicator should have available. In a sense, if the adjudicator never initiates a single investigation or uses a single one of his or her powers, this could just as easily indicate success as it could do failure of their functions. The reason for both the code and the adjudicator is not to catch retailers out so much as to compel good behaviour and to make clear where the boundaries lie between competitive and anti-competitive practice. The presence of the adjudicator alone, especially an adjudicator with teeth, such as strong powers to fine, should, we hope, be enough of a deterrent to ensure that retailers never stray beyond the rules of good practice set out by the code. If a referee-or, if it pleases my noble friend Lord Browne of Ladyton, a quasi-referee-goes through an entire football match without giving a single booking, you would applaud it as a success. You do not question the future need for the referee.
It is therefore worrying that the Government have included a mechanism for the adjudicator's abolition without giving any indication of how they intend to measure the continued value of an adjudicator. At the very least, the bar for abolition should be set higher than it currently is within the Bill. Our amendments 12,
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Just yesterday in this Room I led the Opposition debate on the transfer of powers from British Waterways to the Canal and River Trust and on the abolition of the Inland Waterways Advisory Council. Those orders originated from the Public Bodies Act and used the super-affirmative procedure. We were guided by an extremely useful report from the Secondary Legislation Scrutiny Committee, its first report of this Session, which sets out the reasons for triggering the extended period of consultation around those particular orders that the super-affirmative procedure allows. The procedure would require the Government to undertake a thorough process of consultation on any proposal in order properly to ascertain whether, for instance, adjudicator inertia was an indicator of a well functioning market regardless of, or because of, its presence. Crucially, it would also allow Parliament to amend any such order which, in other forms of order-making, is not possible. For instance, should Parliament believe that there was a case for scaling back the adjudicator's role rather than its complete abolition, it could do that.
While I am all for efficiency, there is something perverse about providing for the manner in which a new public body should be abolished before it is even set up, but I accept that it is in the legislation and that the Government might want to do that. However, the Government should make it clear to Parliament what their long-term plan for the office is, how they will distinguish between a successful and an irrelevant adjudicator, and they should certainly adopt the better practice that we fought hard for in your Lordships' House when we passed the Public Bodies Act, that of the super-affirmative procedure. If I could beg to move I would do so, but I suspect that I cannot.
Baroness Wilcox: My Lords, on the amendments tabled by the noble Lord, Lord Browne of Ladyton, I recognise that in due course the references to the Competition Commission and the Office of Fair Trading will most likely need to be changed to refer to the Competition and Markets Authority. My ministerial colleagues in BIS are currently working hard to ensure that the Enterprise and Regulatory Reform Bill, which will bring about these changes, makes a successful passage through the other Chamber. However, the Government believe that it would be presumptuous of us to take the will of Parliament for granted by making a reference to the Competition and Markets Authority when the Enterprise and Regulatory Reform Bill has not yet received its Third Reading in the other place, so we propose to consider the amendments tabled by the noble Lord, Lord Browne of Ladyton, at a later stage of this Bill's passage through Parliament-namely, when the other Bill is more advanced.
With regard to the amendments tabled by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, we all agree that when granting delegated powers, the
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The Public Bodies Act has been mentioned as a precedent. However, there is a big difference between that Act and this measure. The Public Bodies Act confers powers to abolish, reform and modify a wide range of public bodies, and confers a range of ancillary powers such as the power to amend primary legislation. However, this Bill is a limited measure to establish a new adjudicator in a single, specific area of the economy, the grocery sector. It is quite a different thing.
I remind noble Lords that the Delegated Powers and Regulatory Reform Committee examined the Bill. Its report is available to any Member who wishes to read it. The committee carefully considered whether the procedures provided by the Bill were appropriate, and specifically considered whether some measures should be delegated at all. However, it concluded that the procedures were appropriate and did not recommend the replacement of the affirmative procedure with the super-affirmative procedure at any point.
Lord Knight of Weymouth: The noble Baroness is of course right to refer to the first report of the Delegated Powers and Regulatory Reform Committee. When it considered abolition, in paragraphs 6 and 7 of the report, and Clause 16(2), it stated:
"If the Competition Commission revoked the Order containing the groceries code, the Act would serve no purpose so it could be repealed. There would be no great point of principle involved in its repeal, for the Act is wholly dependent on the Order".
The committee's view was very much informed by the weirdness-which I referred to earlier-of setting up in primary legislation a quasi-referee to govern a code that Parliament has no power to scrutinise.
It is entirely appropriate and comparable with the Public Bodies Bill, which was about the bonfire of the quangos and the Government having the power in secondary legislation to get rid of quangos that they had set up in primary legislation. In this primary legislation we are setting up a quango. In Clause 16 the Government are seeking to use just the affirmative procedure if they want to abolish it. It is entirely consistent with the Public Bodies Act to argue for the super-affirmative procedure.
Baroness Wilcox: Perhaps if I go back and continue for two paragraphs, we might find something a bit more helpful. I will go back again to say that the Delegated Powers and Regulatory Reform Committee examined the Bill. It carefully considered whether the
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"We considered whether this goes far enough and whether the policy and repeal of the Act in these circumstances should be effected by another Bill. But we are satisfied that the affirmative procedure is appropriate given the overall purpose of the Bill".
"An order under clause 16(1) can transfer all or some of the Adjudicator's functions to another public body (undefined). The power is balanced by the affirmative procedure; and the Adjudicator's functions are specific under the Bill. We are satisfied with this approach".
Abolition and transfer of functions are major steps that should be subject to the super-affirmative procedure. The Secretary of State can abolish the adjudicator only for being ineffective or unnecessary, under the clauses referred to by noble Lords, following one of the triennial reviews. These reviews require full consultation. Transfer of functions can be done only after consideration of whether it will increase efficiency, effectiveness and economy, while ensuring appropriate accountability to Ministers.
This Committee's job is to carefully scrutinise delegated powers and to ensure that the appropriate procedures are chosen. If the committee had recommended changes to the Bill, we would have considered them extremely carefully, but it said that the procedures were satisfactory.
As I said at the beginning, one must ensure that the degree of scrutiny is proportionate to the powers involved. That is why it would be absolutely wrong, for example, for the negative procedure to be used in these cases. Equally, the super-affirmative procedure is a step too far. With that explanation, I invite the noble Lord to meet me after today and talk this through further. I would be delighted to do so, rather than taking up any more of the Committee's time at this stage. Therefore I ask the noble Lord to withdraw his amendment.
Lord Browne of Ladyton: My Lords, I look forward to the Government's amendments at a later stage of the Bill and, although I was slightly premature, the opportunity to claim credit for them. I have to say to the noble Baroness that I would trade that for better consideration of the earlier amendment on the devolved Administrations. If I may crave the indulgence of your Lordships, I realise that when I was responding to that debate I failed to recognise and pay due regard to the contributions of the noble Duke, the Duke of Montrose, and the noble Baroness, Lady Randerson, who graciously supported my amendments and made arguments that created a cross-party consensus on this issue, which the Government were unfortunately immune to. I am grateful to noble Lords for their support and contributions to the debate. I beg leave to withdraw the amendment.
Lord Browne of Ladyton: My Lords, the other amendments in this group are consequential on the first, and challenge the perception that you can invest in one person so many powers without creating an inevitable conflict of interest. As we have already established in our deliberations, the Bill gives the adjudicator many powers in relation to disputes, including arbitrating, investigating and enforcing. It is axiomatic that the adjudicator must carry out these powers with independence and impartiality.
The Bill goes well beyond implying that investigation necessarily gives rise to conflict on the lack of impartiality in a later arbitration-indeed, it creates a mechanism for it. Although the Bill does not compel the adjudicator to appoint an arbitrator, it gives him or her a strong hint that that is what they should do. I know that in the Second Reading debate the noble Baroness was careful not to apply an imperative to that requirement, and suggested that the adjudicator would probably, in such circumstances, appoint someone else to arbitrate.
The reason for the amendment is that although I have some limited experience of arbitration, I cannot, from my research or my consideration of what this adjudicator would do, envisage any set of circumstances in which an arbitration would take place that did not require a prior investigation of some sort. I cannot believe that an adjudicator-particularly one who is expected to arbitrate in a limited number of cases in relation to the groceries code during the course of a year-would decide to use the powers that he or she is constrained to use sparingly, without some preliminary investigation and some conclusion that arbitration was necessary. I cannot conceive of any circumstances in which that argument of impartiality, or lack of it, could not be levelled at an adjudicator when a decision is made to arbitrate.
I am perfectly willing to defer to interventions or contributions to this debate from noble Lords in this Room-and there are many of them-who have much more experience of these sorts of circumstances than I had in my limited exposure to them during my legal career. I cannot think of the circumstances. As a consequence, and given the nature of this legislation, there is a strong implication that the arbitration function should be separate from the role of the adjudicator. Should arbitration be necessary, the adjudicator would be required to appoint a separate arbitrator. Otherwise, what is the point of all the provisions which say that investigations can give rise to the implication of a lack of impartiality? Where did they come from and why are they in the Bill at all, if that is not the logical conclusion?
The first amendment in the group articulates how the mechanism would be imposed. The second amendment, Amendment 14, is consequential in the
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I think that there is a reasonable expectation that we will conduct processes of this nature in a way that is consistent with the law more broadly, and in particular in the expectation that our law will comply with the European Convention on Human Rights, as well as with the international agreements that we make. So I offer in Amendment 15 an opportunity for the Government to incorporate into the Bill a set of rules which I believe they accept in any event. It would make it clear to the parties involved in the process that these will form the minimum expectation. The other amendments in the group are consequential.
Before I move the amendments, I should say that I have been greatly assisted in their preparation by Michael Clancy, the director of law reform at the Law Society of Scotland. Indeed, he has helped with all the other amendments to ensure that they comply with the drafting rules. I pay tribute to his work. He makes a significant contribution to legislation in Parliament and he deserves recognition for the assistance he gives to Back Benchers, parties and, indeed, to governments. I am grateful to him for his help on this occasion. I hope that I have made clear to Members of the Committee the reasons for these amendments so that they can be debated if necessary, and I beg to move.
Viscount Eccles: My Lords, I do not know if this will help or at least shorten what I need to say in the debate on whether Clause 2 should stand part of the Bill. I want to consider what the situation is and has been since 4 February 2010. The dispute resolution scheme is set out in the code in Part 5. Paragraph 11(5), of course, does not conform to the Bill. It states:
"The arbitration will be administered by the Ombudsman, if established. In the event that the Ombudsman is not established, or has a conflict of interest in relation to a particular Dispute, the arbitration will be administered by a single arbitrator appointed in accordance with the Rules of the Chartered Institute of Arbitrators in force for the time being."
My understanding would be that it is a contractual obligation of the retailers that that is included in their contracts with their suppliers, exactly as I have read it out. It goes on in 11(6) to say:
"Nothing in this Article will prevent a Designated Retailer including in a Supply Agreement a right for the Designated Retailer also to refer a Dispute to arbitration if the Dispute is not resolved ... within 21 days".
We need to know what the present situation is with the operation of the code. If the arrangements which have been set out with care by the Competition Commission, and included in the order are working perfectly well then I am bemused as to why the adjudicator would ever want to play any part in arbitration at all. I cannot see why it would be sensible for the adjudicator to play any part, because it is all there. Surely the adjudicator is to monitor whether these arrangements are working satisfactorily?
It may be, of course, that the further sophistication suggested by the noble Lord, Lord Browne, would also be a sensible thing to do. I have no view on that; I am not sufficiently expert. However, I cannot understand-and I need to be given some sort of comfort-why the adjudicator is involved in arbitration, as opposed to simply taking note of the fact that arbitration is taking place, and probably coming to a view as to whether, when it took place, it was a satisfactory procedure or not?
Baroness Wilcox: The noble Lord, Lord Browne of Ladyton, has raised an important question that it is well worth us examining closely. It is correct that the adjudicator will have two separate main roles. One will involve arbitration, as set out in Clauses 2 and 3 of the Bill. The other will involve investigations and is set out primarily in Clauses 4 to 10 of the Bill. Both roles will be carried out fairly and impartially. The two functions will be distinct from each other and it is important, as the noble Lord, Lord Browne said, that they remain so in order to prevent any conflict of interest.
The noble Lord, Lord Browne, asked whether the adjudicator would always be conflicted. Not necessarily. If arbitration is sought on a subject where the adjudicator has not carried out an investigation or given advice, it is likely that there would be no conflict of interest. We do not consider it inherent in the functions of the adjudicator that he or she will be conflicted in carrying out arbitrations.
It is important to remember that the adjudicator will carry out all their functions fairly and impartially. It is not the role of the adjudicator to act as an advocate for suppliers in carrying out investigations, but it is possible that conflicts will arise in particular cases, and the Bill provides the flexibility to deal with each situation as it arises. The Government consider that Clause 2(1)(b) in particular will help ensure that the distinction between the adjudicator's arbitration and investigation functions is maintained and that any conflicts of interest are prevented. This clause allows the adjudicator to appoint another person to arbitrate a dispute. The Government envisage that this will be used in cases where a conflict of interest may exist, for example where the adjudicator has previously advised on, or investigated, an issue which is relevant to the dispute. To assist the noble Lord, Lord Browne, the powers to arbitrate are applied at the request of the supplier or retailer. No previous investigation is actually needed.
The adjudicator will be required to act responsibly and will refer any cases where a conflict may arise. However, in cases where there is no conflict of interest, the Government believe that it is sensible to allow the adjudicator to arbitrate. This was envisaged by the Competition Commission in its drafting of the groceries supply order. The adjudicator will, after all, probably be the single most experienced person in the workings of the code.
On the proposed procedure for appointing an arbitrator, I do not consider it necessary to set this out in the Bill. As the Explanatory Notes explain, in England and Wales and Northern Ireland, Section 94 of the Arbitration Act 1996 will broadly apply the provisions of Part 1 of that Act to any arbitrations carried out under the groceries supply order and this Bill. In Scotland, Section 16 of the Arbitration (Scotland) Act 2010 will broadly have a similar effect in applying the Scottish arbitration rules.
The arbitration legislation which will apply to arbitrations by the adjudicator or a person appointed by the adjudicator includes protections on fairness and impartiality, including an ability for parties to apply to the court to remove an arbitrator on those grounds. The adjudicator can of course be expected to satisfy himself or herself either that they can carry out an arbitration themselves fairly and impartially, or that the person they appoint will do so, but there is a safeguard in the arbitration legislation if, for some reason, that does not happen properly.
I wanted to respond to my noble friend Lord Eccles, and have now found the speaking note for that. The groceries supply order has already established a dispute resolution scheme for disputes arising between a particular retailer and a particular direct supplier under the groceries code. The order anticipates that the adjudicator, referred to there as the "ombudsman", will arbitrate these disputes. This will both ensure that the disputes are arbitrated by an individual with a high level of expertise in the sector and will allow the adjudicator to gain a greater understanding of how the code is operating that will be helpful when carrying out his or her functions, such as providing advice or preparing the annual report. I hope that that is helpful.
I hope that these rather long but, we felt, necessary explanations have proved satisfactory to noble Lords. While I would of course be happy to speak further to the noble Lord, Lord Browne of Ladyton, about this matter, I ask him to withdraw his amendment at this stage.
Lord Browne of Ladyton: My Lords, I am grateful to the noble Viscount, Lord Eccles, for expanding into a potentially fruitful area my further deliberations on this. I had not thought to look at the terms of the code itself, but his drawing my attention to the detail of the provisions on arbitration points to an area at least worthy of consideration: the interaction between existing provisions and those that would be enacted by the Bill, which are less descriptive. It interests me that the Government have chosen to legislate in way that is less clear than the simple provisions in the code, which the noble Viscount read out, composed by the Competition
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I am grateful to the noble Baroness for giving these amendments such careful consideration, and for her words suggesting that they raise an important issue. It is an important issue and I remain to be convinced that it would be appropriate for the adjudicator to embark on arbitration without doing some prior investigation. I suppose that it depends on what one means by "prior investigation". Given that it is expected that the adjudicator will arbitrate in a very small number of cases over the course of a year, I would expect that he or she would pay great attention to whether it was appropriate to deploy scarce resources on such a request, even if it came from a big retailer.
I honestly cannot conceive of a set of circumstances in which an arbitration-not a request for an arbitration-is embarked on where there has been no prior engagement with the issues. I am willing to be dissuaded from this view, but it is an important issue and I will take advantage of the invitation from the noble Baroness to speak to her. I had the benefit of discussions with a member of her Bill team and found them very helpful in relation to all my amendments, so I am happy to engage again because that is my approach. I am not interested in creating unnecessary regulation or making the Bill unworkable. I am interested in trying to make the legislation work. Certainly I seek to avoid creating an industry of judicial review of decisions. Big issues are at stake here in relation to these large organisations. If this works in the way that many of us want to see it work, it must work to a conclusion and it must be settled. I am not interested in being party to creating a vehicle for further deliberations in courts that will take forever and eat up scarce resources. We use up far too many resources and this is an attempt to avoid doing that-and it is a noble attempt, so I will take up the invitation of the noble Baroness and speak to her and her Bill team so that they can explain why I am wrong, because I cannot conceive of those circumstances.
Finally, I am grateful to the noble Baroness for explaining-I will need to go away and read this carefully-the mechanism by which the provisions of the Arbitration (Scotland) Act 2010 and the equivalent piece of legislation in England and Wales are incorporated into the process. I am reassured if that is what is intended and if that will be the effect. I am slightly concerned about the use of the qualification "broadly". This is not the time to explore that, but there may be a time on the Floor of the House to explore what "broadly" means, how broad that discretion is and whether there is a possibility that we will create the potential for arbitration that does not meet rules that the Scottish Parliament and this Parliament, for example, sought to impose on arbitrations in Scotland, England and Wales.
I say that advisedly because there is another noble ambition. Our country has an enviable history in the administration of justice as a world centre for arbitration. If we are not consistent in the way in which we apply the rules that we set up in order to create that environment,
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I do not intend to take any more of the Committee's time and I will take advantage of the very generous offer to discuss this between now and Report. I hope that we will be able to find a way to move forward without the necessity for another debate. In the mean time, I beg leave to withdraw the amendment.
On the question of independent arbitration, I hope that we will investigate what is happening. It is very normal in conditions of supply and sale for there to be arbitration clauses. I suspect that if we were dealing with a large supermarket and somebody like Nestlé, Kellogg's or Unilever, there would be arbitration clauses in the supply and purchase agreements. Are we saying that the adjudicator will override those clauses in some way because of the provisions of the Bill? That is one of my main reasons for suggesting that the adjudicator should play no part. That is why Clause 2 should come out of the Bill-and with it, under my Amendment 16, subsection (1) of the following clause. The adjudicator will not be at all well served by having the duty to administer arbitration or, if not being the arbitrator him or herself, to appoint another. That will override a lot of the existing and quite normal arrangements that are set out independently in contracts.
My noble friend said in different terms that the adjudicator will be neutral and fair between suppliers and retailers. I say with some regret that that is not the expectation. The expectation of the adjudicator, and those lobbying for the appointment of one, is that he or she will be in support of suppliers. I do not think that we should blink at that in this Committee. There has been no argument by the retailers of the kind that there has been by the suppliers. I quite accept that that is something to do with the gearing of perceived market power between the two sides, but if the adjudicator does not serve the interests of the suppliers, there will be a lot of disappointment.
Lord Knight of Weymouth: I am grateful to the noble Lord. As we have already heard, Waitrose, as one of the big retailers, is fully supportive of the establishment of not only the code but the adjudicator as well.
Viscount Eccles: I am grateful to the noble Lord, Lord Knight. I have looked at that with some care and he is quite right that the things said by Waitrose during these procedures have been more positive than some of the things said by other supermarkets. If you read the compliance reports in the supermarkets' annual reports and accounts-those that are available-you will find that they are all complying, and doing so in cheerful and positive way. That is why I want the OFT, under paragraph 7 of the code-it gets all the reports and it has all the information-to give its assessment and judgment of the extent to which the supermarkets are complying in a cheerful and positive manner with this code. My belief is that they are complying. I have sought to find out the views of the supermarkets and all their responses have been 100% positive; not one has put up any kind of negative response. Their trade association's response has been, "We are going to make this thing work. We are making this thing work. We do not really think that an adjudicator will help, but we may have to have one". That is perhaps the attitude I am taking-if we have to have an adjudicator, we will get on with it. I do not think the argument that Waitrose stands out as an exception runs.
Viscount Eccles: I am only talking about expectations. It is up to Members of the Committee to make up their minds as to where the expectations that might arise as a result of this Bill being enacted lie. We all make up our own minds. In conclusion, I would much prefer it, and I think that it would be much in the public interest, if Clause 2 did not stand part of the Bill.
Baroness Wilcox: My Lords, my noble friend Lord Eccles has already made clear that he believes that the adjudicator's function should be given to the Office of Fair Trading. The Government disagree and consider that with arbitration, just as with investigations, there is merit in establishing a dedicated, independent office which can build up a high level of expertise in the groceries market. I have already discussed this issue in some depth in response to previous groupings and have set out why we have made the provisions for the adjudicator to arbitrate.
The groceries supply order has already established a dispute resolution scheme for disputes arising between a particular retailer and a particular direct supplier under the groceries code. The order anticipates that the adjudicator-referred to there as the "ombudsman"-will arbitrate these disputes. This will ensure that disputes are arbitrated by an individual with a high level of expertise in the sector and allow the adjudicator to gain a greater understanding of how the code is operating that will be helpful when carrying out his or her functions, such as providing advice or preparing the annual report.
In response to the question asked by my noble friend Lord Eccles on whether the Bill will override existing arbitration clauses, the order already gives a
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Viscount Eccles: I thank my noble friend. I want to reiterate that I do not read anything in Article 11 that currently prevents a supermarket and a supplier entering into their own contractual arrangements about arbitration. Perhaps we could deal with that matter. I am sticking to my point that I would like an answer to the question: do the arrangements proposed in the Bill override normal contractual arrangements that exist between many suppliers and their customers in many markets?
I would also welcome-because I would like to come back to this at the next stage-some reflection on this matter of arbitration and its independence. I think that I am supporting the noble Lord, Lord Browne, because I remain of the opinion that it is almost inconceivable that the adjudicator will not have some perceived conflict of interest. Therefore, once it is perceived, the adjudicator will say, "I think that I had better back out of this and let it be done another way". Meanwhile, I withdraw my opposition to the Question that the clause stand part of the Bill.
"( ) The power conferred by this section is not exercisable in relation to information or documents in respect of which a claim to legal professional privilege (in Scotland, to confidentiality of communications) could be maintained in legal proceedings."
Lord Browne of Ladyton: My Lords, I shall not detain the Committee long with my amendments in this group. They are designed to protect legal professional privilege and confidentiality of communications in Scotland.
I am certain that the noble Baroness will say that legal professional privilege is recognised by common law and is therefore protected by it; that it is not therefore necessary to make legislation to protect it; and that the same applies in Scotland. My question to her, although she may not be able to answer it, is: why do we protect legal professional privilege in some legislation but not in other legislation? For example, in the Counter-Terrorism Act 2008, at paragraph 12 in Part 3 of Schedule 7, we enacted exactly the provision I have sought to include in the Bill. That is only one example and I can find others. I apologise to the noble Baroness for bowling her a bit of googly, even if I am a Scotsman-and we normally cannot play cricket at all, unless we captain the English team. Why on some occasions do we legislate to protect legal professional privilege and on others we do not? If she can answer that at some stage, I will be pleased. I do not intend to press this matter to a Division. I beg to move.
Baroness Wilcox: This is an important issue. It is clearly important that documents subject to legal professional privilege should not be subject to the information-gathering powers that are granted here. I thank the noble Lord, Lord Browne, for raising this point and reassure him that the Bill already gives protection to documents that are subject to legal professional privilege, on the basis of the general rule about legal professional privilege in civil proceedings. Because the enforcement mechanism in Schedule 2 and Clause 3 is via civil proceedings, the outcome is that legal professional privilege cannot be overridden.
I can say that confidently because legal professional privilege can be overridden only by express words or necessary implication. That is precisely what the House of Lords decided in the case of R (Morgan Grenfell & Co Ltd) v Special Tax Commissioner 2003. There are no express words of override here, nor is there anything that can be thought of as giving rise to unnecessary implication. In the mean time, I have been given an answer to the question put to me by the noble Lord. It is difficult to talk about other legislation, but we are clear that the intent is to protect legal professional privilege here.
Lord Browne of Ladyton: My Lords, the purpose of this amendment is to give the adjudicator a basis for investigating an alleged breach of the groceries code. Perhaps I may say at the outset that, if it is of concern to the noble Baroness or the Government, I do not intend to undermine in any sense the requirement for reasonable grounds of suspecting a breach of the code before an investigation can take place. Clause 4 enables the adjudicator to investigate in those circumstances, and I think that that is the appropriate test. However, we will have a debate about whether it is the appropriate test in response to other amendments before the Committee.
There is a perception that proaction on the part of the adjudicator and reasonable grounds are inconsistent with each other. I do not believe they are, and this amendment makes that clear. There is no provision in the Bill that allows the adjudicator to form the reasonable grounds for an investigation, so providing a route for complaints to the investigator is the best way to achieve reasonable grounds. This amendment provides in a simple way for the adjudicator to take his own initiative, on receiving a third party complaint, to begin an investigation. That is straightforward, and if we are legislating in plain language to indicate what we intend, we should spell that out. I beg to move.
Lord Teverson: My Lords, I should like to speak to my own amendment in this group, Amendment 26. Something that particularly interested me in the speech made by my noble friend the Minister at Second Reading was that, following the considerable work carried out on this Bill in its preparation stages, the provision allowing bodies to make a complaint was widened. In her opening statement, the Minister set out a list of bodies that could bring complaints before the adjudicator. The major change was that instead of only suppliers themselves being able to complain, the Bill specifically opens up the ability to do so to trade associations and third parties. I want to use the amendment moved by the noble Lord, Lord Browne, to ask whether that is absolutely the case.
While I do not have the depth of knowledge of the noble Lord, Lord Browne, on these issues, which he has demonstrated so well, I want to be clear that what it means is that whoever reports a reasonable suspicion that there has been an abuse, the adjudicator can get involved. In fact, I was slightly concerned by his Amendment 23 as it seems restrictive, although I am not sure that that was his intention. It refers to,
I am also aware that Amendment 27, which is in this group although the noble Lord, Lord Howard, has not spoken to it yet, seems to be even more restrictive. The Minister's assertion that we should be as broad as possible in terms of the adjudicator is very important, not only in his being able to take evidence-which is my own amendment-but also in his being able to have a wide range of people reporting problems to him. That is fundamental to the proper working of this Bill.
As regards my Amendment 26, it is important to emphasise that the adjudicator can consider any information that it seems appropriate to consider. I am not certain but that may well be covered by default by the Bill. I would like to test that and to ask the Minister to respond on whether that will exist within the wording of the Bill.
Lord Borrie: I join in the query of the noble Lord, Lord Teverson, to the Minister, which I hope she can answer, to make sure that those who can make complaints are not only individual farmers, producers or whatever but also trade associations such as the National Farmers' Union or the British Retail Consortium.
I hope that my noble friend Lord Browne does not think I am going for him today in the various matters on which we disagree, but I am slightly worried-as I think the noble Lord, Lord Teverson, was-by the phrase in Amendment 23,
If the third party is a trade association, then I suppose that parties one and two are the supplier on the one hand and the supermarket on the other. But then, what does "third party with an interest" mean? If that is the trade association, does that mean that it has to have some interest other than the fact that the supplier, who has got a real complaint, is a member of it? Is that what "interest" is meant to mean, or must it be wider than that? That is the query I put to my noble friend Lord Browne but there is also a general point about where complaints can come from. I hope that it is from as widely as possible.
Lord Howard of Rising: My Lords, I feel I should first finish declaring my interests: I am a farmer as well. I find it rather gripping to find the noble Lord on the other side defending the farming industry so strongly during this debate.
My Amendment 27 reflects the wording which was included in the draft Bill and limits those who can complain to parties to the transaction. If anybody else
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I ask the Minister one question. In the notes for the draft Bill, there was a comment that the adjudicator has no power to require people to provide information for the purpose of deciding whether to commence an investigation. I would like confirmation that this is still the case in the Bill as it has been presented to the Committee.
Baroness Byford: My Lords, I declare a past interest. We are still farmers, but we do not supply supermarkets any longer. In fact, we used to have a contract with Waitrose to supply pigs. I reiterate what the noble Lord, Lord Knight, said earlier: Waitrose offer a very good example and a steer to a lot of the other retailers that we are talking about.
I will comment on my noble friend Lord Howard of Rising's point. I would be anxious if we went back down the route that he suggests. I also seek clarification from the Minister, or from himself, on how you classify what is "publically available". Obviously, a lot of information is hearsay and is not publically available. I would be really quite concerned about that.
On the earlier comments about third parties being able to give evidence to the adjudicator, this morning I asked the National Farmers' Union, which has sent a briefing to all of us-and of which I declare myself a member-whether it would only do that on behalf of its members. It seemed a logical question to ask. Otherwise, there may be many other people who would be affected if they were willing to take it up on everybody's behalf. I think that the answer I got to that was that, generally, it would probably be instigated by a member, but that other evidence and considerations would obviously be taken into account. I am quite happy with what is in the Bill, and would be quite concerned if we started narrowing it back just to information provided by a supplier. We have been down that route before. That would identify the supplier to the supermarket very quickly, which the Bill is not trying to do. The acceptance that third parties can give evidence and bring things forward to the adjudicator is hugely important.
My noble friend Lord Howard of Rising is right that the balance lies where mischievousness creeps into it. Clearly, all Members of this Committee would
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Baroness Randerson: My Lords, I wish to state clearly that I do not agree with the arguments of my noble friend Lord Howard of Rising. If there had been a robbery, would we ever argue that a witness to that robbery could not give evidence to the police and that the only people who could do so would be either the robber or the victim? We have to open this out so that the general principles on which we base so many issues of this nature in society apply, so that other people are allowed to make complaints. I give one example: there are plenty of organisations in civic society that might wish to make a complaint on behalf of a supplier in this case. I remind noble Lords that other aspects of the Bill ensure that it is not in your interest to make vexatious complaints. The adjudicator can, at his or her discretion, apply costs against those who do so. I am absolutely sure that a supplier who sought an advantage against another supplier in the way that has been suggested would be the subject of that kind of cost.
The Earl of Sandwich: The noble Baroness, Lady Byford, and others said exactly what I would have. I am an NFU member. I know how much the Government have steered a course in this to accept third parties. I do not know what the noble Lord, Lord Howard, meant by "all and sundry" but it is a rather sinister phrase. It presumably means mischief and none of us wants that. I hope that the Government keep the wording as it stands.
Lord Grantchester: Picking up on quite wide-ranging amendments, I think that on this side we are content that included in the drafting of the clause is the fact that third parties can be party to the complainant. That is perhaps the easiest way to put it. Yet we appreciate what has been said and would like the Minister to underline and put on the record that that is indeed the case. On this side, we think that third parties will act as a responsible check and balance to the process in that they will pick up widespread experience of the supply chain, including from other suppliers who may come forward with information. I am sure that they will act as a steadying hand on any vexatious claims that individual suppliers might feel they have under their own individual circumstances. I will also reply to the noble Lord, Lord Howard. Of course, on this side we are very concerned that fair and best practice should be everyday experience for all businesses, whether they supply supermarkets or not.
I assure noble Lords that the Government are in complete sympathy with the aims of the amendments tabled by my noble friends Lord Razzall and
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The amendment of my noble friend Lord Howard of Rising would return the Bill to the draft that was originally published for pre-legislative scrutiny last year by restricting the sources of information that the adjudicator could consider to information from suppliers and information in the public domain. I remind noble Lords that this issue was considered carefully by the BIS and EFRA Select Committees, both of which explicitly rejected the version of the clause that is now being proposed. They concluded that third parties, including trade associations and whistleblowers, could have a valuable role to play. After discussion with both suppliers and retailers, the Government decided that that was right. Trade associations, for example, may have a better overall picture of practices in a sector, which could reveal systematic breaches of the code. The Government therefore consider that it is right that the adjudicator should be able to consider any relevant information when making decisions to investigate. However, I reassure my noble friend Lord Howard of Rising that we have also introduced Clause 15(10) to enable the Secretary of State to restrict the possible sources, if it turns out that third parties do act irresponsibly.
I say to my noble friends Lady Byford, Lady Randerson and Lord Howard that there is protection in the Bill against malicious complaints, in that costs can be awarded against a complainant who makes a vexatious complaint or one that is wholly without merit. If those answers are seen as good and fair, I will ask the noble Lord, Lord Browne, to withdraw his amendment.
Lord Browne of Ladyton: My Lords, at Second Reading the Minister said that there would be no restrictions on who could complain to the adjudicator and she has confirmed that that is the position, which I am satisfied with. I am grateful to all noble Lords who have spoken in this debate for their support of that position, which was overwhelming, with one notable exception.
The noble Lords, Lord Teverson and Lord Borrie, raised the issue of my reference to the phrase "with an interest" as perhaps restricting those who can complain. I may, in including it, have been guilty of what I have been trying to avoid and want the Government to avoid: attaching legalese when it is unnecessary. The concept of "with an interest" is well recognised by lawyers. It was intended not to restrict but to indicate that there ought to be a bar against frivolous or vexatious complaints. The idea of title and interest is a concept with which I am entirely comfortable, but I
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