Examination of witnesses
(Questions 20 - 39)
TUESDAY 21 JULY 1998
and MR SIMON
20. I want to know whether anybody is taking
an interest in the reform of the Court structure. This Committee
recently did a report on the Court of First Instance which is
getting gummed up with work and was making a very modest proposal
for changes in its rules to enable it to organise its resources
more efficiently. I think both Courts feel that they need quite
a lot of loosening up in the structure that is imposed on them
by the Council's rules in order to be able to cope with the work
that they are doing. They also feel, at least those I have spoken
to, that there is not any real political interest in doing something
about it. I wonder what you feel about that.
(Mr Henderson) We are aware of the problem. I
think all Members of the Council are aware of the problem. There
is this proposal that the Court of First Instance should sit with
one judge rather than more than one judge and that seems a reasonable
proposition to us and we would support that. The idea that there
should be more judges appointed to deal with the matter is one
that we are not so keen on. We think that proposal should be supported
and when we get the opportunity to support that we will.
21. I quite understand about having more
judges but then the only other solution is to make more efficient
use of the judges you have and that sort of proposal of the Court
of First Instance is just a drop in the bucket compared to the
difficulties they are having in dealing with their work?
(Mr Henderson) I am not familiar with all the
detail apart from that major point, but I would be happy to look
at that if there are any specific suggestions you think would
be helpful. We are enthusiastic that the Court should work effectively
and if that can be done without a huge increase in resources,
then we would certainly want to support that.
22. I suppose we are reactive to proposals
of others such as the one to which Lord Hoffmann has been referring
with regard to the Court of First Instance and the way in which
some improvement can be obtained by a single judge making the
decision and we reported favourably, in the way in which the Government
is also favourable, but we are going to have enlargement; we are
going to have a lot of cases dealing with technical matters such
as trademarks cases that are coming along inexorably, whether
people want them or not, and there seems to be no particular movement
from the powers-that-be in terms of ensuring that over the next
few years, let alone further, the European Court of Justice and
the Court of First Instance will be adequately staffed, resourced
and so on, to cope with that, which is an anxiety which I wonder
if you share with me?
(Mr Henderson) Yes. Sometimes I have difficulty
in defending the Courts in another place. Some people take the
view that the Courts should stay out of business but our view
is that where it is appropriate for the Court to have a role then
it should be able to give effect to that role without delay and
in a way that is responsive to the needs of the Community. I think
it is wise to review these things every so often to make sure
that the Court is able to deal with some of the things that you
suggest might arise. I am quite sure you are right on that and
there will be lots of arguments about these things and if the
provision for the Court to sit with one judge is at least a partial
solution, then I think that would be welcome. If there are other
suggestions that can be made, then I would be happy to look at
any proposals, and I am sure they can come through the appropriate
23. Do you think that some of the lack of
interest arises from the fact that people in the other place do
disapprove of the Court being there at all? If you do disapprove
of the Court being there at all, it seems an odd solution to produce
a situation in which it takes them two or three years to produce
(Mr Henderson) I think there is an element of
that on some of the benches in the other place.
24. Could I ask a question about the Common
Foreign and Security Policy. There was a recent report from a
Committee in your House recommending there should be more parliamentary
scrutiny of the Second Pillar. Do you think that is possible and
how could that best be done?
(Mr Henderson) In terms of principle, we very
much support that. I think one has to recognise that a lot of
decisions that are taken in CFSP are taken at very short notice
because of the nature of those particular events and, therefore,
it will not always be possible to provide papers in advance. Indeed,
there are no papers in many cases. A lot of decisions of the CFSP
in my experience on the Counciland my colleagues, especially
Mr Jones Parry, will be able to confirm thisare taken literally
a day or two sometimes after the event has happened and the papers
are really prepared on the day. Often the discussion takes place
without papers and then there is a paper drafted to reflect the
discussion which is then confirmed. It then leads to action if
there is action necessary by the Commission or whatever. So given
that restraint, we very much support that. Occasionally there
may be matters of confidence of security which would not be appropriate,
but I think most of the time it would be appropriate to have the
scrutiny where it is allowed for, but many of the decisions have
to be taken very quickly. I do not know whether Mr Jones Parry
would like to add to that.
(Mr Jones Parry) I would only add, my Lord Chairman,
that one of the things we tried in the British Presidency was
to have better handling of business and that constituted in part
making sure that Councillors did not suddenly, over a lunchtime
or on occasion almost capriciously, take it on themselves to have
a policy on country X or whatever the situation was, so we put
a high premium on proper preparation through the Political Committee,
through COREPER and then a proper text going to the Council. That
meant, we thought, that we would get better decisions at the end
of the day. Where that process is followed and where it is quite
clear that Councillors have notice of it, which would permit us
to go through some form of dialogue and discussion again, then
I think the Government would be very happy to do that. The only
proviso would be in certain cases where ministers in the Council
would need to respond to urgent situations which came up genuinely
at short notice and where there was need for a response. If we
put those aside as a category which would be the subject of subsequent
notification, then I think the Government would be very well disposed.
25. In this Committee we are very familiar
with these situations but on the whole we do manage to have working
arrangements with departments so that if something of this kind
is coming up we can be given warning, if possible; if not, a rapid
explanation after the event. But there is another aspect of this
which is of interest to our Committee here. Of course, this is
not an area in which the Select Committee in the Commons have
hitherto operated and there would be some boundary questions between
the two Houses. I do not know what my Lord Chairman thinks of
this but it seems to me this is something that we ought to get
straight so that we each know what we are doing.
(Mr Henderson) The Modernisation Committee of
the HouseI think it is agreed in principle already that
there should be scrutiny on Pillars 2 and 3still has to
work out some detail. One of the things I think would be helpful
is if the Clerks could be in contact with the officials to look
at some of the practicalities. We would be very happy from our
office to provide some of our officials to take part in that dialogue,
again looking at the detail and the nitty-gritty of how it could
Lord Bridges] That
is very helpful.
Chairman] That is
very helpful because we do sometimes feel a bit jealous of our
Scandinavian colleagues, who claim at least that they mandate
their ministers before they go. I suspect that it is not quite
as simple as that.
Lord Bridges] I suspect
sometimes the Clerk accompanies the delegation to the Council
of Ministers and is available for rapid consultation.
26. Nevertheless, I think if we are talking
about transparency and the role of the citizen in all this, then
anything we can do to improve the flow of information between
governments is to be welcomed. I think that one of the disappointing
things about the British Presidency as far as we were concerned
was that there was not really much improvement in the laying of
documents, not by the FCO particularly but in general by departments,
and there is a long black book building up of correspondence with
(Mr Henderson) I did anticipate that you would
identify this issue and I specifically raised it with the President
of the Commission, Jacques Santer, to press him to try to implement
the terms, because these are not controversial terms in the Amsterdam
Treaty, but there are a lot of administrative changes that need
to be made in the Commission. He is committed to the principle
and the Commission are currently looking at what changes they
need to make to their system to be able to accommodate the needs
that people like yourselves have and, of course, the electronic
transmission is something which should help.
27. I think there are two issues here. We
have identified one in terms of transmission of information from
the Commission to the Council and to the various countries, but
there is also the fact that in every Presidency there is a felt
need to cram as much into the agenda as they possibly can in the
last few weeks and things are not being properly scrutinised by
Parliaments. I know that Sub-Committee B in particular have had
difficulties in this area.
(Mr Henderson) We have asked all the government
departments and have instructed them to be mindful of their responsibilities
in this regard and to look in the future to having to put in a
better performance. I hope they will be mindful of our prodding
and that your needs will be met.
Chairman] Thank you.
We will keep prodding.
Lord Geddes] As long
as they keep mindful.
Chairman] That really
takes us on to access and information.
28. I was wondering what progress the Council
is actually making in allowing greater access to information about
its own activities?
(Mr Henderson) During our Presidency we managed
to get agreement that there will be a register of public documents
and I think that should be availableMr Gass will knowfrom
about January 1999. I think that will be important in that it
creates a different climate. We have opened up the Council meetings,
we have invited lots of people to observe what happens and some
of it was on the Internet. I appeared on the Internet on the day
of one of the Council meetings and talked to people in different
parts of Europe about what had happened. We are committed to opening
up CFSP, and indeed the Foreign Secretary addressed the European
Parliament for the first time on these issues and I myself have
dealt with them on a number of occasions. Domestically, as I have
already mentioned, we very much support improving scrutiny under
Pillars 2 and 3.
29. We feel there has been a culture of
greater secrecy in the Council than there has been in the Commission
strangely enough over the last few years. It has been much more
difficult to get information out of the Council. There was a time
when you could not even get access to the agenda after the Council
meeting. I think the Ombudsman has done something to free up that
(Mr Henderson) There is now greater access to
Government documents. There are very many press conferences that
take place and they are open to anyone to come along and ask what
has happened. We would encourage more transparency in the discussions
of the Council although clearly there are areas where it would
not be appropriate because often the importance of a Council decision
is that it is a unanimous decision and that gives the EU strength
in an external situation. If it was shown before unanimity was
reached that there were differences of view then I think that
could be exploited in a damaging way.
Baroness Hilton of Eggardon
30. Our concern is not just the Council
but also the many committees that seem to advise the Commission
endlessly in relation to environmental Directives. Scientific
data are apparently the basis of the Directive but we are not
allowed to know who the scientists are or what the scientific
research has been or what the committee has been that has recommended
particular standards for bathing water or drinking water or whatever.
That seems to us to be totally contrary to normal scientific procedure
that is based on peer review and knowing exactly what the research
has been. That has made it very difficult for us looking at some
of the draft Directives on environmental matters and it is quite
idiotic not being allowed to know who the national experts are,
who the scientists are or what the science is on which the Directives
have been based.
(Mr Henderson) Our position is we are in favour
of more openness in these matters. I find what you say strange,
I would have thought if one wants to impress on someone else the
scientific evidence one has is legitimate one would want to at
least mention who it was that drew up the evidence.
Baroness Hilton of Eggardon] We
have commented on this endlessly.
31. It has been a bone of contention for
a long time, particularly from Sub-Committee C which is the environmental
committee. When you have got a couple of Fellows of the Royal
Society of Chemistry sitting on your Sub-Committee and they say
"The science on which this Directive is based is crap",
although they do not use words like that in this place, of course,
but that is the meaning of it, then somebody ought to sit up and
take notice and say "It is not, because we have the authority
of so and so and this is what it is based on". We do not
get any feedback from them.
(Mr Henderson) The Commission are currently looking
at the organisation of comitology. I am quite interested in this,
I was not aware of this criticism. If I was to be briefed in more
detail by the Clerk I would be happy to look into this further
and come back to you.
Baroness Hilton of Eggardon
32. Could I also say that Mr Gass was nodding
his head when I was putting my question so I think Mr Gass is
aware of this problem.
(Mr Jones Parry) He has this affectation.
(Mr Henderson) It is probably a breach of parliamentary
privilege for me to suggest that Mr Gass might be giving ponies
out to get a question like this in the first place.
Baroness Hilton of Eggardon] We
have been complaining about this ever since I have been Chairman,
which is three years now.
33. And longer than that. The impression
that I formed when I was on that Committee was that if you had
a Commissioner, say, who was German and a Deputy Director who
was Dutch, they would have very good access to Northern European
scientific evidence, and this might be over the pollution of maritime
waters or something like that, but they did not actually know
what was happening in our waters or they had no access to our
scientific evidence so the net of collecting evidence was defective:
they went to the place which was closest, which was understandable,
but it was not as comprehensive as it should be.
(Mr Henderson) I certainly want to look at that,
if I can write back to you after undertaking some examination.
34. Could I ask you a question about arms
exports. We have now a Code of Conduct. Can you tell us anything
about the criteria and how you think they will work? If I could
add a second question. I remember in Sir Richard Scott's report
on the Arms to Iraq saga there was quite a lengthy passage about
the changes which were needed to bring our national legislation
up to date. Much of it is emergency legislation hurried through
on the eve of the Second World War which is still used as part
of the apparatus for controlling exports of arms. We had a debate
on this report in the House and I spoke on this subject and I
was the only Member of the House who spoke who took it up. Lord
Peston, then in Opposition, now in supporting Government, wound
up for the Opposition and said this was an important matter which
would be taken into account by the future Labour Government. I
just wonder how these two things fit together? We have got some
national legislation which needs updating and we now have a Community
Code, how do these two things fit together?
(Mr Henderson) I am afraid I cannot comment on
the national legislation without some notice, I think it would
be unwise of me. In relation to the European Code of Conduct,
essentially it is taking the principles that we apply as a nation
that we should not be exporting arms if there is a likelihood
they will be used for external aggression or internal suppression.
It is applying that across the European level and is building
in provisions. The great fear of people is if we say it is wrong
politically or morally to export arms to a particular country
then it is completely without purpose if the next day somebody
else in another country exports the very same product and the
only result is that British workers are out of work. There is
a need to have a position which holds over a broader front. We
think we now have that. In a sense it is an advisory code. I think
it puts huge pressure on every country to do the decent thing.
If country B is told by country A that they have not exported
arms to a particular country for whatever reason then they cannot
export without notifying country A, I think that puts a lot of
pressure on them not to export. That is what is achieved by the
35. The distinction between internal suppression
and defending your external frontiers is not always terribly helpful,
as might be observed in the case of Kosovo today.
(Mr Henderson) That is why there is always a judgment
in this. That was how in the past it was easy to evade the International
Court's recent opinion. The argument usually was "we do not
agree with your opinion". Now if a particular country says
"we are not exporting for whatever reason", if another
country decides to export they have to notify that country they
intend to do that so there is then a possibility for discussion
and debate before it happens. There was some accusation that the
Code means you are notifying potential competitors of business.
In my experience of these matters, some of which is while I have
been a Member of another place and some of it before I was there,
these are international markets that are pretty well-known by
the various potential suppliers and they usually know who is trying
to supply who with what.
Lord Hussey of North Bradley] Could I get back
to the priorities of the Austrian Presidency. As I understand
it they have gone on record as saying one of their primary objectives
is to accelerate the rate of tax harmonisation which seems to
me to create quite a wide number of problems. They are talking
about transition raising of VAT, a Directive on Energy which cuts
right across government policy I would have thought, a Code of
Conduct on corporate taxation, taxes on savings. These are issues
that are likely to affect the City of London and business generally.
Lord Bridges] There
was alarm in the Isle of Man and the Channel Islands over this.
Lord Hussey of North Bradley
36. Perhaps you would like to comment on
(Mr Henderson) The Austrians have told me that
it is not a priority for them. It is something that is in the
system that they are dealing with. There was a Code of Conduct
which was issued within the last 12 months, which related to standards
in financial centres. It was not binding, it was an advisory code
and it was taking forward some of the work of that. One of the
things which has been looked at is the question of taxation of
savings but it was not particularly raised by the Austrians. We
have made clear in our discussions that before we agree to any
code we would want to be absolutely assured that there would be
no negative effect on British savers or on the City of London.
37. I see that the Austrian Finance Minister,
Rudolf Edlinger, launches this as one of his big ideas at the
Congress in the immediate future in Vienna, perhaps the Congress
you were talking about?
(Mr Henderson) I do not want to provoke an argument
between different sections. As I understand it, the position of
the Austrian Government is that it is a matter of routine, that
they are doing the business as they are required to do, and I
think the Austrian Ambassador to the United Kingdom wrote in similar
terms to The Times recently to clarify the Austrian position.
38. It is very important in Germany also.
The Germans tried for years to stop the Luxembourg Government
from allowing the payment of interest on deposits by German citizens
without tax. I think they have finally got somewhere on that and
I believe they are now moving forward, possibly hoping to use
the Austrian Presidency in order to prevent other people from
dodging some of the money that should be going into the Community
budget. I think that is part of what is happening and it seems
to be evoking quite a considerable response on the part of the
Commission. In Spain recently I read in a Spanish newspaper about
the efforts which were being made by the Commission to stamp out
tax havens in Britain in particular.
(Mr Henderson) I think we know where the Spaniards
are coming from on that. I think it is in the interests of every
financial centre, wherever it is located, that it is able to demonstrate
that there are firm regulations that apply and international standards
that apply, and I think in the long term that can help to generate
business and not discourage business.
(Mr Jones Parry) May I add, my Lord Chairman,
there are two aspects to taxation, it seems to me. One is that
it is perceived and presented by the Commission and some Member
States as being part of the internal market and that logically,
as we come to the end of the internal market, this is one of the
difficult issues which needs to be addressed. So there is a philosophical
reason for doing it but there is also a practical reason. As Lord
Bridges said, in the case of the German Government it is actually
a loss of revenue to the German Government at the expense of deposits
made in Luxembourg which are not subject to tax. But there are
other ways of addressing that: compulsory notification of deposits
to the tax authority of the resident is one way round it. We have
spelled out very clearly nationally what the United Kingdom position
is. That has been done by Treasury ministers in the ECOFIN Council.
It is one thing to agree a Code of Conduct and agree a general
trend of policy which is towards co-ordination of tax policies,
where Member States want to do it, but it is another thing to
accept a taxation which is actually detrimental to the interests
of the City and to parts of the United Kingdom. So we are very
vigilant on that.
Chairman] That is
39. Is there not a Protocol to our Treaty
of Accession which allows us to do what we do in the Channel Islands?
I thought we negotiated that particularly at the time?
(Mr Jones Parry) There is certainly a Protocol
which covers the position in the Channel Islands. It is the case,
though, that in some other territories the tax regimes have not
been quite so transparent and aboveboard and there is certainly
a British interest as a British dimension to try to make sure
that there is good government, good taxation policy, throughout.