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House of Lords

Wednesday, 1 February 2012.

3 pm

Prayers-read by the Lord Bishop of Norwich.

Council of Europe

Question

3.06 pm

Asked by The Earl of Dundee

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, our chairmanship priorities were outlined in my Written Statement of 26 October 2011. They include, among other things, reform of the council's work on local and regional democracy, which should assist in strengthening the citizenship role in member states.

The Earl of Dundee: I thank my noble friend for that reply. Can he affirm that our chairmanship will seek measures to improve the co-ordination of local democracy, including among the Council of Europe's separate branches for local government, non-government organisations and the Parliamentary Assembly itself? Can he also assure us that our chairmanship will recognise and encourage experience of good practice such as city diplomacy, where different cities and centres already improve their local results by working together on similar issues and problems?

Lord Howell of Guildford: The answer to my noble friend is yes on both points. The Council of Europe can have a major role in facilitating exchanges of the sort he described, and one priority of our chairmanship is to streamline and make more efficient the Council of Europe's work in the field of democratic local governance. Also, there can be real gains for local communities where those responsible for local services and the governance of towns and cities can exchange good practice and share knowledge and experience with their counterparts in other states, and that, too, we intend to encourage in our chairmanship.

Lord Anderson of Swansea: My Lords, the European Union's Europe for Citizens programme concentrates mainly on town twinning, so we should avoid duplication in the Council of Europe, but the European Union programme also deals with communicating with citizens on the work being done by the European Union. Is not there a case during our presidency for informing the citizens of the wider Europe of the valuable work being done in many fields by the Council of Europe?

Lord Howell of Guildford: Yes, I am sure there is. The noble Lord is quite right: the Council of Europe covers about 800 million people, which is wider than

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the European Union. Of course there can be a constructive interchange and the work of each body can be promoted by the other to their mutual benefit.

Lord Phillips of Sudbury: My Lords, does my noble friend accept that the so-called democratic deficit is developing in this country and in wider Europe, perhaps to be greatly exacerbated by the eurozone crisis? Is he aware that 2013 is to be the EU year of citizens in action? In that regard, will he assure the House that citizenship education will remain part of the core curriculum, as it has been since 2002, given that there are now questions as to whether it might be taken out of the compulsory core curriculum?

Lord Howell of Guildford: I very much hope-it is a hope rather than an assurance-that all those involved in these great institutions will work in that way. This switches the commentary from the Council of Europe to the European Union, which of course is different, but we all look back to the Laeken declaration, which urged the European Union to bring itself closer to the citizenry, and the Council of Europe is of course on the same sort of track. This is an age of the empowerment of citizens and, as some people say, of empowerment of the street, sometimes with good results and sometimes with less good results. In all cases, empowerment of the citizen, responsibility of the citizen, education and bringing home the potential role of active citizenry remain absolutely vital.

Lord Tomlinson: Does the Minister agree that at a time when we need some good news to be given by the United Kingdom to Europe, it would be appropriate during our chairmanship to ratify the European convention on combating violence against women? I know that the consultation process finishes at the end of March, but if they really get their skates on that will be something for Dominic Grieve to announce when he comes to the Council of Europe in April.

Lord Howell of Guildford: I agree that this would be a good aim. A number of areas need further consideration before a final decision can be made on whether to sign the Council of Europe convention on preventing and combating violence against women and domestic violence. As part of this further consideration, which is on very real and important issues, I am advised that the Home Office launched a consultation in December, about two months ago, on whether to create a new offence of forced marriage. The consultation period will end on 30 March and we will then be able to make a definitive decision in line with the hopes of the noble Lord.

Lord Hamilton of Epsom: Following my noble friend's question about the crisis in the eurozone, what is the Government's policy towards unelected Governments of so-called experts in Greece and Italy?

Lord Howell of Guildford: I think that my noble friend will be the first to recognise that we have to leave the member states of Europe, and indeed the nations and democracies of the world, to decide how best to govern themselves. From time to time they call upon experts and technocrats to make up for the deficiencies of quarrelling democrats.



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Baroness Farrington of Ribbleton: My Lords, I declare an interest as an honorary vice-president of the Standing Conference of Local and Regional Authorities of Europe. Will the Minister please give an assurance that during their presidency our Government will do everything to ensure that citizenship education includes the rights of Roma, Gypsy and Traveller populations within the countries of Europe? There is terrible discrimination in Council of Europe countries against these groups.

Lord Howell of Guildford: The noble Baroness is absolutely right that discrimination against Roma and concerns for the position of Roma are very important issues. As she knows, the secretary-general of the Council of Europe convened a high-level meeting way back in October of not last year but the year before. That was after the really chilling example of the French deportations of Roma and it produced the Strasbourg declaration on the treatment of the Roma. However, I fully agree with the noble Baroness that this issue should remain at the top of the agenda, and it is one that we should examine and promote very carefully and assiduously during our chairmanship.

Lord Richard: My Lords, if there really is a campaign called Citizens in Action, would the noble Lord urge whoever is responsible for it to look again at the title, which, to put it mildly, has a certain ambiguity about it?

Lord Howell of Guildford: I am sure that the noble Lord, with his learning and skill, could contribute to better titles and labelling for some of these programmes.

Health: Diabetes

Question

3.14 pm

Asked By Lord Collins of Highbury

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, we are working with the National Diabetes Information Service and National Health Service organisations to ensure that local services have the audit data for their own areas to show how they compare with others and where improvements can be made. NHS Diabetes has a suite of tools that can be used to help drive improvements and reduce avoidable deaths.

Lord Collins of Highbury: I thank the Minister for his response. Diabetes UK estimates that about 26 per cent of the 450,000 residents in nursing and care homes in England have diabetes. Care home residents are a highly vulnerable group of people and, without regular screening for diabetes, they are at an increased risk of complications such as heart disease, stroke, kidney failure, blindness and amputation. What are

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the Government doing to ensure that residents in care homes receive the appropriate screening that they need for diabetes?

Earl Howe: My Lords, much will depend on the way in which primary care engages with those in social care to ensure that the residents of care homes, who need diabetes care management, receive it properly. We very much want to see that joined-up commissioning arise from the reforms that we are currently in the process of debating in your Lordships' House. The noble Lord makes a very good point. We have many tools at our disposal. There is no shortage of guidelines in this area. Much will depend on the training of care home staff and a lot of work is going on under the aegis of the National Clinical Director for Diabetes in this area.

Lord Rennard: My Lords, does the Minister agree with the 15 checks or services promoted by Diabetes UK that every person with diabetes should receive or have access to? In particular, does he agree that they should have access to high-quality, structured education, firmly embedded in the NHS, based on a programme such as that for type 1 diabetics, promoting dose adjustment for normal eating?

Earl Howe: My Lords, the answer to my noble friend is yes. Those checks and services are firmly supported by NICE, by the National Service Framework and by the NICE quality standard. I also agree with him that structured education is fundamental if we are to ensure that patients can self-manage. A number of tools are available for that. He mentioned one for type 1 diabetics that has the acronym DAFNE-dose adjustment for normal eating-and for type 2 diabetics there is DESMOND-diabetes education and self-management for ongoing and newly diagnosed.

Baroness Finlay of Llandaff: Can the Minister please tell the House what levers the Government will have in the new NHS to ensure an increase in the use of insulin pumps for the control of diabetes in children, given that the pump appears at face value to be expensive, but as a long-term investment it is very cost-effective because it results in far better control of diabetes and a lower incidence of hypoglycaemic attacks, which is important for children at school?

Earl Howe: My Lords, we know that insulin pump therapy can make a huge difference to glycaemic control and the quality of life in some people. It is not appropriate for everyone, as the noble Baroness will, I am sure, recognise. We know that much more has to be done to improve the uptake of insulin pumps in line with NICE recommendations. The NHS operating framework for this year highlights the need to do more to make these devices available. The NHS Technology Adoption Centre has published guidance to support NHS organisations in the adoption of these devices and I know that the National Clinical Director for Diabetes, Dr Rowan Hillson, chairs a working group focusing on the uptake of insulin pumps.

The Earl of Courtown: Does my noble friend agree that one of the greatest problems for those suffering from diabetes-particularly type 2 diabetes-and for

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those looking after them, is that they are not actually taking up the education that is available so that they can learn how to live their lives to get a better result from their illness?

Earl Howe: I agree with my noble friend. We are firmly of the view that education is a major action area for primary care clinicians, and for those in secondary care too, if we are to avoid unplanned admissions to hospital, which are unpleasant for patients and very costly for the NHS.

Lord Brooke of Alverthorpe: Does the Minister agree-I am sure that he does-that the recommendation that there should be more comprehensive and effective preventive care is an important part of the report, and that it is important to highlight the link between obesity and this illness? Does he agree that it is now high time for the Government to introduce calorific labelling of alcohol products so that people know the number of calories they take in when they drink, and to stop citing the European Union as the reason why they are not doing it?

Earl Howe: The noble Lord is to be congratulated on bringing me back to the very important subject of the labelling of alcoholic drinks. I hope that the House will feel that he was a little unfair in blaming the Government for the line that they have taken on this. As the noble Lord knows, labelling is an area that is very largely a matter of EU competence. However, he is right that type 2 diabetes is closely linked to obesity and insufficient physical activity. We would like to see businesses use a more consistent front-of-pack nutrition labelling approach than has been achieved in the past, particularly with food.

Lord Harrison: Will the noble Earl recognise another acronym, the DAFNE programme, and give greater government support to rolling out such a programme, as illustrated by the noble Lord, Lord Rennard? Will be also reply to the Danish Government, who have made diabetes a priority under their presidency for the coming six months? What is being done with our Danish colleagues to promote a better understanding of diabetes and its treatment?

Earl Howe: The noble Lord is right to emphasise the role of DAFNE. The 2011-12 NHS operating framework signals the need to commission patient-structured education for people newly diagnosed with diabetes, and at appropriate points in their life as their condition progresses. I do not have a briefing on the dialogue with our Danish colleagues on their programme of action, but I will write to the noble Lord on that.

House of Lords: Scottish Referendum

Question

3.22 pm

Asked By Lord Hunt of Kings Heath



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The Chancellor of the Duchy of Lancaster (Lord Strathclyde): My Lords, the Government can proceed only on the current constitutional framework. We will of course take all relevant factors into account when planning the timetable for reform.

Lord Hunt of Kings Heath: My Lords, I am enormously grateful to the noble Lord, Lord Strathclyde, for that illuminating response. Remarkably, it appears that Mr Clegg's Bill is to be the centrepiece of the Government's legislative programme for the next Session. However, this will be in advance of the outcome of the Scottish referendum which could-I am sure the noble Lord will agree-have profound constitutional significance for the United Kingdom. How will the Government take that into account? Furthermore, as Scotland is to have a referendum, why on earth are the British people not to be allowed one on Lords reform?

Lord Strathclyde: My Lords, there were a number of questions there. The noble Lord is right that it would have profound constitutional implications for the United Kingdom if there were to be a referendum result in Scotland in favour of breaking up the United Kingdom. However, as I said in my Answer, we can proceed only on the current constitutional framework. If there is a Scottish referendum, I for one-and, I am sure, the noble Lord for another-will campaign in favour of retaining the United Kingdom. The Government of course considered the case for a referendum on the future of the House of Lords. However, given that all three manifestos in the most recent election were remarkably similar on reform of the House, we feel that people's views have already been taken into account.

Lord Cormack: My Lords, the manifestos were rather different. However, does my noble friend agree that those of us who are concerned about the future of the United Kingdom must not take the people of Scotland for granted and must not appear to patronise them? To anticipate the results of the Scottish referendum would seem to do precisely that. Therefore, is there not the strongest possible case for getting the issue decided before we turn to House of Lords reform?

Lord Strathclyde: My Lords, of course we must neither patronise nor anticipate. On the other hand, normal work should not come to a halt because of a possible referendum. That is why we are carrying on with our stated proposal for reform of the second Chamber.

Lord Kakkar: My Lords, if the Scottish people were to determine that their constitutional destiny lay with the devo-max model, would it be appropriate for them to participate in elections for the Deputy Prime Minister's senate in 2015?

Lord Strathclyde: My Lords, a rather different question is raised by the noble Lord, and I am not sure that I know entirely what is meant by this phrase devo-max.

Noble Lords: Oh!



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Lord Strathclyde: My Lords, I hear some moaning from the other side, but I expect that if we asked three of them what they thought devo-max meant we would get four different answers. It would probably be the same if we asked them their views on House of Lords reform. The point is that any different arrangement of the United Kingdom would of course have an impact on an elected House, in the same way as it would have an impact on the House of Commons.

Lord Foulkes of Cumnock: My Lords, I am not going to ask about devo-max. However, last week, in reply to a question from my noble friend Lord Campbell-Savours, the Leader of the House gave an unequivocal reply that no list of new Peers is being proposed. In the Daily Telegraph today he was quoted as saying that there is a new list, and indeed that the SNP has been asked to nominate. Would he care to clarify the position?

Lord Strathclyde: My Lords, I stand by my original answer. It is, of course, up to the Prime Minister to decide when and if he comes forward with a list. I am not aware that he has any current plans to do so. I certainly voiced a view that there is no reason why there should not be a Scottish nationalist in this House, but I do not believe that any has been proposed.

Lord Maclennan of Rogart: My Lords, would it not be wise to allow the United Kingdom to reach consensual decisions about the role, powers and composition of this House when the future political relationships of all the constituent nations of the country have been settled?

Lord Strathclyde: My Lords, I do not think there is any requirement for us to wait on a referendum on breaking up the United Kingdom, which may not take place until the end of this Parliament, before legislating on what a future second Chamber will look like. However, as I said in my earlier Answer-which I think is not out of keeping with what my noble friend has just said-if the relevant factors were to change, we would take them into account when planning the long-term timetable for reform.

Lord Cunningham of Felling: My Lords, would not the best way of improving Scottish influence on proposals for House of Lords reform be to abandon the current, deeply flawed draft Bill, and replace it with support for the excellent Bill tabled by the noble Lord, Lord Steel of Aikwood, which commands wide-ranging respect in this House?

Lord Strathclyde: My Lords, I am well aware of the respect with which it is held in this House. However, it does fly in the face of the three manifestos on which the Members of the House of Commons were elected only 18 months ago.

Baroness Symons of Vernham Dean: My Lords, is it not the case that because the people of this country had no chance to vote for any party except those that support Lords reform, they ought to be afforded such an opportunity?



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Lord Strathclyde: My Lords, that is a good point: when all the parties are united, there is no room for much opposition. However, if a Bill is published after the gracious Speech, I am sure that there will be very effective debate within Parliament, because, as I have said before, very often the differences on House of Lords reform exist within the parties rather than between them.

Lord Brooke of Sutton Mandeville: My Lords-

Lord Low of Dalston: My Lords-

Noble Lords: Brooke!

Baroness Anelay of St Johns: My Lords, it sounds as though my noble friend Lord Brooke has the Floor just at the moment.

Lord Brooke of Sutton Mandeville: My Lords, to revert to an earlier answer, why does my noble friend think that the world is not going to come to an end if a Bill to abolish the House of Lords is introduced into your Lordships' House?

Lord Strathclyde: My Lords, I am always wary of my noble friend winning this sort of competition to speak in the House. I rather wish that I had taken the question from the noble Lord, Lord Low.

Northern Cyprus

Question

3.29 pm

Asked By Lord Sharkey

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, the United Kingdom remains committed to supporting the UN-led process on Cyprus. Although only limited progress was achieved at the latest round of talks between the two leaders and the United Nations Secretary-General, the process has not ended. The UN Secretary-General has called for a decisive move to reach a final agreement, and will provide a report to the Security Council at the end of February.

Lord Sharkey: My Lords, the Minister may recall that, writing in the Times on 8 November 2010, Jack Straw said:

"It is time for the UK Government to consider formally the partition of Cyprus if the talks fail".

The talks he referred to did fail, as did the next and latest. In the same article, Jack Straw also said that,

Does my noble friend the Minister agree with Jack Straw on this point?



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Lord Howell of Guildford: No, I do not. Jack Straw is not a member of the current Government, of course, and his comments were made in a private capacity as an MP. The guarantor power, the UK, has undertaken by treaty to prohibit any activity aimed at promoting, directly or indirectly, either the union of Cyprus with any other state or the partition of the island; so I repeat-a pretty emphatic no.

Lord Maginnis of Drumglass: My Lords, I beg leave to take the opportunity to pay tribute to my late and dear friend, Rauf Denktas, whose courage and leadership frustrated EOKA-B's Akritas and Ifestos plans for ethnic cleansing. After 49 years' discrimination against Turkish Cypriots and 38 years of successive Greek Cypriot rejections of resolutions, including the 2004 Annan plan, is it not time for the United Kingdom to cease its systematic humiliation of Turkish Cypriots?

Lord Howell of Guildford: On the first point, our high commissioner sent a letter of condolence to the leader in the north of Cyprus and to Mr Denktas's family. I personally associate myself with those condolences, having had an opportunity to meet him in the past. I do not think that the other language used by the noble Lord is justified. "Humiliation" does not come into it. The aim, and it is a noble aim, is to see equality of treatment and the bizonal federal ambition for a peaceful Cyprus achieved, with all citizens on an equal footing. There is no question of humiliation being involved.

Lord Triesman: My Lords, I start by expressing our agreement with the position that the Government have expressed this afternoon. It reflects a long-term policy and desire to see equality of treatment. I agree strongly with all those propositions. Does the Minister agree that if any process was inaugurated towards recognising Northern Cyprus, it would flow in exactly the opposite direction to any prospect of achieving the objectives that he has set out?

Lord Howell of Guildford: I am just trying to fathom out that question. First, I thank the noble Lord for his agreement and support for what we are all trying to do. This matter rises well above political parties and differences. As I was reminded this morning, these negotiations have been going on for 43 years. It really is time that we encouraged, by every effort possible, a resolution of these differences for the island of Cyprus. The noble Lord says the pressures go in the opposite direction to everything that we are trying to achieve, but I am not sure they do. I think the pressures, throughout the world and certainly from the United Nations Secretary-General, are that there can be some reconciliation and resolution. The main issues involved are to how to share power; the question of property, which is very sensitive; citizenship; and elections. On all these, I think it is possible for there to be progress, although I have to admit that for the moment it has been very modest.

Baroness Knight of Collingtree: My Lords, I am chairman of the group for Northern Cyprus in this House and I recently led a delegation there at the invitation of that country. Since the Minister has mentioned the length of this dispute, will he also bear

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in mind that every one of those 43 years has meant pain and suffering? Even today, if a Turkish Northern Cyprus group should visit the south, even on a sporting occasion, it is set upon and viciously attacked. This situation goes on and on. Surely some really hard effort must be put towards ending it.

Lord Howell of Guildford: I fully agree with my noble friend. Of course, these are unacceptable conditions for any citizen. The whole aim of working for a comprehensive settlement must be to make all those kinds of treatments and suffering, and the anecdotes associated with them, a matter of the past.

Lord Harrison: My Lords, I renew my previous request to the Minister to ensure-

Lord Hannay of Chiswick: My Lords, does the noble Lord agree that since the deadlock in the talks at the moment is at least half the responsibility of Mr Eroglu, it is pretty odd to be discussing the matter on the Order Paper today?

Lord Howell of Guildford: First, I defer to the extreme knowledge of the noble Lord on this matter. It is very hard to apportion the blame. All the parties concerned say that they want to make progress. The Governments, as it were, of the countries concerned, Turkey and obviously Greece-which are not directly involved because clearly this matter must be left to the people of Cyprus to sort out-have indicated a positive attitude. We have a positive attitude, as does the United Nations, and we just have to take our opportunities as they come. At the moment, the talks of the other day have come to a halt, but the Secretary-General is pressing ahead. He has asked Alexander Downer to do more work and to create a review. If the review is positive, he has said that he would like to move towards a multilateral conference in late April. So there may be hope on this front, but I do not want to raise those hopes too high.

Health and Social Care Bill

Order of Consideration Motion

3.38 pm

Moved By Earl Howe



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Lord Hunt of Kings Heath: My Lords, I am sure that at Report on the Bill there will be issues which relate, however indirectly, to the finances of the National Health Service. Perhaps I may ask the Leader of the House whether the Government could give an indication of the procedural implications for this House on the Welfare Reform Bill following a Statement on financial privilege by the Minister earlier today in the other place.

The Chancellor of the Duchy of Lancaster (Lord Strathclyde): My Lords, I thank the noble Lord for his kind invitation for some procedural advice. We will be dealing with the Welfare Reform Bill when it comes back from another place. I should say that matters for privilege are not a matter for the Government but a matter for the House of Commons and the Speaker of the House of Commons on advice from his clerks. The position of privilege has of course been jealously guarded by the House of Commons since 1671. It is well precedented and there is nothing unusual, although the second Chamber might always think that the Commons using financial privilege is a little unfair.

We will get to that Bill in due course. I cannot comment on the Health and Social Care Bill, which is of course the subject of the Motion before us now, as to what the Government's attitude will be on defeats. But, as I said earlier, there is nothing unusual about financial privilege being prayed in aid. Since there are many former Members of another place present in this House I am sure that they will readily understand.

Lord Grocott: My Lords, the Leader of the House has given us a proper and guarded answer to quite a difficult question. However, does he not agree that this encapsulates the kind of problem which needs to be resolved before we have a directly elected second Chamber? It goes to the heart of one of the issues that has been accepted as the norm by both Houses for many decades but which would undoubtedly be challenged time and again in the event of a directly elected House. I do not expect the noble Lord to give an immediate answer now-he will give a guarded response-but can I try to be helpful and suggest that this is the kind of issue which the committee of my noble friend Lord Richard should look at, and that that may involve an extension of the period of time the committee needs to consider it? But it is clearly issues like this-alongside, in relation to an Oral Question taken earlier, issues like the impact of a referendum in Scotland-which need to be considered by the Joint Committee before we proceed any further.

Lord Campbell-Savours: My Lords, before the House approves the Motion, perhaps I may ask the noble Earl, Lord Howe, a question about the risk register appeal, because we now have some dates that change the debate. I understand that the Report stage is to begin on 8 February and that it is expected to complete by somewhere around the middle of February.

Noble Lords: March.

Lord Campbell-Savours: The appeal on the risk register will be held in a tribunal on 5 and 6 March, and therefore there might be an opportunity for Members to raise the issue of the decisions of the tribunal,

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depending on the dates that the Government actually set for the Report stage. Would he care to comment on that? Further, if there is not too much flexibility, has the noble Earl considered what the Companion says on the admissibility of amendments tabled at Third Reading:

"The principal purposes of amendments on third reading are ... to clarify any remaining uncertainties"?

The risk register may well raise issues that constitute "remaining uncertainties". Can we have an assurance that if it is not possible to raise them on Report, there will be some flexibility at Third Reading under the heading in the Companion that I have just read out to ensure that we can have a debate on any issue arising out of the tribunal's decisions? I am sorry to have to raise the matter in this way, but this is an opportunity to do so.

Baroness Hollis of Heigham: My Lords, perhaps I may ask a question of the noble Lord, Lord Strathclyde. I ask him as the Leader of the whole House-which I know he is very mindful and respectful of-and not just as the leader of a government coalition party. Whenever we deal with a social security Bill-apart from turning negative regulations into affirmative regulations-that almost inevitably involves expenditure, either increasing it or reducing it. That may also apply to health Bills and transport Bills. If, on any choosing of the Speaker and one of the noble Lord's right honourable friends at the other end in a position of authority, the claim can be made that that is financial privilege-this is before the Speaker has even ruled on it, so clearly there is a government view so far as I can tell; I stand to be corrected-and if any Bill involving any element of expenditure, including on welfare, pensions, health and education, can at the fiat of the House of Commons be ruled as money and therefore privilege, then, taking the noble Lord's statement that this House is a part-time House, it will become a very part-time House indeed because we might as well go home.

Lord Strathclyde: My Lords, let me deal with the two questions put by the noble Baroness, Lady Hollis, and the noble Lord, Lord Grocott. My noble friend Lord Howe, who is an expert on these matters, will respond to the noble Lord, Lord Campbell-Savours. In response to the noble Baroness, as I said earlier, this is a matter for the House of Commons; it is not a matter for me. It is the Speaker who takes a view on the advice of the clerks. I would not be at all surprised if they had had a discussion with the Government, but there is nothing new in any of this. No procedure has changed and no substantive law or practice has done so. It is perfectly possible for this House to suggest and recommend changes to Bills over a whole range of issues, no doubt including financial ones. How the House of Commons deals with those is a matter for that House.

I thought that the points made by the noble Lord, Lord Grocott, were precisely the kind of points that he might make if a "reform of the second Chamber" Bill were brought forward. I would not dream of trespassing on matters which are the preserve of the noble Lord, Lord Richard, and his Joint Committee. I am sure that they will have taken account of what the noble Lord said.



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Lord Hunt of Kings Heath: I thank the noble Lord, Lord Strathclyde. Perhaps I may come back to a point he raised. I am sure that the procedure was followed appropriately in the other place and I assume that the Government made application to the Speaker. The question is whether it was wise for the Government to use this process in this place, because, essentially, they are hiding behind parliamentary procedure to curtail consideration of the amendments that your Lordships passed on the Welfare Reform Bill. In essence, my noble friend has put it absolutely right: if the Government continue to do this on these Bills, our role as a revising Chamber is effectively undermined.

Lord Strathclyde: I simply disagree with the noble Lord. This situation has existed for 350 years. It was as though the noble Lord were suggesting that the Government had found some new ploy to stop the will of the House of Lords. I think that the noble Lord, Lord Grocott, will agree that we are an unelected House. The House of Commons is an elected House. It has protected its financial privilege since 1671. Nothing has changed for the debates that we will no doubt have on the health Bill and the welfare Bill.

Lord Mackay of Clashfern: I wish to question the timing of such a decision on the part of the Speaker. It seems somewhat of a waste of time if your Lordships debate provisions which turn out to be completely sacrosanct because of the decision on privilege made at the other end. The expense involved in your Lordships coming here and taking part seems a waste of taxpayers' money at a time of considerable austerity if the whole procedure is useless. I suggest that the timing of such decisions needs to be looked at.

Lord Martin of Springburn: Perhaps it would help the noble Baroness, Lady Hollis, if I were to say to her that no Speaker takes these decisions lightly. It is not done with representation from the Government, in the sense that they come in and say, "We want to do it this way and you'll give us a hand, Mr Speaker". Perhaps I can give an insight into what happens in the Speaker's study: the Speaker takes advice from the clerks-I stress that is clerks in the plural. You have clerks there who act like the devil's advocate and put a contrary view. They end up giving strong advice to the Speaker. Therefore, the Speaker is independent in this matter of Government and Opposition-let us not kid ourselves that the opposition Whips are not often in there pounding the ear of the Speaker. If the Speaker's signature goes on that piece of paper, it is done very sparingly and with considerable advice from those who are experts in this matter.

Lord Rooker: My Lords, that being so, and referring to the Motion that we are debating at the moment, would it not be for the convenience of everybody concerned with the Health and Social Care Bill if, for every amendment tabled, we knew before we debated it on Report in this House that it was subject to financial privilege? We would then know that we were wasting our time, as the noble and learned Lord, Lord Mackay, said. The problem is the lack of knowledge. If we know beforehand and we have a certificate for a money Bill, we know that it is a money Bill. We do not

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know that with domestic policy Bills. If particular amendments are a cause for concern among the authorities of the other place, that should be signalled before we debate the issue in this House.

Baroness Farrington of Ribbleton: My Lords, in my experience there are two issues. One is the matter of degree. I hope that the Leader of the House will agree that this is not a clear, black and white issue in terms of the individual parts of a Bill that could be declared financial privilege or the range of parts of a Bill that could be declared financial privilege.

Secondly, the Leader of the House said the week before last in your Lordships' Chamber, and I hope that I recollect his words accurately, that obviously a wholly or partially elected second Chamber would exercise greater authority and power and have greater legitimacy. Does the Leader of the House believe that people would stand for election were huge chunks of legislation to be declared beyond their competence?

Lord Newton of Braintree: My Lords, to avoid repetition, I say that I would still like to hear answers to the questions raised by my noble and learned friend Lord Mackay, the noble Lord, Lord Rooker, and the noble Baroness, Lady Hollis-what is the point against this background? Also, what is the application to the Bill that we are about to get back to, the Legal Aid, Sentencing and Punishment of Offenders Bill, where a lot of money is also involved? Are we completely wasting our time?

Lord Elton: Would my noble friend enlighten me? I think I know the answer to this, but I may well be wrong: the more an amendment changes the volume of money in issue, the more likely a Bill is to become a money Bill. If that is the case, we all know where we are: it is just a question of how high the bar is.

Lord Strathclyde: My Lords, I am rapidly becoming an expert on privilege, which I was not expecting a few moments ago. I am grateful to the noble Lord, Lord Martin of Springburn, because he explained with his experience the process of deciding privilege in another place, which I repeat is not a matter for me as a member of the Government. Nor is it a matter for the Government or a Member of this House. It is something that has been jealously guarded by the House of Commons for many years.

My noble and learned friend Lord Mackay, the noble Lord, Lord Rooker, and indeed the noble Baroness, Lady Hollis, raise the same question, which is how we could be pre-warned. I am not sure how that process could take place because we do not know what the Government will lose or what amendments the House of Lords will press to a Division. I dare say that we could. I am thinking as I am speaking, which is always a dangerous thing to do from the Dispatch Box, about a system where amendments might be deemed to be likely to invoke privilege by the House of Commons. But I suspect we can probably do that ourselves. Maybe my noble friend Lord Elton was correct in saying that amendments that mean a substantial increase in expenditure of public spending are more likely to invoke privilege than those that do not. Perhaps that is the way to go.



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I wonder if we are profiting in continuing this debate now. Would it not be better to wait until the Welfare Reform Bill returns from the House of Commons with its amendments to see if privilege has been invoked? There is then a well trodden process in this House. I do not think that the House wastes its time by debating the issues. We do not insist on all the amendments that we pass in this House. We sent them back to the House of Commons to get the Government and the House of Commons to think again. If they have thought again and invoked financial privilege, we should let the matter rest.

Lord Hughes of Woodside: My Lords, I have listened to the noble Lords, Lord Martin of Springburn and the Leader of the House. They both claim, each in their different way, that this is a wholly independent procedure. Are we really to believe that one morning the Speaker gets up and says, "Eureka, I'm going to decide whether this is financial privilege or not"? Who initiates the process? It is hard to believe there was not a nudge and a wink from the Government to try to save their own blushes.

Lord Howarth of Newport: My Lords, is not the reality that when the Government have run out of arguments and patience they ask the Speaker if he will invoke financial privilege? They cross their fingers and hope that he will do so. Do this Government actually want the House of Lords to operate as a revising Chamber or not?

Lord Strathclyde: I do find it faintly comical that former Members of the House of the Commons, who would have died in a ditch to preserve and protect financial privilege, decide to take a completely different view as soon as they are translated into Members of this House. I said earlier that surely the time for us to have this debate is when we are faced with the facts of the Bill, with the amendments from the House of Commons. We will have the benefit of seeing the debate that is taking place in the House of Commons as we speak. Would that not be a better way of proceeding? I very much hope that we will be able to pass this Motion from my noble friend Lord Howe, unless he wishes to add anything to the questions that were put to him.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, perhaps I could address the question posed by the noble Lord, Lord Campbell-Savours, about my department's risk register. When I last spoke to the House on this matter, I promised to use my best endeavours to ensure that the appeal hearing on the matter of the risk register took place at the earliest possible date. As a result of discussions between my department and the tribunal that will hear the Government's appeal, that date was brought forward from the one that I originally announced to 5 and 6 March. I believe that is a welcome development. The outcome of the appeal will not be known until a few days after that. It is of course a matter for the tribunal.

As regards the timing of Third Reading, the noble Lord will know that it is a matter for the usual

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channels in this House. I am aware that there is a Motion in the name of the noble Lord, Lord Owen, which invites the House to consider the matter of the department's risk register before the House goes into Third Reading on the Bill. I suggest that once the timing of the appeal outcome and of Third Reading are known, it would be appropriate to revisit this question. However, it is perhaps a little early to decide now quite what the best order of events should be.

Motion agreed.

Legal Aid, Sentencing and Punishment of Offenders Bill

Bill Main page
21st Report from the Constitution Committee
22nd Report from the Joint Committee on Human Rights
21st Repors from the Delegated Powers Committee
22nd Report from the Delegated Powers Committee

Committee (7th Day)

3.59 pm

Clause 45 : Recovery of insurance premiums by way of costs

Amendment 141

Moved by Lord Thomas of Gresford

141: Clause 45, page 31, line 30, at end insert ", (2A) or (2B)"

Lord Thomas of Gresford: My Lords, Part 2 of the Bill has its complexities, but all sides are agreed on two principles.

Baroness Anelay of St Johns: My Lords, I am aware that the noble Lord, Lord Thomas of Gresford, is hesitating so that he may have the Minister's ear.

Lord Thomas of Gresford: All sides are agreed on two principles-access to justice must be maintained and undue cost must be squeezed out of civil litigation. The issue is what the best framework is for achieving these ends. Unlike with Part 1 of the Bill, public money is not directly involved in supporting the litigation that we are referring to in Part 2.

All sides recognise the unforeseen and unintended consequences of the Access to Justice Act 1999, which threw the burden of the success fee and the ATE insurance premium on to losing defendants and removed from the claimant any interest in the amount of the success fees and premiums that they were only theoretically obliged to pay. Save for the recent changes introducing fixed fees in Road Traffic Act litigation, lawyers have been able to charge 100 per cent success fees, whether or not they undertake other, riskier cases. Insurers have fixed levels of premiums with which not even the costs judges on taxation are able or willing to quarrel.

This policy may have helped claimants by allowing them to retain the full amount of the damages awarded to them. However, the removal of the restraint of competition as to the size of success fees and ATE premiums has put an undue burden of fourfold cost

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on defendant insurers. Ultimately, this is not in the public interest, because insurers take their profit and pass the burden on in increased premiums for motoring, household, employers and public liability insurance. Self-insured large companies and public bodies such as the NHS and public authorities that are funded from the public purse generally carry the burden themselves.

The Bill proposes to shift the burden. The claimant will pay the success fee, which will be limited to 25 per cent of his damages for pain, suffering and loss of amenity and loss of earnings and expense to the date of trial. He will also carry the burden of the ATE premium to an amount that is not limited. The champagne corks will indeed be popping in the City by relieved liability insurers and in NHS trusts, town halls and board rooms all over the country. If these defendants win, all their own costs will be paid by the ATE insurers-assuming, of course, that there is still an ATE market and that the premium is affordable-unless a regime of one-way cost shifting that I talked about on Monday last is introduced at the same time, which will require defendants, win or lose, to pay their own costs.

The Jackson report, which sets out all the consultations that Lord Justice Jackson undertook, demonstrates that insurers and public bodies are up for it and accept that one-way cost-shifting, a system that has operated in legal aid cases since 1949, is a fair price for removing from them their present liability for uncontrolled success fees and uncontrolled "after the event" premiums. If one-way cost-shifting is introduced, at a stroke a claimant will lose the fear of having to pay the defendant's costs if he loses the case, costs that might ruin him and remove the roof from over his head. At a stroke, the "after the event" insurance premium, which is currently in place largely to cover the defendant's costs, will be savagely cut back. A claimant will have to cover only the risk that if he loses he will be responsible not for the defendant's costs but for his own disbursements, court fees, expert and medical fees. Just as it is conceivable that in competing for business a solicitor might advertise that he will not charge a success fee, a solicitor with a large standard practice might well be prepared to absorb disbursements in the cases that he loses. We shall have to see whether that happens.

All this is by way of introduction to my amendments, which deal with a discrete area of litigation-environmental law, involving public law and private claims and the tort of nuisance. Public law cases are judicial review claims brought mainly by individuals concerned by inappropriate development-for instance, whether planning permission has made proper allowance for the effect on local flora and fauna by a particular development or whether a waste dump is in the right place. Private nuisance has enjoyed a real renaissance through the help of independent solicitors since the access to justice scheme came into being. A private nuisance is an interference to land or to rights associated with land caused by the unreasonable conduct of the defender. It is the last resort for local residents who need injunctive relief from a polluter who will not run his enterprise with proper concern for his neighbours, and where the regulator is unable or unwilling to take steps to abate the problem.



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I am indebted to Stephen Hockman, Queen's Counsel, a former chairman of the Bar, Stephen Tromans, Queen's Counsel, named as environment/planning Silk of the Year at the Chambers Bar Awards 2011, and Gordon Wignall, a barrister specialising in nuisance cases and editor of the third edition of the Law Society's Guide to Conditional Fees. I have circulated copies of their joint opinion on the impact of the Aarhus convention on costs and funding rules that are applicable in environmental cases.

The Aarhus convention is concerned with access to justice in environmental matters and was ratified by the United Kingdom in February 2005 at the same time that it was ratified by the European Community. The relevant text is set out in the opinion, but the effect is that the United Kingdom is bound to provide "adequate and effective remedies" in this area,

The convention applies both to judicial review claims in the administrative court and to private law actions in nuisance. The Supreme Court, in a recent case, has referred the question as to the test to be applied in order to determine whether proceedings are "prohibitively expensive" to the European Court of Justice. In one case that is quoted in the opinion, for example, a defendant's costs amounted to well over £3 million. Is that prohibitively expensive?

Since the Minister and others already have a copy of the full opinion, I will simply put the conclusions of the learned counsel on the public record. First, the current costs rules run contrary to the international treaty obligations of the United Kingdom, which the United Kingdom voluntarily accepted. Problems arise largely out of the insistence on the "costs follow the event" rule, which tends to lead to inconsistency with the aims of participating in environmental justice and results in a claimant's liability to pay prohibitively expensive costs.

Secondly, the compliance committee's last deliberation in the ClientEarth case required the United Kingdom to review its costs rules and recommended rectification. Thirdly, two detailed reviews relevant to environmental proceedings in England and Wales have subsequently been undertaken and presided over by members of the Court of Appeal. The learned counsel are referring to the Jackson report, which we have been discussing, and to the report of Lord Justice Sullivan on access to environmental justice. These have been endorsed by the senior judiciary, and the primary recommendation was that the use of qualified one-way cost-shifting in environmental cases would have a dramatic inroad into the "costs follow the event" principle.

Fourthly, by withdrawing the recovery of "after the event" premiums, the size of which cannot be met by claimants or their legal representatives, without providing at the same time for one-way cost shifting as a replacement in environmental claims, the Government have elected to retreat from the full proposals of the Jackson report and the Sullivan report, which were conducted by those eminent Lords Justices. Fifthly, the consequence is that the United Kingdom, already in breach of its convention obligations, is diverging from rather converging with its own environmental expectations and those of the international community.



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Sixthly, the further consequence is that claimants who wish to protect the environment and participate in environmental justice are even less likely to be able to do so than at present. This is predominantly because of the risk of incurring a liability for defendant's costs that may well be prohibitively and grossly expensive in any event, but also because of the uncertainty that claimants face about their liability for those costs, which under the Government's proposals will be known only once the litigation, whether public or private, has been concluded.

Claimants in environmental cases do not want damages; they want relief from the consequence of poor decision-making by public bodies or protection from the degradation of their environment. Even in multiparty actions, damages-based agreements are not a solution. My amendments would enable the Government to honour their international environmental obligations rather than turn their back upon them.

Amendment 147 would provide in subsection (2A) that in an environmental claim the losing defendant would pay the premium in respect of disbursements by way of fees for expert reports paid by the claimant. In subsection (2B), the losing defendant would pay the premium on the costs insurance policy if he had agreed to do so prior to the commencement of the proceedings. There are occasions when a defendant will agree to pay the claimant's premium for "after the event" insurance whether he wins or loses, because if the defendants succeed then they will get all their costs from the ATE insurers.

Amendment 150 defines "environmental claim" by the same definition as is contained in the Aarhus convention. The use of this definition would ensure that only nuisance cases that were truly environmental in nature would be within the scope of my amendment. Insurance recovery claims and private nuisance-for tree-root subsidence, for instance-would not get the amendment of the amendment.

Amendment 157 would introduce qualified one-way cost-shifting in both environmental claims and other claims. The amendment was drafted before I had refined my own views, which I explained at small length on Monday last on this topic. The word "unreasonably" therefore appears in the amendment but I repeat my objections to the vagueness of the word "unreasonable" and reiterate the necessity for clarity by expanding what is unreasonable, as Lord Justice Jackson did, into the familiar expressions of "fraud", "frivolous and vexatious conduct" and "abuse of the process of the court".

Why should we single out environmental law for different treatment from other areas of litigation? Essentially, I am not. In the amendments I am arguing for one-way cost-shifting as a precondition for change and for the premium for cover for disbursements-a far lesser amount than the current premiums recovered against the potential defendant's cost liabilities-to be recovered from the losing defendant. That is very similar to what I was saying on Monday, when I suggested that there are positive benefits in dividing liability for these lesser premiums between the claimant and the defendant in a staged way. In any event, the issue is far more urgent in environmental cases because of our obligation to comply with the Aarhus convention.



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A tidy mind might try to bring every aspect of litigation into one structure, one piece of architecture-the word that the Minister used on Monday-but litigation is not like that. Time and again the Jackson report emphasises that one size does not fit all. I quote from page 44:

That is a recurring theme in the Jackson report and every practising lawyer will agree.

4.15 pm

Lord Carlile of Berriew: I apologise for interrupting my noble friend. Before he sits down, will he help us on this matter in relation to his narrower point on the Aarhus convention? He was kind enough to circulate the learned opinion of Mr Hockman and others, including, as I understand it, to my noble friend the Minister. Will my noble friend tell the House whether he has had a response to the opinion of Mr Hockman and others? If not, does he agree with me that it might shorten the debate if, after he has sat down, the Minister were to indicate whether or not the Government accept the premise of the Hockman opinion?

Lord Thomas of Gresford: I am most grateful to my noble friend for interrupting me with one paragraph to go, which would have relieved your Lordships a great deal. The opinion has only recently been produced to me and the Bill team has had it only for a day, so I could hardly expect an immediate response. I hope that my noble friend the Minister will be able to deal with some of the issues that are raised and the issues that I am raising in my remarks.

To conclude, that one size does not fit all is a recurring theme in the Jackson report. Every practising lawyer will agree with that. Proof of the issues that arise in litigation-sometimes liability, sometimes causation, sometimes quantum, and so on-gives rise to different risks and therefore to different solutions. This very Bill, for example, proposes different statutory instruments making different provision for different types of case. I look forward to hearing my noble friend's response in due course. I beg to move.

Lord Lester of Herne Hill: My Lords, I must choose my words carefully because I do not wish what I say to be taken to be outright opposition to my noble friend's amendments, although I have a certain degree of agnosticism, if not scepticism. I suggest that those who are interested in this area might read the New Yorker article of a couple of weeks ago, which described the abuse of power by the claimant lawyers in the Exxon South American environmental litigation case. That indicates the need for very careful safeguards, even in an environmental setting.

The only reason I speak at all is because it occurs to me that there is a less radical solution to some of the problems that has been fashioned by the courts themselves without any legislative intervention: namely, the protective costs order. I see that the noble Lord, Lord Beecham, shakes his head. I shall explain what I am talking

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about. The problem with English cost rules is, of course, the winner-takes-all rule, which can, as my noble friend has indicated, have a seriously chilling effect on the ability to bring public interest litigation. It is the fear of claimants and their advisers of having to pay the legal costs of the defendant that has a chilling effect.

I was involved in the Corner House case for a small NGO that was seeking to challenge the lack of proper consultation by the Secretary of State in relation to anti-corruption provisions in the export guarantee area. This was not an environmental matter but it did concern public law. The problem was that the little NGO had absolutely no funds to pay for me but, more importantly, the department. The department would not give an assurance in advance that if it succeeded, it would not ask for the whole of its costs against the NGO. Therefore, the puzzle was how the NGO could bring the public interest proceedings not simply by dealing with the claimant's position but dealing with the other side.

Sir Henry Brooke, to whom I pay tribute and who throughout has led thinking on this issue within the judiciary, advocated the use of a protective costs order, which enabled us to go before the court and say, "Even if we lose, can we please have a protective order that protects us against the risk of having to pay the other side's legal costs in advance, so that we know that the worst thing that could happen to the Corner House NGO would be if it had to pay its own costs?". I am glad to say that that was what was eventually decided and the result was that the Corner House was able to litigate.

I am embarrassed to say that I signed a 100 per cent success fee agreement without realising the consequence, which was that I actually profited from what I had thought to be a public-spirited case. I did not return the money, since it was being paid by the Government. I am against 100 per cent success fees and I would never do it again-ever.

However, the point I am making is not about success fees, but that if one develops through the courts, on a case-by-case and flexible basis, a way of softening the winner-takes-all rule in appropriate cases-not just environmental but all cases-that would enable the weak and impecunious to avoid the effect of that rule. The Constitutional Court of South Africa has decided that the winner-takes-all rule should never apply in important constitutional cases, and that in a proper public-interest case each side should at least bear its own costs and, in some circumstances, the Government should be required to pay the claimant's costs, or give an undertaking in advance to give that protection.

This is a slightly long-winded way of saying that there are other means that perhaps are to be encouraged by the legislature, or perhaps not. There are other means that the courts themselves have been developing that can deal with some of the points made by my noble friend without something quite as radical as the proposals suggested in his amendments.

Lord Avebury: My Lords, does my noble friend agree that the protective costs order that he was successful in obtaining in the case he mentioned was a one-off,

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that it was not a general rule of law but a matter of luck that his clients were indemnified against the likelihood that they would have to pay the other side's costs, and that in the amendment that would be a general rule of law that would apply to all such cases?

Lord Lester of Herne Hill: Actually, I cannot agree, because the Court of Appeal's decision was a kind of precedent and it has been followed. There have been arguments about what limits there should be on claimants-whether they should be like an NGO or otherwise-but it would be perfectly possible for a rule to be made by the Lord Chancellor expressly empowering the courts to apply protective costs orders on a more general basis. This was not just a one-off decision; it applied in a line of cases and has been developed since.

Lord Thomas of Gresford: I am sure that my noble friend would agree, however, that protective costs orders are matters of discretion for the judge who hears an application, and that the threshold is extremely high. In his particular case, he obviously advanced matters of considerable public interest that were much wider than only the issues in the litigation that affected his clients. So a protective costs order can be applied for in such cases. However, I was involved in the case following the flooding of houses at Aberfan that occurred as the result of the spoil banks placed there after the disaster. In that sort of case, where individual householders were affected, protective costs orders would not have met that threshold.

Lord Beecham: My Lords, at the risk of being accused of unqualified one-way sycophancy, I must again congratulate the noble Lord, Lord Thomas, on the clarity of his presentation of this complex issue. Although I somewhat dissociate myself from the preamble to the substantive part of his speech, I entirely concur with his amendments. At this stage, I should also express my thanks to the learned counsel whose advice has instructed me in a matter about which, hitherto, I knew nothing. Aarhus meant absolutely nothing to me up till now. It seems that I may have shared that failing with Her Majesty's Government. We shall see from the Minister's reply whether that is a correct inference or not.

The noble Lord referred to the ClientEarth case in which the Aarhus Convention Compliance Committee observed that the cost rules pertaining in the United Kingdom placed it in systemic breach of Article 9.4 of that treaty. The committee concluded that we had not as a country adequately implemented our obligation to ensure that procedures are not prohibitively expensive. Counsel's opinion, to which the noble Lord referred, identified two particular issues. The first is that of uncertainty. The second is the sheer amount of the defendant's costs that might fall on unsuccessful claimants. The noble Lord referred to the case of Barr and Biffa waste company, which arose from a complaint about odours emanating from a landfill site, where the costs were indeed nearly £3,250,000.

Lord Justice Jackson has much to say about those issues. His remedy is, as the noble Lord pointed out, a move to qualified one-way cost shifting. He gave six

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reasons for his conclusions, which are germane to the thrust of the amendments. He said:

"This is the simplest and most obvious way to comply with the UK's obligation under the Aarhus Convention in respect of environmental judicial review cases".

He continued:

"For the reasons stated by the Court of Appeal on several occasions, it is undesirable to have different costs rules for ... environmental judicial review and... other judicial review cases".

His third reason was that the requirement for permission,

They simply do not arise. His fourth point was that,

He pointed out that:

"One was costs shifting in judicial review cases has proved satisfactory in Canada".

His final point, which goes to the issue raised by the noble Lord, Lord Lester is that the protective costs order regime,

So with respect to the noble Lord, the protective costs order regime is not, in the view of Lord Justice Jackson, an answer to the difficulty.

Lord Lester of Herne Hill: I hesitate to disagree with the Lord Justice, but I do not understand that point, as one can apply at the very beginning, a very early stage, for a protective costs order-certainly in judicial review proceedings. I do not know why he thinks that it is too expensive or comes too late, because that has not been my experience.

Lord Beecham: I cannot answer for Lord Justice Jackson, but that is a subsidiary point. His point is that it is expensive to operate and uncertain in its outcome. Therefore, he regards it as an inadequate protection to the one-way costs shifting which the noble Lord, Lord Thomas, has rightly advanced as the best way to deal with these matters. Lord Justice Jackson's approach was, as counsel's opinion, to which the noble Lord and I have both referred, makes clear, endorsed by Lord Justice Sullivan's working party, which was very clear in stating:

"An unsuccessful Claimant in a claim for judicial review shall not be ordered to pay the costs of any other party other than where the Claimant has acted unreasonably-

to go back to the noble Lord's earlier point-

4.30 pm

I rely heavily, as noble Lords will have gathered, on the opinion of learned counsel, which some of your Lordships will have seen, and certainly the Minister, and more particularly-and perhaps in a sense, in fairness to him, more relevantly-those who advise him will have seen. Counsel make some interesting observations. They say:



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"It is disappointing to see that whilst the senior judiciary increasingly recognises the relevance of the Aarhus Convention as a requirement of the rule of law, the Government's own legislative proposals do not recognise, or are not concerned with, the United Kingdom's difficulties in complying with the Convention.".

They go on to say, among other points, that,

this very Bill-

Learned counsel conclude:

"In the circumstances, it is clear from the Aarhus Convention Compliance Committee that current costs rules run contrary to the international treaty obligations of the United Kingdom which the UK voluntarily accepted".

They go on to say:

"Two detailed reviews relevant to environmental proceedings in England and Wales have subsequently been undertaken and presided over by members of the Court of Appeal. They have been endorsed by the senior judiciary. The primary recommendation was"-

again-

Counsel say:

"By withdrawing the recovery of ATE premiums (... which cannot be met by claimants or their legal representatives) without providing at the same time for QuOCS",

the Government have retreated from the full proposals of the two reviews conducted by the judiciary. Furthermore, they say:

"The consequence is that the UK, already in breach of its Convention obligations, is diverging from, rather than converging with, its own environmental expectations and those of the international community".

Finally, they say that,

That is a pretty comprehensive and damning indictment of the Government's approach to their responsibilities under the Aarhus convention to international law and, more particularly, to potential claimants in this country dealing with significant issues concerning the environment and what is adversely affecting the environment.

The remedy is in the Government's hands. It is, in their cherry-picking process of dealing with Lord Justice Jackson's report, to pluck this particular cherry and use it for the benefit not only of the citizens of this country but of this country's observance of its international obligations. I strongly support the noble Lord's amendment.

The Minister of State, Ministry of Justice (Lord McNally): My Lords, I am most grateful to the noble Lord, Lord Thomas, for his usual thorough presentation of these amendments and for sending me this opinion of learned counsel, which, as he rightly said, was delivered only 24 hours ago. Even though, as the noble

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Lord, Lord Bach, will know, the Ministry of Justice is one of the most efficient and speedy departments in Whitehall, the matter is still in the hands of my advisers, and I am sure that we will take it on board. In passing, I should say that I had to clear another piece of paper the other day about asking the advice of learned counsel, and I saw just how much it costs to ask for such advice, so I thank the noble Lord for such an expensive gift.

I was also interested in the confession of my noble friend Lord Lester about accepting success fees. As the debate has unfolded, it has occurred to me that this is indeed a money Bill, but perhaps not in House of Commons terms. Let me also deal with another canard or slur that has been put across the Chamber from the noble Lord, Lord Beecham: that the Aarhus convention is something new to the Government or to government Ministers. Perhaps I can draw his attention to the fact that on 19 October, we in the Ministry of Justice sent out a consultation paper, entitled Cost Protection for Litigants in Environmental Judicial Review Claims,with the specific aim of enabling the UK to implement its obligations under the Aarhus convention. Yet again, when the facts are known, it is clear that the Government are on the case, on the ball and moving forward, despite the attempts of the Opposition to say otherwise.

Lord Beecham: It is said that they are in breach of their obligations under the convention.

Lord McNally: As I said, we are consulting. I shall return to the question of getting it right. The problem is that the noble Lord, Lord Beecham, is impetuous in so many ways, whereas this Government are determined to get things right-you can see the advice that I get on getting things right.

On Monday, we spent some time discussing QOCS and we heard the concerns of my noble friends and others that the matter should appear in the Bill. This afternoon, I do not want to repeat the more general arguments on these matters, but we need to get the details and the rules right to ensure that they are tailored properly in respect of the category of proceedings to which they apply. For example, in personal injury cases, it may well be that there should not be an initial financial test. However, the position is likely to be different for defamation, and perhaps for environmental cases too, which typically involve more than one claimant-sometimes many claimants. In such cases the costs involved can impact considerably on the ability of the public bodies that are under challenge to perform their general functions.

As the noble Lord, Lord Thomas, explained in moving his amendment on Monday, he was looking for specific words rather than words like "unreasonable", which he said had such a broad meaning. Indeed, the noble and learned Baroness, Lady Butler-Sloss, added that the word "unreasonable" was liable to cause serious difficulties of interpretation and yet, as the noble Lord, Lord Thomas, has confessed, the word "unreasonably" is in Amendment 157.

It is precisely for those reasons that we are not yet ready to crystallise in statute, and ring-fence away from development in rules, words which are more properly left to the rules, where they can follow detailed

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discussions with stakeholders. They can be tailored and nuanced for the particular category of proceedings and, of course, the Lord Chancellor will remain accountable for the policy on these issues which is reflected through the Civil Procedure Rules.

Amendments 141, 147, 148, 149 and 150 deal with the recovery of ATE insurance premiums in respect of environmental claims under the Aarhus convention. Amendment 157 would introduce a new clause to provide for costs protection in the form of qualified one-way costs shifting-QOCS-for claimants in environmental claims and, it would appear, for all judicial review claims, whether concerning environmental issues or not.

The Government are, of course, conscious of their obligations under the Aarhus convention. Put simply, the convention requires us to ensure that parties have access to a procedure to challenge relevant environmental decisions that is, among other things, not prohibitively expensive. How we discharge those obligations has been a matter of debate for some time. It was addressed by Lord Justice Jackson in his report and was considered in a number of cases in the High Court and above. Amendments 141, 147, 148 and 149 seek to allow ATE insurance premiums to be recoverable from the other party in these cases. As I indicated in our debate on Monday, the Government's policy is that ATE insurance premiums should no longer be recoverable except in the particular instance of clinical negligence expert reports. Therefore, we do not favour this or any other extension of ATE premium recoverability.

Amendment 157 seeks to apply QOCS to environmental claims, subject to qualification in respect of unreasonable behaviour. The proposed clause would displace any rules of court in this area and provide for the Lord Chancellor instead to have the power to make regulations to extend QOCS to other areas in future. That seems to be something of a departure from the general principle that in civil proceedings, matters relating to costs are regulated in detail by rules of court. It is not clear why the departure would be beneficial.

As noble Lords are aware, the Government are introducing a regime of QOCS in personal injury cases to help balance the impact of the changes to no-win no-fee conditional fee agreements, and in particular as an alternative to "after the event" insurance. Claimants will continue to be able to take out ATE insurance if they wish, but they will pay the premium, which will be lower than the rolled-up premiums presently never paid by anyone other than a losing defendant. Although Lord Justice Jackson suggested that QOCS might be considered for use in some non-personal injury claims, the Government are not persuaded that the case for this has yet been made.

I noted the dispute between the noble Lord, Lord Beecham, and my noble friend Lord Lester about protective costs orders, which are also part of this consultation. As a matter of principle, the Government's view is that protective costs orders can provide appropriate costs protection in environmental cases. Environmental organisations and the working group chaired by the then Mr Justice Sullivan, to whom noble Lords referred, expressed a preference for QOCS, having argued, including in a submission before

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the Aarhus Convention Compliance Committee, that an appropriate PCO regime could provide full compliance with the requirements of the convention. With a PCO, it will be clear from the outset what costs the claimant will have to pay if their claim is unsuccessful, while ensuring that some contribution is made toward the costs of public bodies that have successfully defended the claim. As I said, we have consulted on the issue.

The Ministry of Justice consultation Cost Protection for Litigants in Environmental Judicial Review Claims outlines proposals for a cost-capping scheme for cases that fall within the Aarhus convention. The consultation closed on 18 January and we will announce the way forward in due course.

Lord Lester of Herne Hill: I had not realised that there was a consultation, and I am delighted to hear that that has now been done. The issue seems to go beyond environmental litigation. Perhaps further thought might be given within the costs rules to a user-friendly procedure in all public interest cases whereby the individual can obtain an order quickly and at the beginning, as recommended by Lord Evershed's committee in 1950. Lord Evershed recommended that the Attorney-General should be able to certify an issue of public interest where the costs rules would be displaced. I realise that this matter would be for the rules committee, but could consideration be given to that sensible procedure that would be not generalised but case based, on a user-friendly procedural basis, with the judge giving a decision so that people will know where they are from the beginning?

4.45 pm

Lord McNally: I am not sure that I am able to commit to anything as rash as following up a recommendation that is a mere 62 years old. As always with interventions by my noble friend, I will take that away, but I should also make the point, given that this is the last of a series of amendments chipping away at-to use the term that I used the other night-the central architecture of the reforms that we are trying to introduce, that we have consulted on these matters. We have indicated the idea that PCOs may be a way forward in our commitment under the Aarhus convention. I will certainly make sure that the learned counsel's opinion is fully studied. As I have explained, the Government's view is that the best way forward is within the rules rather than within legislation, but this has given a good airing to the issue. The whole House is now more familiar with the Aarhus convention-I understand it is a Danish town-and we are the better for that debate. I therefore ask my noble friend to withdraw his amendment.

Lord Thomas of Gresford: My Lords, it is a relief to know that the Ministry of Justice, like New York, never sleeps. No doubt the opinion will be pored over and there will be further discussions before we get to Report.

I invite my noble friend to do this now. He says that the proper way to proceed is for one-way cost-shifting to be introduced by tailored Civil Procedure Rules. Your Lordships will recall that on Monday the noble

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and learned Baroness, Lady Butler-Sloss, and I made the point that there should be guidance from Parliament, not simply a discussion between the Executive and the Civil Procedure Rule Committee, about the parameters of those rules and what the boundaries and structure are to be. I would be grateful to know from the Minister the position on this particular point. He is shifting the burden of the success fee and the ATE premium over to the successful claimant. Is that going to be co-ordinated and timed to come into effect at the same time as one-way cost-shifting? That is the key issue. If you do not have one-way cost-shifting, you are shifting to the claimant the liability for the defendant's entire costs, if he should lose, and consequently an enormous premium. We heard of premiums of £900,000. I am familiar with a premium of £80,000. I think that the standard is in thousands for any sort of claim. If, on the other hand, one-way cost-shifting comes in and the defendants' costs are paid by the defendants win or lose, we will be concerned with a premium for a much smaller thing, which is the disbursements of the claimant, should he lose. The risk is that much smaller.

Lord Bach: We on this Front Bench agree absolutely with the question that the noble Lord, Lord Thomas of Gresford, has asked the Minister. It is crucial. To broaden the point slightly, the great danger in the Bill is that we are changing the current arrangements, but the way that they will work in practice is subject to regulations of which there is no sight at present. We need from the Government a statement about how they intend to implement this part of the Bill if they get it through. We have no idea at all. The example that the noble Lord gave is the best one of all. It is critical, but there are other examples where a great deal relies on regulations that are to be made at a later stage, sometimes to be passed by affirmative resolution, sometimes by negative resolution. It is not really a satisfactory way of changing the civil law in such a fundamental way. I would be grateful if the Minister, in his reply to the noble Lord, Lord Thomas of Gresford, would deal with the general point as well.

Lord De Mauley: He did.

Lord McNally: The noble Lord is absolutely right. I have given my reply. That was the reply of the noble Lord, Lord Thomas, to my reply. But I am very happy to take the point. We are considering a consultation. We have said that our judgment is that it is better in rules rather than in the Bill.

Lord Bach: Should all that not have been done before the legislation comes before one House, let alone a second House of Parliament? The result of the consultation, or the Minister's consideration of it, will probably not be known until this Bill has become law. Is that not much too late and entirely the wrong way round?

Lord McNally: The pained look with which the noble Lord, Lord Bach, comes to the Dispatch Box and implies that the Government is the first Government in the world to bring forward legislation with further consultations needed about specific regulation is a bit rich. The implications of this Bill will come into force

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in April 2013. We have a period of time for such consultations. As I said before, I take the point that there has to be a synchronisation in these matters. I do not think we are doing anything unusual by legislating in this way, but we take on board the points made in this debate.

Lord Thomas of Gresford: I am grateful to my noble friend for saying there will be synchronisation. The scales of justice have been tipped against defendants by this fourfold cost that they have been calling for over a period of time. The purpose of this Bill is to even the scales of justice up. If there is any period between shifting from that side to this side the success fee and the ATE insurance without providing one-way costs as the balance, the scales will go completely in the opposite direction, and it is the suffering claimants who will come out the worst in a situation like that.

I cannot resist coming back to the question of protective costs orders, having heard my noble friend Lord Lester. Protective costs orders are applied for in public interest cases. I am not concerned simply with public interest cases. These could be the private individual, the householder whose house is flooded, in the example that I gave-

Lord Lester of Herne Hill: They are also applied for in private lawsuits.

Lord Thomas of Gresford: It is as my noble friend says. Lord Justice Jackson examined it and he came to the conclusion that the noble Lord, Lord Beecham, referred to. There is much more discussion to be had. I shall take my noble friend outside-as I once said in relation to one of the Ministers in the previous Government-and have a discussion with him there. For the moment, I withdraw this amendment.

Amendment 141 withdrawn.

Amendments 142 to 156AB not moved.

Clause 45 agreed.

Clause 46 : Recovery where body undertakes to meet costs liabilities

Amendments 156B and 156C not moved.

Clause 46 agreed.

Amendment 157 not moved.

Clauses 47 to 52 agreed.

Clause 53 : Payment of additional amount to successful claimant

Amendments 158 to 162 not moved.

Clause 53 agreed.

Amendment 163

Moved by Lord Thomas of Gresford

163: After Clause 53, insert the following new Clause-

"Third party litigation funding

(1) A third party litigation funding agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of it being a third party litigation funding agreement; but any other third party litigation funding agreement shall be unenforceable.



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(2) A third party litigation funding agreement is an agreement under which a third party ("the funder") agrees to fund (in whole or in part) the provision of advocacy or litigation services to another person ("the litigant") by a person other than the funder in exchange for remuneration.

(3) For the purposes of subsection (2), "remuneration" includes-

(a) a payment or any other transfer of value representing or calculated by reference to the value of a judgment or settlement; and

(b) an assignment of the proceeds (in whole or in part) of any judgment or settlement.

(4) The following conditions are applicable to a third party litigation funding agreement-

(a) it must be in writing;

(b) it must not relate to-

(i) proceedings which by virtue of section 58A(1) and (2) of the Courts and Legal Services Act 1990 cannot be the subject of an enforceable conditional fee agreement;

(ii) a multi-party action, representative action or any proceedings which are the subject of a group litigation order; or

(iii) any other proceedings of a description prescribed by the Lord Chancellor;

(c) it must comply with such requirements as shall be prescribed by the Lord Chancellor.

(5) Regulations under subsection (4)(c) may-

(a) require any person which enters into a third party funding agreement with a litigant to first obtain a license from a licensing body to be designated by the Lord Chancellor; and

(b) set out conditions to be satisfied in order to obtain such a license.

(6) In this section "advocacy services" and "litigation services" are as defined in section 119 of the Courts and Legal Services Act 1990."

Lord Thomas of Gresford: My Lords, in June 2007, the Civil Justice Council-a body headed by the Master of the Rolls and comprising members of the judiciary, the legal professions, civil servants and lay people with knowledge of consumer affairs, CABs, businesses and employers-published advice to the Lord Chancellor recommending the proper regulation of third-party funding; that is, investment by an external party otherwise unconnected to a claim in a lawsuit in order to gain a maximum return upon its investment. In this country, it used to be called maintenance and champerty, and it was both a crime and a civil tort. In 1641, maintenance was described by the jurist Coke in his Institutes as:

"A taking in hand, a bearing up or upholding of quarrels or sides, to the disturbance of the common right".

"Champerty" is the "maintenance" of a person in a lawsuit on condition that the subject matter of the action is to be shared with the maintainer. It was abolished as a crime in the United Kingdom in 1967 but as recently as July 2009 a solicitor in Hong Kong, where the offence still exists and carries a maximum sentence of seven years, was sent to prison for some 15 months. It remains illegal also in New Zealand but not in the United States.

As the practice has spread across the water into this country, specifically targeted at claim by small and medium business enterprises against large corporations, the Civil Justice Council formed a working party to consider the issue further. Consultations took place in February and July 2008 when a draft code of conduct

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for a third-party funding, which the working party had produced, was considered.

Following Lord Justice Jackson's recommendations -he obviously considered this as well as conditional fee agreements-the draft code of conduct was revised. In February 2010, the Civil Justice Council held another stakeholder event to consider the revised code. The working party, under the chairmanship of the very eminent solicitor and Queen's Counsel Michael Napier, chairman of Irwin Mitchell, which is essentially a leading claimants' firm, produced a voluntary code of conduct for litigation funders, which was published on 23 November 2010. This voluntary code sets out standards of practice and behaviour to be observed by funders who are members of a newly founded Association of Litigation Funders of England and Wales. Without in any way impugning the very hard work of the members of the working party or the motivation of the new association, I am not at all content that this development in litigation funding should be subject to a voluntary code without any parliamentary debate, approval or control-of course I appreciate that it was put together under the auspices of the Civil Justice Council.

5 pm

When Lord Justice Jackson considered this issue in his final report, he recommended that a satisfactory voluntary code to which all litigation funders would subscribe should be drawn up, and to that extent his preliminary recommendation is followed up by this code. But he went on to say that the code should contain "effective capital adequacy requirements" and should place appropriate restrictions on the ability of funders to withdraw support for ongoing litigation. His second recommendation was that,

It is expanding and is continuing to do so and, as Lord Justice Jackson recommended, the question of whether there should be statutory regulation is the question I am raising in this debate.

His third recommendation is very important. He said that,

In the voluntary code, which was published in November, there are manifest weaknesses. Rule 7(a) says that a funder will ensure that a litigant has received "independent advice" on the terms of the agreement, but then states specifically that such advice can be obtained,

the very lawyer who is to be funded by the funding arrangement. The conflict of interest is obvious in such a situation. Rule 8 says that the funder must state in the funding agreement whether he is undertaking "liability for adverse costs". It certainly does not say that the funder must undertake such a liability. This is directly contrary to the third recommendation made by Lord Justice Jackson, which I made clear to your Lordships a moment ago. The funder could walk away and leave a small business to carry the costs of the other side, which would leave it completely broke. If a

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funder is to take a percentage of the damages awarded to its clients, which is the purpose of the funding agreement, the funder should bear the risk of paying the other side's costs if he loses.

Rule 9 of the voluntary code provides that the funding agreement,

It further provides that the funder may terminate the agreement if he,

(ii) reasonably believes that the dispute is no longer commercially viable".

In other words, the funder may dictate to the litigant that a particular offer to settle must be accepted under the threat that he will withdraw his support. If there is to be fairness, the funder should continue to fund disputes until they are finally resolved. Further, a funder may dictate to counsel how to conduct a case, putting counsel in the particular case in the impossible position of having to choose between the interests of his client and the interests of the funder, who is actually paying his fees and the fees of his instructing solicitor. Rule 9 simply does not match the first of the Jackson recommendations. As I say, for the moment Lord Justice Jackson was prepared for there to be a voluntary code, but that it,

In the face of that recommendation, what does the voluntary code say? "Oh well, he can withdraw if he decides that the case is not going very well." He can terminate it if he ceases to be satisfied about the merits of the dispute.

I have had a very constructive discussion with Mr Leslie Perrin, who facilitates litigation funding and is a former solicitor. I accept, as he has argued, that if a wrong is done to a business, it is very frequently a contractual wrong that hurts that business's profitability, so that damages will include not only the cost of putting right the immediate damage but also the profits lost as a consequence of the wrong-it is a commercial situation. A commercial litigation claim could be said to be a business asset and tradable as such. But there are many areas of litigation where a wrong has been done, of which personal injuries is a prime example, where the litigation is not an asset and should not be traded as such. No speculative hedge fund looking for somewhere to get a good return on its money should have an interest, for example, in a share of the damages of a seriously brain-damaged claimant.

While as yet, so far as we can tell, litigation funding has not spread into personal injuries as it has into divorce litigation, there is nothing in the voluntary agreement of November last to prevent it. No categories of case are excluded. According to Mr Perrin, the industry asked the working party to limit the code and the association to commercial litigation but, for some reason that I do not understand, it did not agree to that, so it is wide open for third-party funding to be available in serious personal injury litigation where large sums of money are at stake. I do not regard this as assisting in access to justice; rather, it takes us back to the old days of maintenance and champerty-hence, my amendment.



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I do not suggest in my amendment that third-party litigation funding should be banned, provided that it complies with conditions, some of which I set out and others to be prescribed by the Lord Chancellor and brought forward for proper parliamentary scrutiny. It is all very well having voluntary codes, but Parliament, which represents the people of this country, has absolutely no say in what goes into codes of that sort. Under my amendment, proceedings which cannot be the subject of a CFA under Section 58A(1) and (2) of the 1990 Act, which I refer to, are essentially criminal proceedings but they also include family proceedings for divorce, for adoption and for the welfare of children. Sometimes, large sums are at stake in divorce proceedings. That is not an appropriate area for litigation funding to intervene. My amendment also seeks to regulate funders by requiring them to obtain a licence from a designated licensing body so as not to be operating without any control.

Some of your Lordships may have received a letter from an American association. It is not that it wishes to spread the American type of litigation into this country; rather, it wants to prevent it, because it can see from its own experience what problems it can give rise to.

I concede that if in a commercial case a company wanted to give away a third or four-10ths of its damages to a funding firm of this sort, it could do so but, so far as other areas of the law are concerned, the barriers should remain up. I beg to move.

Lord Davies of Stamford: My Lords, I was not intending to intervene in this part of the debate, but I was absolutely fascinated by what the noble Lord, Lord Thomas, said. He has done a great service to the House and to the country by bringing forward this matter for parliamentary debate. I am going to disagree with what he actually said, but had he not taken the initiative, we would all have been the poorer. We would not have had to focus on this important subject in the way that we will now need to do.

My concern is quite simple. We are in the process in this Bill of restricting access to legal aid. We thereby reduce the scope for businesses or individuals, whether in a tort action or some other kind of action, to pursue their civil rights in court. I take it for granted that an individual who does not qualify for legal aid but is at the other end of the income spectrum, where he or she can easily afford the costs of pursuing cases and the risks of potentially paying defendants' costs as well, will prefer to do that and would not want to go into any artificial risk-sharing arrangement with a third party or with lawyers by means of contingency fees or conditional fees. Those lucky enough to retain access to legal aid despite this Government's restrictions on its access, who are perhaps in the bottom 5 per cent of the population in terms of income or capital levels, and the top 5 per cent of the population who are rich enough to consider litigating and hiring solicitors and barristers will continue to have access to civil justice. But there is an enormous problem for the 90 per cent of the population who will be between those two extremes. We should be concerned about them.

I know that lawyers always like to say that any individual who acts as a litigant in person is making a

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fundamental mistake-the old lawyers' joke is that such a person has a fool for a client-and one can understand why lawyers like to put that about. Those people who may feel confident in taking a case forward themselves would probably rightly prefer to do so rather than go into some sort of risk-sharing arrangement with somebody else. Any such risk-sharing or cost-sharing arrangements involve a potential conflict of interest.

There is a conflict of interest in the case of hiring a lawyer on a conditional or contingency fee basis. Clearly, there may come a point when the lawyer himself does not think it worth pursuing the case because it is not a good risk from his point of view but his client wishes to continue to do so. There is that conflict, which the noble Lord, Lord Thomas, discussed with regard to other third-party funding in the case of classical contingent or conditional fee arrangements. But if we now say that such arrangements are not possible and we wish to make it a matter of law that certain types of third-party funding shall not be allowed, we further restrict access to justice.

I put it to the noble Lord and to the House that cases where one is brain damaged, has had a bad accident or suffered medical negligence have great resonance with all of us because they are horrible situations for anyone to find themselves in. Like other noble Lords who have served in the House of Commons, I have come across many cases of that kind. Clearly, any arrangement under which somebody else has a share in any potential damages seems at first sight to be obnoxious. But if the alternative is that one cannot get justice at all because one does not fall into the bottom 5 per cent or the top 5 per cent of the population as I have described, we are in an even worse position.

I accept that the amendment was conceived with the best possible motives and on the basis of considerable familiarity with civil justice, but the effect would be to exclude certain people from any chance of pursuing a case at all because they do not feel able to pursue the case as a litigant in person and they do not have the funds required to arrange a conventional civil action hiring lawyers in the classic fashion. Maybe no lawyer is willing to take them on on a contingency or conditional fee basis, because lawyers do not take a sufficiently optimistic view of the risks involved or the return involved in relation to the risk in particular case. However, some third-party entrepreneur or investor may be willing to do so. The noble Lord does not want to exclude such third-party funders in commercial cases, but he would exclude them in personal cases in a large number of circumstances. The House should think carefully before we exclude or shut off anybody from access to civil justice by any means. The important thing is that there should be full disclosure of the risks and full explanation by those who will undertake to invest in a case as to what the conditions are.

It may well be that there will be points along the line at which there will be a difference between the investor and the litigant as to whether it is worth pursuing the case. That can arise in the case of a commercial third-party investor, or of a friend or family member who is prepared to support a friend or relation in a case. When it comes to the question of a settlement offer, they may take a different view. It is in

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the interest of everybody that there should be a clear contractual basis, agreed at the outset, as to what happens in those circumstances. I do not think we should exclude anyone from coming to an arrangement that happens, with full disclosure and understanding on both sides, maybe in less than desirable circumstances, to best meet the needs of the case.

5.15 pm

Lord Boswell of Aynho: My Lords, I rise in support of my noble friend Lord Thomas of Gresford's amendment with considerable diffidence, as a layman tiptoeing for the first time into consideration of this legislation. As the noble Lord, Lord Davies of Stamford, has already reminded the Committee, the context is the further constriction of legal aid. I think the concern of all lay people, as well as practitioners, must be that this will in some way inhibit people's access to justice unless they fall within narrow categories.

I do not wish to detain the Committee at length on personal cases, but I first had experience of this-as typically happens, by chance-in relation to a personal injury claim involving a member of my family, which took place in the 1970s. As it happened to take place on a British-registered ship, which was at that time within United States territorial waters, it gave rise to a certain interest in the forum. At that time there were no contingency fee arrangements at all within the United Kingdom. However, as it was possible to bring litigation within the United States, I was able to avail myself of such an arrangement. I will say no more about it other than that it did provide an opportunity that would otherwise not have been available to me.

Nobody wishes to make it impossible for individuals to pursue their personal injury claims or indeed for small and medium-sized enterprises to have redress for their commercial disputes with large multinational or well-funded companies or bodies. However, it has become clear recently that third-party litigation funding was growing in potential and was a growing practice-and, potentially, a growing problem across virtually all developed countries, broadly simultaneously. I have sought to inquire further into this by means of Parliamentary Question. I go along with my noble friend who moved this amendment very much in the spirit of inquiry to try to focus on the issue and see that it is properly handled. However, I am a little less optimistic than the noble Lord, Lord Davies of Stamford, as to whether arrangements that are based on transparency and the market solution will in fact work to the wishes of the public at large.

It seems that we need a fairly robust code. My noble friend has sketched such a code to manage this, with further details to be supplied in due course by the Lord Chancellor. Those who are practitioners in the field will accept that there has to be some boundary to it. My concerns are threefold. First-and my noble friend has already referred to this-the potential for conflicts of interest can be pretty explicit in the arrangements, where it may be in the interests of the funder to stop the case but not in the interests of the litigant. Secondly, there is the question of transparency. I do not spend my life reading court reports, but they have the names of counsel, the instructing solicitor

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and, obviously, the parties, so you do broadly know what is going on. However, in cases where people are operating behind that, with arrangements that are being concluded privately, it becomes less clear what is happening.

Thirdly-and I confess considerable distaste for the potential here-one can imagine a situation where it is not merely a matter of somebody taking on a particular venture but where these claims are warehoused, securitised or packaged in a bundle and sold on to third parties who have no interest in the interests of the litigant and probably no knowledge of who they are. It might simply become a kind of impersonal transaction. I feel myself very uncomfortable with that. If I go no further than members of my family who, unlike myself, happen to be lawyers, there is a certain resonance-even if they are not specialists in this area-in the concepts of maintenance and champerty. Those are enshrined in our traditions for a very good reason. We do not want to have a purely commercial interface in these matters. On the other hand, we do not want to stop access to justice or stop perfectly reasonable and above-board arrangements by responsible people operating within a framework.

I feel a welling-up of some disquiet in this area. I have a feeling that we need to set boundaries on it and a fear that there might be potential for some hard case or scandal that would excite public interest-and the public would then ask how we had slept on this. I look forward to the Minister's reassurance that the Government are on the case and that it will be sensibly-not restrictively but properly-regulated and observed.

Lord Mackay of Clashfern: My Lords, the introduction of conditional fees into our system was an innovation in the rules against maintenance and champerty. Therefore, this is an area with which, at least some time ago, I had a certain degree of familiarity. It carries with it the risks recognised in these prohibitions that went back to the very beginnings of the system of common law.

When I sought to introduce the conditional fee, I tried to do it with a good deal of care as to the areas in which it would operate, as my noble friend Lord Thomas of Gresford reminded us. I was certainly of the view that it would be developed according to our experience of how it worked. On the whole it has worked in the sense in which I thought that it was likely to work when I proposed it. It was to deal with the area that the noble Lord mentioned of those who did not qualify for legal aid but were not sufficiently well resourced to undertake litigation on their own. It met quite a considerable degree of need in that area, and it has been allowed to develop.

Of course, changes were made. When I introduced the conditional fee, I did so on the principle that the defendant had no real responsibility for the relationship between the claimant and his lawyer and therefore that the arrangement by means of a conditional fee should not affect the liability of the defendant. Those of your Lordships who are old enough to remember the presence of Lord Simon of Glaisdale in this House will remember that very often, when anything about legal aid came up, he dealt with the development under which, if a party had legal aid, the defendant would not be allowed to recover costs without leave of the court. The

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contribution of the claimant with legal aid to the defendant's costs was limited-often to zero. Lord Simon of Glaisdale thought that was completely unjust, and your Lordships may remember that it was not once that he said that. Ultimately, I began to understand the force of his argument. However, that remained the law on legal aid, and I suppose that it is still the law on legal aid.

When I was introducing the conditional fee I did not feel that it was the same thing as a statutory provision for the claimant which was provided by legal aid. It was a private arrangement between the solicitor or the lawyers involved and the claimant, so I did not have any such effect. In due course, my successor introduced effects on the defendant of that particular relationship and the result was, as we know, a considerable escalation in the cost of litigation, which Lord Justice Jackson analysed in a report that cannot be criticised for its brevity. The consideration was very detailed indeed, but I think that in the end he came to the conclusion that the system as it originally operated was more just than the new system. I, of course, therefore support Lord Justice Jackson's conclusion in that regard.

The noble Lord, Lord Bach, points out to me from time to time, when we have a chance to discuss this, that we are not just going back to my situation because legal aid was even more liberal in my time than it seems to be now. If this Bill is passed without any effect on the legal aid proposals, then it will continue to be so, but if the legal aid proposals are effected, there will probably be rather less legal aid than at the moment-certainly a good deal less than when I was dealing with these matters. To that extent it is a different situation, but from the point of view of the litigant in connection with conditional fees, what Lord Justice Jackson recommended was to go back to my system.

That was, as I said, an innovation on the rules against maintenance and champerty because the lawyer was given an interest in the outcome of the litigation, which on a strict view of these rules might not have been allowed. However, statute was able to allow it and there was no further question about that. Third-party funding is a further development, which goes into the area where these dangers had been seen for many years. I therefore respectfully suggest to your Lordships that that is an area in which a good deal of caution is required before we allow it. For example, in relation to the conditional fee we allowed it in certain areas but not in others. In particular, as my noble friend Lord Thomas reminded us, it was not allowed in the criminal area or in family law. If third-party funding is to become at all common in our courts, it needs to be subject to fairly careful control. Otherwise the dangers foreseen in the old law will occur.

I cannot think of a better way of doing that than by giving the Lord Chancellor power to regulate the situation. He can, of course, from time to time, alter these regulations as he sees the practice developing. For example, if some unforeseen difficulty arises he could restrict further. If on the other hand it seems to be successful, he could open the scope further. I strongly support the principle of the amendment moved by my

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noble friend Lord Thomas of Gresford. The detail of it will require to be worked out-primarily by regulation, I should have thought-and the question is whether the scope of this amendment is adequate to give sufficient power to the Lord Chancellor to control all aspects of the matter.

This seems to be a pretty thorough kind of amendment, but obviously I await the Minister's comments on the matter. That regulation is required seems absolutely clear. A voluntary code, particularly one that falls short of Lord Justice Jackson's recommendations on the matter, is not at all sufficient. This needs statutory control under regulation, particularly in relation to the costs that the third party will have to bear if the litigation is unsuccessful. For example, if the third party can get out of the contract before the case goes to full proof, is he thereby going to escape the costs of the litigation that he has taken responsibility for helping to start?

There are difficult issues connected to this that are dangerous to the justice of the system that we all prize. It therefore seems very wise that the matter should be the subject of statutory control by regulation in the hands of the Lord Chancellor.

5.30 pm

Lord Beecham: My Lords, this has been a short but interesting debate. I shall not detain the House long. I very much welcome the contributions by my noble friend Lord Davies, the noble Lord, Lord Boswell, and in particular the noble and learned Lord, Lord Mackay. I have some sympathy with my noble friend's approach; he sees in third-party funding arrangements an alternative source of funding for cases that might not otherwise be advanced because of other changes that are in hand. My problem with that is that in effect he is throwing a lifeline to the Government to pursue that very restriction, and that does not serve the cause of access to justice.

The noble Lord, Lord Boswell, rightly drew attention to the concerns about this matter, and the remarks by the noble and learned Lord, Lord Mackay, clearly constitute a significant degree of support for the case advanced by the noble Lord, Lord Thomas. It is clear that we are potentially seeing a sea change in the way that some litigation will be funded in a way that runs contrary to the traditions of justice in this country. I note that the noble Lord, Lord Thomas, referred to hedge funds, and I think he is right; there is a danger here of legal hedge funds, as it were, being created and a secondary market developing, and who knows whence the funding of those organisations will derive? Experience in the United States is not encouraging, as the noble Lord, Lord Boswell, reminded us. I understand that in America, particularly in divorce cases, huge sums are in play.

The noble Lord, Lord Thomas, has done the House a great service in identifying the issues here and in coming up with a viable framework that could be put in place in order to deal with the potential difficulties. I think that the view of the House, from those noble Lords who have spoken, is that a voluntary code simply will not suffice, however well intended the motivations of those who sought to produce one-and

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they clearly were well intended. There needs to be a more rigorous structure, and the reference by the noble and learned Lord, Lord Mackay, to the Lord Chancellor making regulations, coupled with the ideas set out in the noble Lord's amendment, offer a way forward.

If at this stage the Minister cannot give a clear nod to the amendment, and I can understand if he cannot, then I hope at least that further discussions can be held on the matter and an agreed position put forward on Report. We do not want this genie getting out of the bottle, to which it could not be returned, by default. There are issues here of great significance and we hope the amendment will provide the basis for taking matters forward in a way that can be agreed across the House-I think there is a general interest across the House in this-to the advantage of litigants and the cause of justice itself.

Lord McNally: My Lords, in 1962-which is now, sadly, 50 years ago-part one of my degree course contained a subsidiary paper on English legal institutions. About the only thing I can remember from that course is the concept of champerty and maintenance. It therefore came as something of a shock to be told that it no longer applied, and indeed had not applied for some time.

Lord Bach: The Minister has been misleading us all along. He has played the role of a non-lawyer with immense skill during the debate. I have asked him many questions in our debates but now the truth is out-he is a lawyer.

Lord McNally: I have been trying to keep that quiet. The paper I mentioned was one of nine papers that I took in 1962 for my economics degree. The other day I found the statistics paper, which evidently I had passed. However, not only did I not know the answers to the questions, I could not understand the questions.

Lord Dubs: Nothing has changed.

Lord McNally: I think I had better get on to the brief.

Lord Beecham: Could the noble Lord offer his services to the Office for Budget Responsibility?

Lord McNally: My Lords, this has been an interesting and useful debate and I am grateful to my noble friend for outlining the matter with his usual thoroughness. Third-party litigation funding has developed and-to use the phrase deployed by the noble Lord, Lord Boswell-there is a welling up of disquiet about it. The noble Lord, Lord Davies of Stamford, takes what I would describe as the Robin Hood approach to this matter and views it rather optimistically as a way for the rich to help the poor. The noble Lord, Lord Boswell, was a little more sceptical about that scenario and drew on his American experience of how the process works. I think that people are a little worried when investors and investment opportunities are mentioned-the noble Lord, Lord Davies, mentioned that matter-when we are talking about the law.



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I was delighted to hear the noble and learned Lord, Lord Mackay of Clashfern, mention Lord Simon of Glaisdale, who I remember speaking from the Cross Benches. You used to see the colour draining from a Minister's face as he realised that Lord Simon of Glaisdale had thoroughly read and filleted the relevant Bill and knew exactly the contradiction in the government amendment that he was about to dissect. I experience that same feeling of foreboding whenever the noble and learned Lord, Lord Mackay, rises to speak. The noble and learned Lord said that Lord Justice Jackson could not be criticised for his brevity. All I can say to him is that Lord Justice Jackson is not alone among lawyers in that failing. I look at no one in this House in saying that.

Like other noble Lords, however, I take on board the noble and learned Lord's point about the need to exercise caution in this matter. I think that the noble Lord, Lord Beecham, caught the mood of the House when he referred to the concept of legal hedge funds being established and cases being bundled up as investment opportunities as something that gives rise to rightful concern.

The code of conduct was drawn up with the specific requirement that the matter would be revisited if and when third-party funding expanded. It is a question of whether it has now expanded to a point where the matter should be revisited. As the noble Lord, Lord Thomas, explained, the Civil Justice Council published a voluntary code of conduct for litigation funders on 23 November. It was drawn up with the co-operation of the Association of Litigation Funders.

What I can say is that some serious points have been made during this debate, to which I have listened extremely carefully. My right honourable and learned friend the Lord Chancellor would like further time to reflect on these matters. They are serious, and some serious and worthwhile advice has been given. I see that the noble Lord, Lord Davies, is about to leap to his feet, and perhaps I may say that there was good and useful advice on both sides of the argument. I ask my noble friend to withdraw his amendment so that the Lord Chancellor can reflect on this issue. I shall not sit down if the noble Lord, Lord Davies, wishes to intervene.

Lord Davies of Stamford: The noble Lord is extremely kind. Does he agree that the best way of looking at this situation is to try to find the least undesirable possibility, or a less undesirable possibility, of a whole lot of very undesirable possibilities? Those are the only possibilities that exist. It would be lovely if legal aid was universally available for civil justice, and there were people in the 1940s who thought that that might happen. Sir Hartley Shawcross was saying at the time that he thought that legal aid could be turned into a kind of National Health Service equivalent for civil justice. We know that that is not financially conceivable.

The Government are engaged in further cutting back access to legal aid. I disapprove of that because it is an undesirable objective. We introduced conditional fees. I remember having a conversation with the noble and learned Lord, Lord Mackay, after I introduced an access to civil justice Bill in the House of Commons. He asked me not to take it any further because he was

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thinking of introducing conditional fees as a government initiative. I agreed with that at the time. He said that the Bill had certain inadequacies and did not cover all cases. However, when we introduced contingency fees, a lot of perversities were attached. I concede that, at first sight, investment in a tort case just as a commercial transaction seems unedifying and unattractive. However, I put it to the noble Lord that all these solutions are undesirable. The most undesirable solution of all might be further to restrict access to civil justice for whole categories of potentially meritorious cases.

Lord McNally: My Lords, I am sure that that postscript will be studied by the Lord Chancellor, and he will carefully study this debate. As I was saying in my concluding remarks, I thank my noble friend Lord Thomas for introducing this subject and noble Lords for expressing a variety of views on it. The Lord Chancellor would like further time to reflect and I ask my noble friend to withdraw the amendment.

Lord Thomas of Gresford: My Lords, I am most grateful to all noble Lords who have spoken. I accept that the opposing view, put forward by the noble Lord, Lord Davies, was certainly an arguable one. I have not suggested that third-party funding should be banned but that it should be subject to statutory regulation, as opposed to the voluntary code.

I could not help reflecting on my rugby days and the occasional game in which the leader of the forwards, an extremely formidable person, would observe the scrum-half dropping the ball and say to us in the pack, "Boys, they've had their chance. We're not going to give it to them again". Consequently, everything changed and we adopted a different tactic.

Here, a voluntary code has been brought in. They have had their chance. In formulating the voluntary code, they did not include what Lord Justice Jackson rightly set out as the essential needs of such a code. They decided not to do that. When approached by the industry to say that they should limit themselves to commercial litigation, they decided not to do that. A two-page code has been produced of nine clauses which gives the broadest possibilities to the funders for the way in which they operate. I am not satisfied with that. I am most grateful to the noble and learned Lord, Lord Mackay, and the noble Lord, Lord Boswell, for their support. There is a perception of a genuine problem arising.

I look forward to further discussion with my noble friend and, perhaps, the Lord Chancellor, and we will see whether we can take forward this matter for Report but, for the moment, I beg leave to withdraw the amendment.

Amendment 163 withdrawn.

5.45 pm

Amendment 164

Moved by Lord Thomas of Gresford

164: After Clause 53, insert the following new Clause-

"Third party's insurance company



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(1) A third party's insurance company may not solicit a claimant who has a cause of action for personal injuries against its policy holder, to settle that cause of action where to the knowledge of the insurance company, the claimant is legally represented either under legal aid or a conditional fee agreement.

(2) A third party's insurance company may not make an offer to settle in circumstances not prohibited by subsection (1), unless-

(a) it has obtained adequate medical evidence of the personal injury and has disclosed it to the claimant; and

(b) the claimant is advised when the offer is made of his right to obtain legal advice; and

(c) the offer is in full and final settlement of the cause of action.

(3) Any settlement made in breach of subsections (1) and (2) shall be void."

Lord Thomas of Gresford: I apologise for wearying your Lordships once more. The amendment would ban the practice of third-party capture life insurance companies. Third-party capture is something with which many people, including many insured people, will not be familiar, but I have heard about it. Frankly, it is a nefarious practice.

The amendment would ban an insurance company-we are talking about banning in this amendment, not regulation-from directly contacting third parties who have been involved in accidents. That is currently commonplace behaviour following road traffic accidents. An accident happens, two drivers exchange with their details, driver A submits full details to his or her insurer and that insurer contacts driver B and offers an early settlement, usually at a much lower rate than would be achieved through due legal process. Insurers frequently make offers to accident victims that are far lower than the claim is worth, denying a person who has suffered an injury caused by someone else the redress that they deserve. They frequently make settlement offers without proper medical examination to ascertain the full extent of the injury, again denying the accident victim real evidence-based representation.

In this way, insurers seek to close off a claim without offering accident victims the opportunity to seek independent legal advice. There is obviously a conflict of interest. Insurers are acting both for the defendant, their policyholder, and the accident victim. Given that the insurers' primary objective is to minimise the level of payments, they have little interest in securing a fair deal for accident victims.

There is another, equally unpleasant practice carried out by insurance companies where they contact a third party who has been injured in an accident with one of their policyholders and suggests that he or she makes a personal injury claim through their legal services arm. Other insurers simply refer the case details on, at a price-we will be dealing with referral fees shortly-to an independent personal injury lawyer. That is a major revenue stream for insurance companies, but it overrides common sense and is a substantial conflict of interest for insurers.

Since I tabled the amendment, I have been approached by the Association of British Insurers. It has kindly sent me its code of practice. The ABI code of practice for third-party assistance occupies some 11 pages,

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unlike the two-page code I was referring to in the previous amendment, and presents advice for insurers on how to contact unrepresented claimants, what they are to say to them about the injuries that they have received, how they are to deal with the damage to their vehicles and how to hire other vehicles. A section headed "Managing the Relationship" says:

"This section sets out how the insurer will manage the relationship with the unrepresented claimant where they have agreed on a provision of services, and covers where a claimant goes from unrepresented to represented".

It sets out the policy, how to arrange medical treatment and so on. I suppose that in one way this could be said to be good practice. If the insurer is to be allowed to interfere with the other side in this way and to make offers of settlement, it is good practice to advise him to get a proper medical report and so on, as the ABI code says. However, there is absolutely nothing to enforce it. An insurer-and there are many insurance companies-may have a copy of the ABI code of practice but there is nothing to require him to adhere to what it says. Therefore, not only can the insurer ignore the provisions of his own code of practice but he can directly approach the other side. That is what my amendment seeks to prevent. I beg to move.

Lord Dubs: My Lords, I should like to speak to Amendment 164ZA in my name and give my support to Amendment 164, which has just been moved by the noble Lord, Lord Thomas of Gresford.

The Bill contains a series of proposals that attempt to dent access to justice for people who have suffered harm. It reduces their damages quite dramatically by taking away the recoverability of success fees and "after the event" insurance premiums. The referral fee ban may go some way to curbing the abuses of some claims management companies, but it will also sweep up many organisations, including important victims' charities and membership organisations, that do a lot of good hard work in ensuring access to justice, and it will do nothing to curb some of the abuses that have inhibited access to justice.

The noble Lord, Lord Thomas, referred to third-party capture. What is it and why is it so controversial? Perhaps I may quote from the Financial Services Authority's guidelines on third-party capture:

"Third-party capture (or third-party assistance) is when an insurer deals directly with a person who has a potential claim against their policyholder, in order to investigate and settle the claim. Typically, an insurer offers a compensation payment to settle the claim directly to a third party, rather than settling through a legal representative for that party. This is mainly used for third-party motor claims. But sometimes it's used in other types of insurance, such as employers' liability.

Concerns have been raised by industry bodies and consumer groups that this practice could mean third parties do not receive fair and reasonable treatment and compensation.

The handling of all insurance claims by insurers-including third-party claims-is regulated under the Financial Services and Markets Act 2000. This means that an insurer's conduct towards third parties must comply with our Principles for Businesses and, where relevant, the claims handling rules in chapter eight of our new Insurance Conduct of Business Sourcebook ... Complying with our Principles for Businesses includes acting with integrity, due skill, care and diligence and observing proper standards of market conduct".



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The trouble is that that is not how it works in practice, as the noble Lord, Lord Thomas of Gresford, has clearly shown.

The system is used by insurers, in their drive to maintain and increase profits, to collect premiums but reduce the amounts they pay out. In short, the insurers want to be their own judge and jury. The system should protect legitimate claimants who may have suffered great harm and be in great mental anguish and who are therefore susceptible to an approach that undermines their rights but ends the process quickly. They should receive what the law says they are entitled to, not what the insurance company says it is prepared to pay, and there is a big difference between the two. In the old days, it was not unusual for the same solicitor to represent both purchaser and vendor in a conveyancing transaction. Of course, there were clear conflicts of interest and major problems as a result. Thankfully, that practice no longer occurs.

Third-party capture has the same risks to consumers attached to it. The insurer, who has a responsibility for paying out on a claim, also decides how much to pay, more often than not on the basis of no, or inadequate, medical evidence and without the claimant having the benefit of legal advice. There could not be a clearer conflict of interest between a big insurance company playing the numbers and an unrepresented, unadvised claimant, but the great irony is that insurers end up actively encouraging claims with the direct approach of offering to settle quickly without the purported inconvenience of a medical examination.

A further irony is that the idea of putting forward a whiplash claim can be put in the mind of a claimant when they had not originally thought of claiming. Of course, the newspapers are full of such behaviour. The insurers are, in some respects, playing the numbers. They think that if they can buy off 10 whiplash cases for, say, £1,000 or so-even if some of them are, dare I say, fraudulent-it will cost them less than paying out the correct compensation to properly advised claimants on, say, four or five of them. That benefits insurers significantly. It can be no surprise that that has led to an increase in low-value whiplash claims and the undersettlement of more serious claims.

The insurance industry and the personal injury industry have been playing games for too long at each other's expense. The result has been that genuine victims of harm lose out-and lose out significantly. Third-party capture is a damaging practice and I urge the Minister to accept either this amendment or the other one.

Lord Neill of Bladen: I support this amendment. The practice that it outlaws seems to be absolutely disgraceful, with an insurance company being paid by its own side-by the defendant-and then approaching the plaintiff to try to do a cheap deal with him for the benefit of the defendant. It seems to me that the conflict of interest is so gross that it ought not to be permitted at all. I am a little surprised by the words in the amendment, which mention knowing that the plaintiff is represented, because I am not quite sure how the amendment would cover a situation where the plaintiff had no representation. When thinking about how one would refine the language, I think one might

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consider taking out that qualification, because, with a general ban on this practice, your Lordships would simply agree with the amendment.

Lord Bach: My Lords, we welcome Amendment 164 in the name of the noble Lord, Lord Thomas of Gresford, and Amendment 164ZA in the name of my noble friend Lord Dubs. I also welcome the remarks of the noble Lord, Lord Neill of Bladen.

Amendment 164 is really about motor insurance and motor accidents. All Members of the Committee will agree that motor insurance is a social good. It is unique among financial service products in that it is not just necessary but carries with it the coercive powers of the law. As we all know, failure to insure a motor vehicle is a criminal offence with a fixed penalty of having the vehicle wheel-clamped, impounded or destroyed or facing a court prosecution and the imposition of a maximum fine.

That is all well and good and we all agree with that philosophy, but the private industry that delivers this social good is, as has already been said in this short debate, frankly deeply dysfunctional at present. That is perhaps an understatement. Its protagonist, the road traffic personal injuries sector, which comprises 75 per cent of all litigation, has developed deeply dysfunctional behaviours too. The arms race between road traffic personal injury lawyers and the insurance industry is completely dysfunctional.

The Transport Select Committee in another place has studied this twice in the past year. My right honourable friend Jack Straw has led a campaign to fix these structural issues in a market that is very flawed. We have seen the rise of an industrialised road traffic accident personal injury market, aggressively marketed as though it were a consumer good and operated a bit like a sweatshop, with non-lawyers hired at cheap rates to process hundreds of thousands of claims a year. This number is still growing at a startling rate.

6 pm

Success fees, much criticised in our debates, are not to blame for the rise in the case load. We introduced an RTA portal that has operated for nearly two years. It compresses timelines, fixes costs and increases efficiency. It has done well. No less a figure than the Prime Minister commended it and wants to expand it to other areas of low-value claims. The portal has a maximum success fee of 12.5 per cent. The Association of British Insurers and Keogh and Co-well known lawyers in this field-told me and my colleagues in a recent meeting that ATE insurance is very low in this field: well below £100. However, the burden of litigation keeps increasing, despite the fact that the post-1999 regime of success fees and ATE simply does not exist in this area. Why does this happen? It is partly the result of decisions taken by the industries themselves, including the rise of aggressive marketing techniques, which we will debate shortly. The corollary to the personal injury market dysfunction has been the behaviour of the insurance industry itself, as the noble Lord, Lord Thomas of Gresford, said in his opening remarks.



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The issue gives rise to the claim, believed by 83.6 per cent of the population, that we live in a compensation culture, when all the reports that have been received, including that of the noble Lord, Lord Young of Graffham, suggest that this is more of a perception than a reality. It gives a bad name to other, legitimate claims. For example, 5 per cent of claims are employers' liability claims, often made by trade unions on behalf of their members. They get a bad name because they are meant to be part of a compensation culture, but they are not; for the most part they are legitimate claims. What are not legitimate are claims that are suggested, recommended and almost forced out of people who have been involved in road traffic accidents.


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