Advanced Research and Invention Agency Bill

Report

Clause 2: ARIA’s functions

Amendment 1

1: Clause 2, page 2, line 6, at end insert— “(ba) financial support provided by ARIA may be treated as convertible to equity interest in the business entity which has received such support; (bb) for a period of ten years after ARIA has provided financial support, or made property available, the business entity which has received such support must obtain the consent of ARIA before—(i) transferring specified intellectual property rights from the United Kingdom to any territory outside the United Kingdom, or(ii) selling or otherwise transferring a controlling interest in that entity to another entity not resident in the United Kingdom;”Member’s explanatory statement This amendment would enable ARIA to make it a condition of the provision of financial support to a business that it is convertible into an equity interest in the business and that, for 10 years after ARIA has provided financial support, or made property available, the business requires the consent of ARIA either to transfer abroad intellectual property rights or to sell or transfer a controlling interest in that business to another business not resident in the United Kingdom.

My Lords, Amendment 1 would enable ARIA to make it a condition of the provision of financial support to a business that it is convertible to an equity interest in the business and that for 10 years after ARIA has provided that financial support, or made property available, the business requires the consent of ARIA either to transfer abroad intellectual property rights or to sell or transfer a controlling interest in that business to another business not resident in the United Kingdom. I am grateful for the support from my noble friend Lady Chapman of Darlington and the noble Lords, Lord Morse and Lord Clement-Jones, who have added their names as supporters of the amendment. I am especially grateful to the noble Lord, Lord Morse, who prepared the first draft of the amendment—although, anticipating that its drafting may be criticised, I make it clear that I take full responsibility for its revised form.

In moving Amendment 1, I support the other five amendments in the group in the name of the noble Lord, Lord Lansley, and have added my name to Amendments 2 and 8. I am pleased that these amendments have been grouped, as they are a response to the same concern. The House will be pleased to hear that I do not intend to rehearse the arguments that I advanced in Committee. I am grateful for the support that I received then from the noble Lords, Lord Fox, Lord Lansley and Lord Broers, and my noble friends Lady Chapman and Lord Stansgate.

Yesterday, I and other noble Lords received a letter from the Minister, which I will come back to later. First, I will explain exactly what the amendment would do, because it is relevant to the letter, which was extremely welcome; it covers the issues that have been raised and shows that those who have amendments in this group have common concerns with the Government —we are broadly on the same page. The degree to which we differ is marginal now, and much less than it was at the beginning of these issues being raised in Committee. So that is progress, but I do not think we are yet where we want to be.

Since receiving the letter yesterday, I began to wonder what had caused this apparent change of tack by the Government and this Minister in particular: the debate that we had in Committee, or the Science Minister who is responsible for this Bill expressing the view at that meeting that he shares the objective we have set ourselves by tabling these amendments, and that it is a matter of concern that needs to be addressed.

On the content of the letter, as the noble Lord, Lord Lansley, pointed out when he responded to it, there is a lot in common between those who support these amendments and the Government. The concerns have been identified; we know that they are serious; we know that they sit in a broader set of circumstances that will need to be addressed. But we still think it important that they be addressed in this particular case and that, in meeting the objective which the Government have set for ARIA in exercising its functions and later, in Schedule 1, in the supplementary powers it is given, it is advised and helped by us, protecting its ability, if necessary, to take equity in businesses in which it invests and to insist that, over a period of time, those businesses stay in the hands of those who have the UK’s economy in their interests.

That is essentially what the letter sets out. However, it does not go as far—nobody would expect it to—as we seek to do in this Bill, for reasons which are articulated. The first of them is that the Minister does not

“think it is appropriate to mandate a particular ‘one size fits all’ approach through the Bill”—

that is why I explained what Clause 2 did in the first place. In this particular subsection, nothing is mandated; it only facilitates ARIA including these conditions if it thinks that is appropriate—a power which the Government, as they set out in the letter, are willing to give ARIA and wish it to have.

Secondly, the letter states:

“The type of obligations referenced in the amendment should not be applied inconsistently. The approach taken by ARIA to IP ownership must reflect the approach taken by other public R&D funding bodies in equivalent situations, or it would create an unlevel playing field. If funding from ARIA comes with strings attached, or fewer IP rights compared to funding from IUK—

that is, Innovate UK—

“or elsewhere, it would act as a further disincentive to the most innovative businesses choosing to participate in ARIA programmes. This discussion should therefore encompass our wider public R&D funding system.”

I agree that there may be a problem in the wider R&D funding system, but we are dealing with this Bill. The Bill cannot keep a level playing field for this reason. It is interesting that Innovate UK was the example the Minister chose to put in the letter. If this Bill is passed in its present form, there will be an unlevel playing field for this reason.

Innovate UK helpfully publishes on its website a brochure for those whom it wishes to engage. It states on page 3 that

“we do not take any equity in the business or make any claim on the intellectual property created in the innovation”.