Calcutt warns on EU directive

European draft takeover laws would threaten the UK Takeover Panel's relationship with the courts and could lead to tactical litigation to delay the system, according to David Calcutt QC, the panel's chairman.

Brussels has been sitting on various forms of the draft Takeover Directive, for several years.

“There may one day come a day when the European Takeover Directive may be appropriate for all members of the EC, but we say that day has not yet come,” said Calcutt.

Calcutt was speaking at the second annual Leonard Sainer lecture, sponsored by the Leonard Sainer Legal Education Foundation and law firm Titmuss Sainer Dechert.

The UK to date has had far wider experience in takeover regulation than any other European country. And while other countries are increasing their experience in such work, they are finding it less straightforward in practice than in theory, said Calcutt.

“The experience of our European colleagues is, I believe, now tending to show to them the unwisdom, at least at this stage, of enacting any pan-European directive along the lines which have so far emanated from Brussels,” he said.

“By having a non-statutory system in the UK, certain advantages accrue to us…in the regulation of takeovers…with comparatively easy adaptation of the code to changing circumstance, [the] facility…for advance consultation, the ability to rely upon the decision of the panel and the speed with which those decisions are reached.” All of these advantages accrue principally because of the panel's relationship with the courts, said Calcutt.

Describing this relationship over the panel's 25-year life, Calcutt referred to Sir John Donaldson's Datafin judgement as defining the courts' respect for the panel's decisions. Such decisions are assumed to be valid unless quashed by the court, Donaldson had ruled.

This relationship is “crucial to businessmen”, providing them with “the confidence they need to be able safely to rely and to act on a decision of the panel”. Calcutt argued that if the European Directive was brought in, then the Takeover Panel would have to be put on a statutory basis.

This could compel the courts to give “a different view of their relationship which presently exists between the panel and the courts and if that were to happen there those essential, beneficial characteristics would be placed in jeopardy by the prospect of tactical delaying litigation”.