EU change to takeover procedures resisted

A cross-party committee of peers has called on Brussels to abandon proposals for a European takeover directive which would replace Britain's non-statutory arrangements with a legally-binding system for controlling behaviour during bids.

The House of Lords Select Committee on the European Communities said that harmonisation gains from adopting the directive would be outweighed by the damage it would do to existing arrangements in the UK where the Takeover Panel supervises contested bids through the application of the City Takeover Code. The Panel has launched a fierce rearguard action to have the directive ditched, warning that it would create a lawyers' paradise with target companies running to the courts to frustrate hostile bids.

In a 160-page report released yesterday the Lords committee says the directive might prevent the Panel from applying the Takeover Code with sufficient certainty and flexibility and increase the risk of "tactical litigation". The committee also concluded that the directive did not meet the requirements set down by the EU for subsidiarity - the principle that, wherever possible, decision-making is devolved to national level - while safeguards in the directive to discourage target companies from appealing to the courts were insufficient.

The UK's efficient system for the regulation of takeovers"should not be put at risk without substantial and clearly identifiable benefits", said the report.