Joint Committee on Financial Services and Markets Second Report


Memorandum from The Right Honourable The Lord Steyn

  By letter dated Friday, 14 May the Secretary of the Joint Committee on Financial Services and Markets wrote to me in the following terms:

    "Lord Burns, the Committee's Chairman, invites you to consider the memorandum and to give the Committee your views, preferably in the form of brief written submission suitable for publication, to reach me by Friday, 21 May. The essential question is, whether in your view the Treasury's memorandum makes it more likely that the eventual legislation will stand up to legal challenge on human rights grounds."

  I received a copy of the First Report and, at my request, certain additional information on Monday, 17 May. I received the Bill on Tuesday, 18 May. Given the need to respond by Friday, 21 May, and my involvement every day this week in sittings of the Appellate Committee, time for consideration of this important matter has been extremely limited. Nevertheless, I would like to help so far as I am able to do so.

  I respond in my capacity as a judge. In doing so I am expressing provisional views on proposed law reform the effectiveness of which will no doubt be tested in the courts after the Human Rights Act 1998 comes into force. I may have to revise such provisional views in the light of arguments in a concrete case. I write this letter on the understanding that my response will be a matter of public record.

  Except for one point, I do not propose to comment on the principles the courts will have to apply after the Human Rights Act 1998 comes into force. It is important to bear in mind that a basic theme of the jurisprudence of the European Court of Human Rights is to find a fair balance between conflicting values and interests. That is how an English court will probably approach the matter when the Human Rights Act comes into force. It is likely to take as a starting point that the new regulatory system must be just and must protect Convention rights, but also to accept as a basis premise that in order to serve the interests of the public it must be effective. In my view the courts are therefore likely to accept the importance of the objective as it is described in paragraph 4 of the Treasury Memorandum dated 14 May 1999. But it may be useful to spell out the twin objectives in the long title to the Bill.

  The only specific comments that I am able to make on the somewhat fluid and developing shape of the proposed legislation are as follows:


  It is of vital importance that the precise nature and role of the Tribunal, and the insulation of Tribunal from the FSA's internal procedures, should be clearly spelt out in the legislation. This is an indispensable requirement for the effectiveness of the new system. Paragraph 6 of the Memorandum suggests that the necessary changes will be made. This is reassuring.


  It is an important question whether the disciplinary system is likely to be classified in Convention terms as criminal proceedings. While I recognise the force of the contrary arguments (and notably the point about the potential size of fine) my present view is that it is likely that the courts will generally speaking treat the disciplinary system as involving civil proceedings. But where the disciplinary matters closely overlap serious species of market abuse I regard the position as entirely open.


  For reasons given by Lord Lester of Herne Hill it is probable that the courts will classify the market abuse provisions as criminal proceedings. I am glad to see that the Government has decided to ensure that additional Convention procedures are put in place in the new Bill. I have not seen those changes nor any changes designed to deal with Lord Hobhouse's comments in his recent letter on the flaws in clause 56. At present it is apparently intended that the proposed system will continue to be underpinned by a vaguely worded Code, such as is contained in the document headed Part 2: Draft Code of Market Conduct (dated June 1998). In these circumstances there is a substantial risk that in respect of market abuse the system will be held not to comply with the Convention principle of certainty.

  My answer to the question put to me is that the Treasury's Memorandum represents considerable progress. But there is clearly much work to be done.

20 May 1999

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