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Lord McIntosh of Haringey: The noble Lord, Lord Jenkin, was good enough to say that he was not going to attack the substance of the amendments. Indeed, he had better not, because the supervisory and regulatory principles were debated in his absence at considerable length this afternoon. As far as concerns his point about the amendments to the Bill, I have already "grovelled" to the Committee about the way in which to some extent amendments are being introduced late in the process of the Bill. But on this occasion I am certainly not going to grovel. We are responding to pressure from the Opposition. We respond to pressure when pressure comes. If that pressure comes at this stage, we have to respond as best we can at this stage or at a later stage. I am not going to apologise for that.

Lord Jenkin of Roding: The noble Lord really cannot get away with that. He said himself that he had hoped that the amendment to meet my noble friend's point would have been tabled today. Yet it has not been, and somehow it will have to be tabled so that it can be reached next week. The noble Lord will then have to come back to the clause on Report to table the

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amendment. That is something for which the noble Lord should apologise. It is no way to legislate. I shall be astonished if the Bill emerges from this procedure without need for substantial further amendment very quickly thereafter.

Lord Kingsland: In relation to the substance of the matter, I am experiencing an emotion of cautious optimism in response to what the Minister said. However, in articulating his reasons for a positive approach, the noble Lord raised again the distinction between supervisory and disciplinary, a distinction which he himself said earlier in the day, I think very openly, had not yet featured in statutory form. His answer underlines the general point made by my noble friend Lord Jenkin that there are still important parts of the Bill with which we cannot grapple until the underlying principles have been finally formulated by the Government. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 124 agreed to.

Clause 125 [Legal assistance scheme]:

Lord Kingsland moved Amendment No. 226B:


    Page 58, line 6, leave out ("under section 117(4)").

The noble Lord said: Amendments Nos. 226B and 235A are plainly consequential on the line of amendments to which I spoke earlier, beginning with Amendment No. 215A. In that context, I beg to move.

9.45 p.m.

Lord McIntosh of Haringey: I cannot be quite as terse as the noble Lord. Perhaps the word is "telegraphic".

Clause 125 gives the Lord Chancellor the power to establish a subsidised legal assistance scheme by regulations. This is a free-standing scheme for legal assistance and not an extension to legal aid.

The effect of opposition Amendment No. 226B would be to widen the coverage of the scheme. It is not the Government's intention to make legal assistance available for tribunal cases across the board. Legal assistance is not generally available in tribunal proceedings which are intended to be speedier and less formal than court proceedings.

As I said, the additional protections that have been put in the Bill in relation to market abuse were included as a precautionary measure because of concern expressed about the possibility that the market regime might be judged to be "criminal" for ECHR purposes. What is criminal for ECHR purposes is not, as noble Lords will know, the same as what is criminal for domestic purposes.

The reasons for deciding to import the ECHR criminal protections into market abuse penalty proceedings were set out in some detail by the former Economic Secretary, Patricia Hewitt, and the Government's legal advisers, Sir Sydney Kentridge QC, and James Eadie, in evidence to the Joint Committee.

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However, there is no question that the disciplinary regime might be considered as criminal. I note that the noble and learned Lord, Lord Donaldson, is listening to this. It is concerned with policing the standards of the regulated community and in that respect is analogous to the regulation of professions. The ECHR jurisprudence is clear that such regimes are civil, not criminal. There is, therefore, no need to extend the scheme further. Since authorised persons are to pay for the legal assistance under the scheme, they are entitled to be sure that we should keep the scheme within proper bounds. I hope that the noble Lord will withdraw the amendment.

I do not know whether the noble Lord would like me to speak to Amendment No. 235A. I do not recall him speaking to it in introducing the amendment.

Opposition Amendment No. 235A seeks to extend so-called "Saunders-proofing" to procedures involving disciplinary measures under Part XIV as well as penalties for market abuse. Again, the amendment is unnecessary as a matter of law, as we stated in our evidence to the Joint Committee. It is also undesirable as a matter of policy.

It would place an unhelpful constraint on the FSA's ability to deal with misconduct by regulated persons. Criminal offences or market abuse may be committed by a wide range of people, but civil penalties under Clause 199 apply only to authorised persons. Authorisation is not just a privilege which allows a person to do financial services business; it also involves obligations. One of the most important of those is the obligation to be frank with the FSA about how the authorised person's business has been conducted, including cases where there has been misconduct.

It would be quite mistaken to allow authorised persons who have committed serious misconduct that would justify a financial penalty to escape the consequences just because the evidence took the form of a statement they had made to investigators.

On that basis, I hope that the noble Lord will withdraw the amendment.

Lord Donaldson of Lymington: Is it possible to refer a matter to the tribunal other than under Clause 117(4)?

Lord McIntosh of Haringey: I think that with anyone who is subject to a penalty or falls to make a statement, the matter can be referred to a tribunal.

Lord Donaldson of Lymington: That is not under Clause 117(4).

Lord McIntosh of Haringey: Basically it is. If there are other places in which a reference can be made, I shall write to the noble and learned Lord.

Lord Donaldson of Lymington: It seemed a somewhat futile amendment if one could not do it any other way.

Lord Kingsland: On Amendment No. 226B, we shall return to the matter at Report stage.

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As I said at an earlier stage of today's proceedings, in my submission Article 6.l of the European convention applies to all proceedings, whether civil or criminal. To limit the effect of that article to criminal proceedings is incorrect. Nevertheless, in the circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 125 agreed to.

Clause 126 agreed to.

Clause 127 [Funding of the legal assistance scheme]:

Lord Kingsland moved Amendment No. 226C:


    Page 59, line 10, leave out paragraphs (b) and (c).

The noble Lord said: Clause 127 covers the funding of the legal assistance scheme which is brought in for individuals accused of market abuse. I believe that it is wrong to provide that only authorised persons have to fund the scheme because, typically, it will not be authorised persons who commit the offence.

However, assuming that the Government stay firm on that, the most important change is to prevent the FSA being able to use surplus levies from fines owed to the authority by authorised persons merely for an ordinary breach of the rules. The money should be returned to the individuals who paid it in the first place.

I believe that the legal assistance scheme should also apply to disciplinary proceedings. It seems clear that disciplinary proceedings are covered by Article 6.1 of the convention and the convention requires the hearing to be public and fair. That also ought to be covered in the case of a tribunal, even though Article 6.3 expressly spells out the obligation to provide legal assistance in the case of criminal offences only. I beg to move.

Lord McIntosh of Haringey: The effect of Amendment No. 226C would reduce the flexibility on how the funding is accumulated and distributed. The legal assistance scheme will be paid for by levies raised by the FSA from authorised persons. The Lord Chancellor will determine the costs of the scheme and set the total which the FSA is required to raise in levies from authorised persons during a particular period, which will normally be a financial year. The FSA will decide on how to distribute that amount among authorised persons.

It will not be possible to forecast precisely the amount required for legal assistance in any forthcoming period, so subsection (1) provides for

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levies to cover anticipated or actual costs. That enables the levy to be set to cover both anticipated costs in the period ahead and any amount by which the actual costs in the preceding period had exceeded the anticipated costs for that period.

The forecast of anticipated costs could be an over-estimate, so subsection (7) is necessary to allow the FSA to distribute the money among persons who originally paid it. Specifically, paragraph (a) allows it to repay the money directly to those who paid the levy, while paragraph (b) allows it instead to reduce the amounts which those persons are required to pay. Paragraph (c) allows it to use a combination of those methods.

The amendment would remove that valuable flexibility. It is intended to ensure that, for example, the FSA does not have to send out separate invoices for small amounts which it can more sensibly and economically offset against the following year's fees or levy for invoicing purposes. Removing options (b) and (c) could lead to costs being incurred sending out cheques for derisory amounts.

Of course, the FSA will need to exercise its discretion in a way that is fair and reasonable and it will still have to be able to account separately for levies raised for different years and between levies and fees. I can confirm that disciplinary proceedings are covered by Article 6.1, but disciplinary proceedings are not criminal for ECHR purposes. Legal assistance is expressly required only for proceedings which are criminal for ECHR purposes.

I hope that on the basis of that explanation the noble Lord will not press the amendment.


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