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Lord McIntosh of Haringey: My Lords, in this large group of opposition amendments there is one lone government amendment, Amendment No. 159, to which I should like to speak before I refer to the opposition amendments.

The Bill introduces the controllers regime to replace the current patchwork of arrangements set out in various pieces of legislation with a single set of coherent prohibitions--provisions; it was a Freudian slip! The regime has attracted much debate during the passage of the Bill both here and in another place. The principal matter for discussion has been the scope of the obligation to notify a change in control. A number of interesting and technical examples have been put

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forward where it is felt that these obligations fall too heavily or too indiscriminately in certain circumstances.

The Government are committed to creating a regime which is both effective and fair while also ensuring that we fully and properly implement our obligations under European law. The single market directives constrain our room for manoeuvre in this area to a large degree, but we have been persuaded that there is a case for greater flexibility. With that in mind, we have tabled Amendment No. 159 to Clause 188, which introduces a power for the Treasury to exempt by order certain persons from the obligations to notify the FSA of acquisition or divestment of control. In the case of a provisional agreement to sell shares, for instance, we do not consider it necessary to require both the buyer and the seller to notify the agreement. In that situation, the seller might be exempted from the obligation to notify.

We do not think it is appropriate or sensible to seek to be definitive on the face of the Bill about the circumstances in which it would be reasonable and proportionate to disapply the notification requirements. Our discussions on this part of the Bill have thrown up a number of fairly detailed technical points and it seems likely that other circumstances will arise or will be identified in the future in which it is desirable to relieve persons of the obligation to notify using this power. But I must emphasise that this power can be exercised only in accordance with the single market directive.

In addition, the Delegated Powers and Deregulation Committee judged that the amendment raises no problems in relation to the delegated power provided for here, and I hope that the amendment will be acceptable to the House.

I turn to the Opposition amendments, beginning with those relating to nominees. The point raised by Amendments Nos. 158F--and by 158G, which seems to be a straight duplicate of Amendment No. 158F; I hope I understand it correctly--and Amendment No. 219F--

Lord Elton: My Lords, it is clear to me and it surely cannot have escaped my noble friend's notice that the last line of Amendment No. 158F contains the words,


    "at the direction of Y",

and in the last line of Amendment No. 158G the words are,


    "at the discretion of Y".

Presumably, therein lies the difference.

Lord McIntosh of Haringey: My Lords, I had not noticed that either. I wonder whether, with the leave of the House, the noble Lord, Lord Kingsland, would like to explain the difference between the two.

Lord Kingsland: My Lords, because I realised that there could be a difference, I referred to the amendments, rightly, as "they" and not "it"!

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Lord McIntosh of Haringey: My Lords, I have already used my Browning example. Noble Lords will recall that Browning was asked late in life what his early poem, "Sordello" meant. He said,


    "When it was written, God and Robert Browning knew what it meant; now only Gods knows".

Lord Kingsland: My Lords, that applies to a number of places in this building!

Lord McIntosh of Haringey: My Lords, I am delighted to have discovered the difference between the two amendments, for which I am grateful to the noble Lord, Lord Elton.

Amendment 219F, which is not the same, also concerns circumstances where there may be a degree of unnecessary double counting of shares and voting rights. The amendments seek to exempt a nominee or agent who only acts on the instructions of another person.

Unfortunately, as I explained in Committee, we cannot agree to this amendment as the terms in which it is drafted would breach the European directives; namely, Article 11 of the second banking directive and Article 9 of the investment services directive, which require notification of the holding of either capital or voting rights. I shall gladly look further at examples of possible duplication in the notification requirements to see whether we should exercise the new power to exempt particular circumstances. But that cannot be at the expense of giving full effect to the requirements of the directives.

Amendments Nos. 158E to 158EB and Amendments Nos. 158H to 158L refer to "taking steps". We are in complete agreement with the noble Lord, Lord Kingsland, that it should be only the step which results in the acquisition of control that should need to be notified. Equally, it is important that it is clear that this step should not proceed without approval.

We amended Clause 174 in another place precisely to make this clear. However, in view of the concerns expressed by the noble Lord, Lord Kingsland, in Committee, we have again consulted parliamentary counsel. We are satisfied that it is implicit that the steps referred to in Clause 174 are the steps which, if taken, would directly lead to the person concerned acquiring control and not some prior steps, and that the courts will not take the view that some first tentative step on the path to acquiring control should be notified. To be more precise, we are clear that merely instructing your broker to ask the price at which your target shares are currently trading would not trigger the obligation to notify.

We have considered whether there is anything further that might be done to make that conclusion any more secure. We do not see that there is. We certainly do not think that the amendments achieve that. We therefore take the view that the text of the Bill is correct as it stands.

I turn now to Amendment No. 219A, which appears to seek to separate the definition of "controller" under Clause 412 as it applies for the purposes of other parts

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of the Bill--for example, Part XI on investigations--from the circumstances in which acquisition of control requires notification under Part XII.

I do not think that such a separation is helpful. The concepts to be applied are the same. Having a separate definition of "controller" in Clause 412 can be seen as rather duplicative, but we think it is necessary to have a single Bill-wide definition of the term.

In practice, we shall want to keep the definition under Clause 412 in step with the notification requirements under Clause 175, which is why we have included a power to amend Clause 412 with the power to amend the notification requirements. I am happy to make clear for the record our intention to keep these provisions in line if that provides any reassurance.

Finally, Amendments Nos. 219B to 219E and Amendments Nos. 158EC, 158M and 158N appear to be drafting amendments. We do not see that they add any value and we are not, therefore, inclined to accept them. I hope that the House will approve our Amendment No. 159 and that noble Lords will not feel it necessary to press the other amendments.

Lord Kingsland: My Lords, I thank the Minister for his response and derive some comfort from it in relation to our amendments. I shall look carefully at the text of Hansard to see whether I must pursue the matter at Third Reading.

The noble Lord asked whether the Opposition was prepared to support Amendment No. 159. I hope that the Minister will allow me one further request for clarification. Following on his observations, my understanding is that the amendment allows the Treasury to provide for exemptions from the notification requirements. To that extent it is, therefore, applauded. The Treasury's Explanatory Notes make clear that the power of exemption is intended to protect persons from an unnecessary obligation to notify the authority. It is explained that exemptions will be granted only in cases where the single market directives do not apply or where, for example, the definition of "associates" has the effect that two or more people must notify the same acquisition of shares or voting rights.

However, we believe that what would do most to prevent unnecessary obligations to notify would be a change in the phraseology of the notice requirement in Clause 174. It is very difficult to be able to identify the precise step that will result in somebody acquiring control under Clause 174(1). Accordingly, any act which is likely to lead to a person acquiring control may in practice cause that person to notify. The Minister has been quite helpful on that point, but it shows the importance of accepting at least the spirit of our amendment to the clause. I hope that what the Minister said does that. If so, I do not believe that we shall need to return to the matter at Third Reading.

Lord McIntosh of Haringey: My Lords, with the leave of the House, we have dealt with it in an amendment to Clause 188 because of the difficulties under Clause 174 of conformity with the European

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directives. The amendments to Clause 174 which the Opposition have tabled, and any others that we have tried to think of, simply do not work. We believe, however, that the amendment to Clause 188 provides the necessary flexibility and makes it possible for the Treasury to exempt persons under certain circumstances from the notification requirements. We share the view of the noble Lord that we should, as far as possible, reduce the burden of notification, and we believe that our Amendment No. 159 is the best way to achieve that.


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