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Lord Bach: My Lords, as I understand it, the amendments that touch on Clause 390 are one Opposition amendment, Amendment No. 199C, which we have accepted, and two government amendments, namely Amendments Nos. 200 and 201. I dealt with the latter shortly, but I did deal with them. Amendment No. 200 adds various references to clauses which involve supervisory notices under Clause 390. It is a consequential amendment on the addition of the new clause after Clauses 51 and 77. Amendment No. 201 alters some of the existing paragraph references in order to refer correctly to those places where the term "supervisory notice" applies. Those are the only amendments which relate to Clause 390.

Lord Kingsland: My Lords, I am much obliged to the Minister. I think this follows logically from what he said, but perhaps the noble Lord could just confirm that the tribunal's ability to take into account a failure by the authority to follow its procedure under Clause 390(12) applies when a supervisory notice is given, as well as when a warning or decision notice is issued. I think it follows, from what the Minister said, that he agrees with that approach. If he confirms that, I need not say anything more about Amendment No. 199C. I see that he confirms that. I am much obliged.

I turn to Amendment No. 188A. The Minister will be well aware of what lies behind Amendment No. 188A. It is the firm belief of the Opposition that the procedure followed in the underlying clause breaches the European Convention on Human Rights. I expect that the Minister is, at least in part, familiar with the argument that I am about to deploy. However, just in case he is not, I draw his attention again to the case of Fayed v. the United Kingdom. The Minister will recall that one of the issues in this case was whether the DTI inspectors, who were looking into the takeover of Harrods, had to comply with the ECHR.

The Fayeds argued that the making, and subsequent publication of, the inspectors' report damaged their reputation and, thereby, their civil rights to honour and reputation. The European Commission of Human Rights was, however, of the opinion that Article 6(1) of the convention was not applicable to the proceedings conducted by the inspectors because those

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proceedings did not determine any civil right or obligation. The same view was subsequently adopted by the court, which stated that it was,


    "satisfied that the functions performed by the Inspectors were in practice as well as in theory essentially investigative ... The Inspectors did not adjudicate, either in form or in substance [and] did not make a legal determination as to criminal or civil liability ... The purpose of their enquiry was to ascertain and record facts which might subsequently be used as a basis for action by other competent authorities.

In Fayed v. the United Kingdom, the role of the inspectors was indeed limited to investigating the facts. But the role of the authority under the Bill in relation to this clause is completely different. The authority does not only investigate the facts, but also imposes a fine--albeit subject to a later independent tribunal hearing. It is quite clear that the authority reaches a view as to whether the accused is or is not guilty; and the accused obviously would argue that he is not. If the accused does not make the effort to appeal to the tribunal and incur the costs of an appeal, there will be an adjudication on a dispute by the prosecutor rather than by an "independent and impartial tribunal". This is, in our view, impermissible under the convention. A prosecuting authority can prosecute but cannot impose a penalty.

I make it clear, of course, that we are not suggesting that the authority cannot reach a settlement with an accused. If the accused is willing to settle, there is no need for a determination of his civil rights and obligations. The informal procedure which the authority wants to bring in, that already exists in the SROs, can therefore continue, but not the other set of circumstances which we believe is incompatible with the convention. I hope that the Minister, on due and mature reflection, will come to the same conclusion.

12.45 p.m.

Lord Bach: My Lords, I shall speak to the Opposition amendments in the order in which the noble Lord, Lord Kingsland, spoke to them. Amendments Nos. 199A and 199B concern access to authority material. They both concern material to which the authority is not required to give access. Subsections (2) and (3) of Clause 389 enable the authority to withhold material in a number of circumstances, including where the material is subject to legal privilege; where it is only being considered by the authority with a view to maintaining consistency of approach between different cases; where providing access would not be in the public interest; and, lastly, where access would be unfair given the likely significance of the materials of the current case weighed against the potential prejudice to the commercial interest of another person.

Amendment No. 199B would require the authority to provide a written summary of any such evidence and to allow access to the material for the tribunal. We believe that this goes too far.

Subsections (4) and (5) require notice to be given of the fact that material is being withheld on grounds that it is subject to privilege, or because the authority has taken the view that access would be unfair or against

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the public interest. Where such a view has been reached, subsection (5) also requires these reasons to be included in the notice. This will enable the person who is subject to the notice to consider whether he should refer the matter to the tribunal.

In this respect, may I make it clear to the noble Lord that Clause 389 deals only with the material to which the authority is or is not required to provide access at the warning notice/decision notice stages. Nothing in Clause 389 constrains the rights of the tribunal to consider relevant evidence. Our amendments to Part IX of the Bill have been drafted to put this beyond all doubt. If the matter is referred, it will be for the independent tribunal to consider whether the material should be disclosed. That will be covered by the tribunal's procedural rules.

Turning to Amendment No. 199A, subsection (2) of Clause 389 ensures that the authority is able to consider how similar or comparable cases have been dealt with in order to ensure proper consistency in its proposed actions and penalties, without thus opening up sensitive commercial details about other businesses to scrutiny by the subject of the action currently proposed. As my noble friend Lord McIntosh said in Committee:


    "If action is being taken against a person X, it is no business of X's whether or not similar action was previously taken against another person, Y".--[Official Report, 30/3/00; col. 1032.]

Indeed, disclosure might well be unfair, particularly if the action in the earlier case had not been pursued.

Nor were we attracted to the idea of requiring the authority to provide summaries with the identities of the persons in the comparative cases removed. This is administratively burdensome and might not always be effective in protecting the legitimate commercial interests of the persons involved in those cases.

I appreciate that Amendment No. 199A does not seek to impose a requirement on the FSA but simply says that subsection (2) of Clause 389 does not prevent the FSA from providing a summary of the principal characteristics of those cases. Let me assure the noble Lord, if I can--as my noble friend attempted to do in Committee--that, as currently drafted, subsection (2) does not prevent this.

Let me repeat another assurance given in Committee: there will be considerable material in the public domain to assist our character X, the subject of a notice, in assessing whether the action proposed is in line with general authority policy and practice. Apart from the statement of the policy on financial penalties, which we have discussed already, there will be considerable detail on already determined cases.

I have already said how grateful we are to the noble Lord for tabling Amendment No. 199C. When it comes to the vote on that amendment, we shall vote with him to accept it.

I turn now to Amendment No. 188A, which the noble Lord considered to be the high point of his speech. The amendment requires that if the person concerned does not opt to refer the matter to the tribunal the authority would be obliged to do so or to

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drop the action proposed. Effectively, it would require all decisions to be referred to the tribunal. This is entirely unacceptable. We have explained on a number of occasions that we do not think it is necessary or desirable to involve the tribunal in all decisions as a matter of course. That would be burdensome not only for the authorised community but also for the authority.

We have deliberately structured the procedures to make reference to the tribunal a right, to be exercised at the discretion of person against whom the authority is taking action or in respect of whom the authority is taking a decision. Importantly, this approach has been considered and endorsed by the Joint Committee chaired by the noble Lord, Lord Burns, and, we believe, was also recognised by the industry as being in its own interests. Requiring all decisions to be considered by the tribunal would be too costly for all concerned--the FSA, the industry and the taxpayer, who, of course, funds the tribunal.

I understand from the noble Lord's remarks that his concern is that providing for a decision to take effect without adjudication by the independent and impartial tribunal if the matter is not referred might conflict with the requirements of the ECHR. There has been correspondence on this matter following the noble Lord's remarks in Committee concerning the Fayed judgment. The Government have never sought to argue that disciplinary action under the Bill does not potentially involved a determination of a person's civil rights and obligations. However, it is not a necessary consequence of that that disciplinary action can be taken only if the case has been argued in front of a tribunal. Article 6.1 of the convention--we shall soon all know it by heart--says:


    "In the determination of his civil rights and obligations of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".

There can be no question that the Bill confers the necessary entitlement to such a hearing. It allows all those against whom the FSA proposes to take disciplinary action to refer the matter to the independent tribunal to be established under the Bill. Where there has been a breach of rules, the authority simply comes to a decision as to what disciplinary action it believes should be taken in all the circumstances of the particular case. In reaching that conclusion, the authority does not determine anyone's civil rights or obligations through the process. It takes an administrative, not a judicial, decision. Once that conclusion has been reached, the person is entitled to refer the matter to the tribunal. The FSA's decision has no effect--I underline that--where a person chooses to exercise his right to have the matter referred to the tribunal. Where the person concerned does exercise his right, then it is the tribunal which determines the person's civil rights and obligations. If a person chooses not to refer the matter to the tribunal, the FSA can proceed to take a final decision. Of course, in such a case the person affected by that decision will have chosen freely not to exercise the entitlement which the convention requires should be afforded to him.

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In sum, therefore, we believe that the Bill does provide the appropriate convention safeguards. It is not necessary to provide for all decisions to be taken by the tribunal; nor, for the reasons which I have attempted to give, is it desirable to provide for that. Therefore, in spite of the eloquent way in which the noble Lord put his case, we do not believe that the provision goes against the ECHR. I invite the noble Lord to consider what has been said. I beg to move.

On Question, amendment agreed to.


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