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Mr. Heathcoat-Amory: I beg to move amendment No. 33, in page 201, line 39, after "faith" insert "or due to recklessness".

The amendment relates to the extremely contentious issue of statutory immunity. All hon. Members should be alert to any proposal to exempt any outside body from the force of law. For that reason, we have paid special attention to schedule 1. Part IV of the schedule will exempt the authority--both the corporate body and anyone who works for it--from legal action, except in certain narrowly defined circumstances.

The matter needs careful scrutiny. It is objectionable in principle for any body or person to elevate themselves above the law. It is ironic that the Bill extends the law--indeed, it creates new law--bringing people within its ambit, in many cases for the first time, while the FSA is retreating behind the wall of statutory immunity.

The Government must explain why the FSA is taking that degree of immunity, when the trend of political development over recent years has been to remove

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statutory immunity. I remember a time when Crown immunity meant that if health and safety provisions were being ignored--in hospitals, for example--the law offered complete immunity from any legal action. Since that time, much has happened to bring public bodies within the law, making them accountable; for example, neither the police nor the Serious Fraud Office are statutorily immune.

However, the FSA, which has an incredible concentration of executive and law-making power, will be statutorily immune, except where it is acting in bad faith. The authority can be subject to judicial review, but the possibility of that has been considerably tightened by the wording of the Bill. Some hon. Members will discuss that matter at greater length.

The question is whether it might be wise slightly to loosen the statutory immunity, at least so as to ensure that it cannot be claimed if the authority acts recklessly.

Mr. Cousins: The amendment would insert the concept of recklessness. Will the right hon. Gentleman define recklessness? If the amendment is accepted, his definition of recklessness could have a considerable effect on how that concept is interpreted.

Mr. Heathcoat-Amory: The interpretation of all these matters is for the courts. However, the concept of recklessness is well known in the legal system. I do not know whether the hon. Gentleman has a driving licence, but I hope that he has never been accused of reckless driving. If he has, he will know that the penalties are severe.

The concept of recklessness--a good old English word--should not create any difficulties, especially as the Bill already includes concepts such as acting in bad faith or negligence. Those mean slightly different things, but they are not new departures within the legal system.

If the hon. Gentleman wants to develop his argument against recklessness, I shall listen to it with interest. We discussed the matter in Committee and encountered no problems with the concept of recklessness--only with the Government's belief that the FSA should be immune in respect of reckless behaviour.

That part of the law runs up against the European convention on human rights. Several cases of negligence in which attempts were made to claim immunity did not succeed; and some court cases brought under the convention resulted in the public bodies--the police, in one case--being made liable for negligent behaviour.

However, we shall not touch on those matters. Our aim is more modest: to net the FSA within the ambit of the law, if it acts recklessly. That is a reasonable proposition. There is a certain symmetry in the Bill. A market participant--a registered firm or an individual--would certainly be found guilty, and could be fined, if it acted recklessly or negligently. An oversight by a firm or an individual will, in some circumstances, render that body or person liable to a fine, or to the disciplinary processes outlined elsewhere in the Bill.

Intent does not necessarily have to be proved. An oversight--reckless or not--could land the regulated person on the wrong end of a fine. However, that does not apply to the FSA. As matters stand, it can act negligently or recklessly and no one can take legal action

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against it. If the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) finds that fair or reasonable, we shall be interested to hear his speech.

Earlier, we discussed compensation--or the financial penalty that could be levied on the FSA, or paid to the firm or individual concerned. However, the Government have turned that down in favour of the much looser concept of ex gratia payments, which are not covered in the Bill. Last year, in the Joint Committee--

Liz Blackman: Will the right hon. Gentleman tell us to which financial regulator the concept of recklessness applies?

Mr. Heathcoat-Amory: The Financial Services Authority is the regulator to which the provision will apply. I am not interested in other regulators, but if the hon. Lady will enlighten me, I am sure we shall have another Bill to cover them.

Liz Blackman: Which other financial regulator, financial or otherwise, has incorporated the concept of recklessness as a test whereby an authorised person can sue that body? Is the right hon. Gentleman seeking to incorporate an entirely new concept in the FSA test?

Mr. Heathcoat-Amory: I have just explained that the concept of recklessness is not a novel proposition for British courts.

Mr. Oliver Heald (North-East Hertfordshire): My right hon. Friend made the point that the concept of recklessness is not surprising in the context of the Bill. Clause 352 makes it clear that it is an offence recklessly to make a statement in certain circumstances. That concept is already in the Bill and obviously has a meaning.

Mr. Heathcoat-Amory: My hon. Friend makes an extremely helpful intervention which reinforces my point that recklessness can incur penalties when the public are guilty but not for the FSA when it behaves recklessly. That is precisely what I mean by the asymmetry in the Bill, which the amendment seeks to correct.

Mr. Cousins: I invite the right hon. Gentleman to comment on the fact that the amendment applies the concept of recklessness not only to the authority but to the investigator.

Mr. Heathcoat-Amory: Exactly the same should apply. It is a modest request to make that if people in authority behave recklessly in the course of their duties, a penalty should apply. In the case of the FSA, that would be done through the investigator. In the case of the investigator behaving recklessly, the penalty would be imposed through legal action.

I find it objectionable that firms can have their reputations ruined even if an investigation is launched but does not reach the point of a fine being levied. Even if it is shown that the FSA was reckless in launching such an investigation and destroying the livelihoods of the people concerned, there is no redress at law. If the independent investigator reaches the same conclusion, the FSA cannot be made to pay any financial compensation--which we seek to correct. The Joint Committee took the same view last year, when it made it clear that statutory immunity in

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the form proposed would only be tolerable if a number of changes were made to the complaints and investigation system. Those changes, which are set out on page 40 of the Joint Committee's first report, have not all been accepted and enacted by the Government.

It therefore becomes even more important to restrict statutory immunity. I am not seeking to remove it entirely. Where the FSA makes a difficult judgment after looking at all the evidence and reaches a reasonable conclusion, it should not be open to legal challenge. Nevertheless, it should not have immunity when it acts recklessly. Removing statutory immunity entirely could inhibit the FSA from taking necessary action, but some erosion of the degree of statutory immunity in the Bill is important.

3.45 pm

Sir Nicholas Lyell: I follow my right hon. Friend in commending the amendment to add recklessness to the concept of bad faith, which would render the authority liable to civil action and damages. It is only a small step from bad faith to recklessness. In some common law definitions, an element of bad faith is one of the ingredients of recklessness. That was so in the leading case of Derry v. Peek, but bad faith is not a necessary element of recklessness.

The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) asked for the meaning of "recklessness". In civil cases over the past 30 years it has meant the following. In 1961, it meant, with gross carelessness, or unacceptable indifference to the situation of the purchaser--here one might say, of the person being regulated. In the Trades Descriptions Acts, a reckless statement is a statement made without regard for its truth or falsity. In that case, it is made recklessly whether or not there is any dishonest intention. Sometimes there has to be dishonest intention, sometimes not.

If there were dishonest intention, the authority or investigator would be caught. One hopes that dishonesty would be exceptionally rare. In cases where there was no dishonest intention but something was done without regard to the truth or falsity of the basis on which it was done, or with unacceptable indifference to the situation of the person being regulated, it is right that the authority should be answerable.

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