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Mr. Cousins: Given comments by Opposition Front Benchers and the right hon. and learned Gentleman's own references to the possible meanings of "recklessness", if the bundle of concepts being advanced--from driving licences and trade descriptions to legal decisions in a number of discrete cases--were imported to the meaning of recklessness in the Bill, would that not seriously undermine the rightful level of immunity to which the right hon. and learned Gentleman referred in the previous debate as something he wants to respect, and is that not something from which he wants to protect the FSA?
Sir Nicholas Lyell: No. We are struggling to strike the right balance and I am sure the hon. Gentleman is anxious to achieve that balance. I am confident that rarely would the FSA successfully be attacked on the ground of recklessness. There is a benefit in having the FSA under an obligation to look over its shoulder at least to that extent.
Any large organisation is likely from time to time to be negligent. It is human nature to be negligent. To place such a burden on the FSA would be to go too far.
The Association of Private Client Investment Managers suggests that the authority should be liable in respect of negligence. Although I respect many of the association's submissions, it goes too far in that. I feel sure that the FSA will supervise those working on its behalf sufficiently well to make the occasions on which it acts with gross carelessness rare. It will not be an undue burden on the FSA or its finances if occasionally it has to pay compensation.
Liz Blackman:
Does the right hon. and learned Gentleman accept that under his vague and multiple definition, it is likely that the FSA would be challenged by large firms with lots of money, which could tie up the authority in court for many years and restrict proper regulation?
Sir Nicholas Lyell:
No, I do not accept that. I recognise the danger that, occasionally, large firms might seek to tie up the authority, but restricting the liability of the authority to bad faith or recklessness provides adequate protection. It is a question of judgment, but I think that it is adequately protected. The authority will wish to be astute and, at least, not reckless. It will try hard not be negligent, and it ought to try hard. Members on both sides of the House think it right to make the authority immune from charges of negligence, but the likelihood of a case being successful on grounds of recklessness is much smaller, and the circumstances in which cases are successful are much less justifiable from the point of view of the authority. To draw the line there would seem to be reasonable.
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out, other large bodies of a prosecutorial or regulatory nature are not given this type of immunity. I do not know to what extent all regulatory bodies have absolute immunity under existing law--it would be helpful to know. We are seeking to reconsider where the line ought to be drawn, and I believe that making the authority liable for recklessness is sensible, and part of that package.
I shall be comforted if the Government accept that the investigator will be able to award compensation, either directly or in a way that will effectively shame the authority into granting it--even though there is an element of ex gratia discretion there. That is one place at which the line should be drawn. Here, we are asking whether the line should not be drawn a little more in favour of the industry and a little less in favour of this immensely powerful authority.
I believe that the authority will be adequately protected if its liability is confined to bad faith and recklessness, and I commend the amendment to the House.
Miss Melanie Johnson:
This subject has aroused considerable interest and was considered in detail by the Joint Committee, which broadly approved the immunity proposed by the Bill, subject to certain proposals to strengthen the complaints arrangements. We have followed those where appropriate. It is essential that we have a structure that allows the FSA to get on with its work efficiently and effectively, and the House recognises that that is important. A strong and accountable regulator must be in the interests of the industry and consumers alike.
Immunity is vital for delivering that aim. Without it, the FSA could be frustrated by potential law suits and red tape. It would be very easy to have frivolous litigation or to distract or hinder the regulator from carrying out its duties, which could have a detrimental impact on firms as well. The absence of immunity could make the FSA more risk averse and engender a more formalistic regulatory environment. I am grateful to the House for supporting the notion of immunity in that context.
There has been much discussion about the nature of recklessness and the contribution that the amendment would make to the Bill were it to be accepted. I have to say that I oppose the amendment. We want the FSA to be a dynamic regulator, and that might mean taking some difficult or finely balanced decisions in cases where the answers are not black or white. The authority should not have to run the risk of being sued as well.
Sir Nicholas Lyell:
I entirely agree with the hon. Lady's last sentence, but she must recognise that finely balanced decisions are a million miles from recklessness. We are discussing, to use the language of the courts, decisions reached with gross carelessness or with unacceptable indifference to the situation of the person affected. That is very different from a finely balanced decision.
Miss Johnson:
Like some of my hon. Friends, I am not sure what recklessness means in this context. It is a term with different shades of meaning in different contexts, and is primarily a concept in criminal law. The right hon. Member for Wells (Mr. Heathcoat-Amory) mentioned reckless driving, and recklessness does enter into driving matters. However, my recollection--from being on the bench as a magistrate--is that most charges relate to driving without due care and attention and driving dangerously, and do not feature the notion of recklessness.
Mr. Tyrie:
Will the hon. Lady give way?
Miss Johnson:
The hon. Gentleman has only just come back into the Chamber, so I am not going to give way. Had he wanted to participate in the debate on the amendment, he would have been here at the start.
Mr. Heald:
The Bill contains within it the concept of recklessness, as clause 352 proposes to make it an offence for an individual recklessly to make a statement. Is not the main concern that a big important body such as the FSA will act in a high-handed way? In other words, it will recognise that there is a risk of damage to an individual but will go ahead anyway. That is the essence of recklessness. Why should there be immunity for acting in that way--the very thing we do not want the authority to do?
Miss Johnson:
The circumstances in which this matter could arise, were we to accept the amendment, may involve occasions when financial regulators and the FSA might have to make rapid decisions or decisions that could involve a difficult question of judgment which could have serious consequences for firms and for the wider regulatory environment. They must be able to do that without fear of being sued, either by a firm or by that firm's customers. I am sure that the House accepts
The right hon. Member for Wells asked why the police did not have immunity for negligence. However, I have given the reasons why immunity from suit is important and I am not convinced that cutting back immunity, as the amendment suggests, is right. The police do not have immunity from damages claims for negligence. If we make a comparison with other countries and financial regulators overseas, we see that they have similar immunity to that proposed by the Bill. I am grateful to my hon. Friend the Member for Erewash (Liz Blackman) for her remarks on that point.
Sir Nicholas Lyell:
Am I not right in thinking that, in France, the regulator is liable for what is known as faute lourde? Is not faute lourde very similar to recklessness?
Miss Johnson:
I am grateful to the right hon. and learned Gentleman for his considerable knowledge of legal systems around the world, and I agree that comparisons are difficult to draw in all cases. However, in the United States, the Securities and Exchange Commission is immune from suit for anything done in carrying out its functions or duties--regardless of whether the actions are in good or bad faith--so long as it does not violate a clearly established constitutional right. That would be established by a court ruling. Probably the strongest comparison--France is not the strongest comparison--is with Commonwealth countries such as Canada and Australia, where the immunities are similar to that proposed in the Bill.
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