Previous SectionIndexHome Page

4 pm

Mr. Quentin Davies (Grantham and Stamford): It sounds as though the Economic Secretary is about to complete her summary of the amendment. However, not only has she failed to deal with the issue of faute lourde, the French analogy to which my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) referred: she has not provided any rationale justifying the distinction between the Government's approach to the liability of the police and their approach to the liability of the FSA. What is the rationale for the distinction? The whole purpose of Report is to go through the Government's proposals and to learn their rationale for departing from existing practice in this country. Will she answer our concrete, precise question?

Miss Johnson: I said clearly that I thought that comparisons with the French system did not hold water--there are too many differences. I thought that I had adequately covered the point about the police. I am sorry that the hon. Gentleman does not think that I did, but the police are in a very different position from the FSA for so many reasons that it is not difficult to imagine them.

27 Jan 2000 : Column 632

I shall wind up my remarks--the hon. Gentleman has almost invited me to do so--by pointing out that core principle 1 of the Basle principles on banking regulators recognises the need for the immunity of banking supervisors. We fully support that principle. We would weaken the FSA's ability to deal effectively and quickly with difficult and finely balanced decisions if we accepted the amendment.

Mr. Flight: There is a huge body of law on the definition of recklessness. It is pointless our seeking to define it--we are not lawyers. However, to pretend that recklessness is not a clear legal concept is not right. As was pointed out, the concept occurs elsewhere in the Bill. In addition to the example given, it appears in clause 149, which deals with offences. Subsection (4)(b) refers to one who,

The French concept of faute lourde means literally "heavy failing". Translated lawyer to lawyer, that means virtually the same as "reckless". As the Economic Secretary said, the United States Securities and Exchange Commission system is different, but it is by no means impossible to sue the SEC under the US constitution. That is a different approach to the one that we are discussing, but, as any US lawyer will say, the idea that the SEC enjoys immunity is false. There is a particular US approach to the issue.

Sir Nicholas Lyell: Does my hon. Friend agree that if the Government do not give some ground, they are likely to fall foul of articles 6 and 7 and article 1 of protocol 1 of the European convention on human rights?

Mr. Flight: I thank my right hon. and learned Friend. He is a lawyer, and that point has been made to me by other lawyers. The Government's hands will, in due course, be forced when an appropriate case is taken to the European Court.

As was made clear in the previous debate, the position of the Burns committee is perfectly sensible. Either the exemption from immunity should be limited or there should be a full and proper system of complaint, award and recompense. The Government are resisting on both counts, and the one on which they should concede ultimately is debatable. However, a decision will be forced on the Government in due course.

We shall not press the amendment to a vote because we made a point in the previous debate. The Law Lords are legally well qualified to sort out the issue in the other place and to insist on the point made by my right hon. and learned Friend. Although the issue will have to be resolved by one of the two routes that we have proposed, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

New Clause 8

Legal assistance scheme

".--(1) The Lord Chancellor may by regulations establish a scheme governing the provision of legal assistance in connection with proceedings before the Tribunal.

27 Jan 2000 : Column 633

(2) If the Lord Chancellor establishes a scheme under subsection (1), it must provide that a person is eligible for assistance only if--
(a) he falls within subsection (3); and
(b) he fulfils such other criteria (if any) as may be prescribed as a result of section (Provisions of the legal assistance scheme)(1)(d).
(3) A person falls within this subsection if he is an individual who has referred a matter to the Tribunal under section 101(4).
(4) In this Part of this Act "the legal assistance scheme" means any scheme in force under subsection (1).".--[Mr. Timms.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Stephen Timms): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Lord): With this it will be convenient to discuss the following:

Government new clause 9--Provisions of the legal assistance scheme.

Government new clause 10--Funding of the legal assistance scheme.

Government new clause 11--Tax treatment of levies and repayments.

Government amendments Nos. 135, 182 and 183.

Mr. Timms: The purpose of new clauses 8, 9 and 10 is to provide the Lord Chancellor with the power to establish a subsidised legal assistance scheme in cases before the tribunal that involve the imposition of penalties for market abuse. They fulfil a commitment that my hon. Friend the Economic Secretary made to the Standing Committee on 2 November 1999 and will be widely welcomed.

In the light of consultation responses and evidence given to the Joint Committee chaired by Lord Burns, the Government reviewed the question of whether the market abuse regime should be categorised as criminal or civil for the purposes of article 6 of the European convention on human rights. We think that there are good arguments for characterising the regime as civil. Nevertheless, as a precautionary measure, we decided to introduce the convention's criminal protections for market abuse penalties. They include the provision of subsidised legal assistance where a person has insufficient means and where the interests of justice so require it.

New clause 8 will give the Lord Chancellor power to establish the scheme by regulations and that will result in a free-standing scheme for legal assistance rather than an extension to the existing legal aid scheme. It also sets out the coverage of the scheme. Assistance is to be provided to individuals who have referred to the tribunal a decision of the FSA to impose a penalty for market abuse. That reflects the category of cases where we think the convention might require assistance to be provided.

Mr. John Bercow (Buckingham): New clause 8 may be entirely unobjectionable and could even be productive, but I am always anxious when reference is made, especially by this Government, to things being done by regulations. Will the Minister assure me that, when the draft regulations are issued, there will be an adequate

27 Jan 2000 : Column 634

period for consultation upon them before they are finalised and those associated with them have to come to terms with them?

Mr. Timms: I am grateful to the hon. Gentleman for what I thought was his welcome for the arrangements in the new clause. The Lord Chancellor will establish the scheme by regulations and I have no doubt that he will go through the normal procedures and provide adequate time for the discussion that the hon. Gentleman is quite right to say should take place.

My hon. Friend the Economic Secretary told the Standing Committee that it was not our 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.

The Lord Chancellor's Department is currently considering the eligibility criteria; it is likely that the current conditions for legal aid in criminal cases will broadly be followed. If the criminal regime is adopted as a model, there will be two tests: first, an interests of justice test and, secondly, a means test.

New clause 9 gives further examples of the sorts of matter that will have to be covered by the Lord Chancellor's regulations. For example, we envisage the scheme being administered by the Court Service, which will run the tribunal. Therefore, subsection (1) of the new clause allows the regulations to specify who is to determine applications for legal assistance. Other detailed matters will have to be set out in the regulations and it will be necessary for the Lord Chancellor's Department to specify the form that legal assistance may take.

The funding of the scheme is dealt with in more detail in new clause 10. My hon. Friend the Economic Secretary told the Standing Committee that the scheme would be paid for by levies raised by the FSA from authorised persons. That is the effect of subsections (1) to (4). The Lord Chancellor will determine the cost of the legal assistance scheme and set the total amounts of the levy for a specified period--normally one financial year--required to be paid for by the levies; the FSA will decide on the distribution of levies on authorised persons.

Because the levy will be raised through FSA rules, the distribution of the levy among different groups of authorised persons will be a matter on which the FSA will be required to consult in the usual way under clause 127. The Government have tabled separately several amendments in that respect.

The cost of administering the scheme will come out of the running costs of the tribunal. In subsection (1), we have provided that the levy may cover anticipated or actual costs. The forecast of costs might prove to be an overestimate or an underestimate, so the arrangement we have made allows such matters to be sorted out at the end of the appropriate period.

New clause 11 deals with the treatment for tax purposes of levies payable to the compensation scheme, the ombudsman scheme and the legal assistance scheme, all of which are to be set up in accordance with the Bill. It specifies that payments from those schemes to relevant firms are to be treated as trading receipts. That is achieved by inserting into the Income and Corporation Taxes Act 1988 the provisions set out in new clause 11.

27 Jan 2000 : Column 635

We have had to make that change because the current provision, clause 198, deals only with the tax treatment of payments to and from the compensation scheme. It does not cover the ombudsman scheme or the legal assistance scheme. Amendment No. 135 would remove clause 198, which is replaced by new clause 11, which covers all three schemes. Amendment No. 182 makes some consequential amendments to the Income and Corporation Taxes Act 1988. Amendment No. 183 repeals provisions in that Act and the Finance Act 1991. As the hon. Member for Buckingham (Mr. Bercow) said, it is likely that the series of changes we are making will be welcomed.

Next Section

IndexHome Page