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5.15 pm

I was glad that the hon. Member for Arundel and South Downs (Mr. Flight) spoke to amendment No. 230, as the right hon. Member for Wells did not mention it. As the hon. Gentleman said, we dealt with the matter in Committee, and my hon. Friend the Economic Secretary said then that we wanted to consider it further.

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We want the FSA to be able to give guidance when that is desirable. We view the guidance power as an important tool enabling the authority to carry out its functions flexibly and with a light touch. Clause 129(1)(d) enables it to give guidance on

We want to look further at the points raised by amendment No. 230 in the light of that. We have not been able to do so yet because we have been resolving other issues, but I repeat my hon. Friend's commitment. I hope that, in the light of what I have said, the matter will not be pressed to a Division.

May I take advantage of the conviviality that we are currently enjoying, and wish my right hon. Friend the Chief Secretary to the Treasury a very happy birthday? He is characteristically present, as we would all expect him to be.

Mr. Heathcoat-Amory: In the same spirit, I too wish the Chief Secretary a very happy birthday. He has aged a little over the past year, but he retains much of his vigour.

I am grateful to the Financial Secretary for responding to many of our concerns. We do not intend to press the new clause to a Division, so hon. Members can relax in that regard.

I am aware that there may be technical deficiencies in some of the new clauses and amendments. They were tabled in probing mode: we wanted in particular to hear a little more about the Government's attitude to the rule book and how it might be reviewed, and to hear more about the question of extra-territorial regulation. Although the Financial Secretary mentioned those points, I do not think that we got to the bottom of the issue of origin-state regulation as against state-of-destination regulation. I fear that that will cause considerable problems in the future, especially in an era of e-commerce when many products can be offered, bought and sold electronically across national borders. I do not think that either the Treasury or the authority has really grappled with the whole question of who authorises the products or processes involved, and how consumers in different countries can obtain redress when things go wrong.

It is very much in the country's interests for us to get this right. I believe that we have much to gain from an origin-state approach. It would enable the City and the British financial services industry generally to offer products abroad on a global basis, and enable others to rely on the strength of our regulatory system. That will not be accepted, however, if at the same time we retain powers to regulate and keep out other products. Other countries will latch on to that, and will use it as a pretext to block, or at least regulate to a different standard, products on sale from this country. I am putting a marker down, because we must all return to the issue in due course.

I am grateful for what the Financial Secretary said about whether, and the extent to which, people could rely on guidance issued by the Treasury. I took him to mean that we have more to hear from the authority or the Treasury, and I think that that is probably a good thing.

A number of question marks hang over these matters, but in many instances the Government and the authority, rather than the Opposition, will be vulnerable. The best that we can do is to flag up the issues and difficulties.

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If they are not properly dealt with in the Bill, that will be a danger for the outside world and for the industry, but it could be an embarrassment to the Government in due course, so I urge the Minister to keep those matters at least under review.

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 43

Judicial review

"Nothing in the provisions of this Act shall restrict, impede, or prevent a judicial review of the exercise or non-exercise of any power or discretion vested in the Authority or the Treasury by or under this Act.".--[Mr. Heathcoat-Amory.]

Brought up, and read the First time.

Mr. Heathcoat-Amory: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 13, in clause 2, page 1, line 19, at end insert

(c) which is reasonable, fair, open, accountable and proportionate".

No. 397, in clause 264, page 134, line 41, after "Authority", insert "reasonably".

No. 398, in clause 283, page 145, line 26, after "(c)", insert "in his view reasonably".

No. 399, in page 145, line 29, after "information", insert

"which in the Director's view reasonably relates to any matter relevant to the investigation".

Mr. Heathcoat-Amory: The new clause concerns judicial review. The background is the substantial statutory immunity that the authority enjoys which, to put it bluntly, means that people will not be able to take legal action against the authority even when it behaves negligently, or recklessly.

In the debate last week, we tried to alter that and to restrict and narrow the statutory immunity. We failed, but the authority must not be completely unaccountable at law. Given the Government's resistance to our earlier proposal, it is particularly important that we explore to what extent there are other ways in which the authority can be held accountable both to the House and through the existing legal system. This group of amendments explores how and to what extent there are provisions for legal challenge, or a review of the authority's actions. The picture is not encouraging.

The authority's decisions as they affect the regulated community can be appealed to the tribunal that is set up and described in the Bill--although, again, we do not have many details about how the tribunal will operate. Those details will be introduced by regulation. The Lord Chancellor will deal with the issue. It is a subject of consultation, but the House will not be able to review the matter.

The important point is that there can be an appeal on a tribunal decision to the ordinary courts only on a point of law. We should remember that the tribunal is not like an

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ordinary court of law. The requirements and qualifications of those who will staff the tribunal will not be particularly onerous. It is a special legal body.

Again, the FSA is making its own rules, which have the force of law and which are not subject to parliamentary review. People can be fined unlimited sums and can lose their livelihoods under a system that allows little appeal to the ordinary, familiar courts and where there is little parliamentary scrutiny.

I think that fairly describes the system in the Bill. If I am at all accurate in my description, it will follow that the remaining aspects of legal accountability are precious and must not be weakened or removed. That brings me to the importance of judicial review. Even the Government are subject to judicial review. It is, to some extent, a blunt instrument, but it is an important safeguard none the less. It means that the Government are finally accountable at law; they are not above the law. The House makes a law. The Government are subject to it. The Financial Services Authority, too, should be subject to the law. We therefore need the long-stop safeguard of providing that the authority's decisions are open to judicial review.

The picture painted in the Bill, and particularly in the detailed wording of the clauses, is not particularly encouraging. The authority is given enormous discretion in its use of powers--in how it may make rules and how it may enforce them. The drafting really seems to be designed to preclude the possibility of a court checking that the authority has acted "reasonably", to take only one example.

We are always being assured by the Treasury and by Ministers that the authority will always act reasonably, and doubtless that is the intention. However, the Opposition would like to ensure that the courts can ensure that the authority acts reasonably and can review a decision by the authority if it is thought that an action is not reasonable. As I said, the wording makes it really very difficult for a court to conduct such a review.

Clause 10, for example, allows for reviews of the authority by an "independent person". The independence of such an investigation would obviously be very important, as there might be allegations that the Treasury or Treasury Ministers were somehow implicated in or associated with the matter to be reviewed. The independence of anyone conducting such a review of the authority is therefore essential.

Although the Bill provides that the inquiry should be independent, that is not an objective test to be applied. Clause 10(7) states:

It will be very difficult for anyone to prove before a court that an inspector or investigator did not seem to the Treasury or to Ministers to be independent. Such a task is very much more difficult than simply requiring the inspector to be independent, a matter that would be capable of objective independent assessment. That is by no means the best example, however.

A more important example is provided in clause 139, on the appointment of inspectors to examine the affairs of the "authorised" community, which is composed of those regulated in the Bill. I own that it is important that the

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Treasury should have the power to appoint investigators to do that work, but it is a pretty draconian power. A firm on the receiving end of an investigation, even if subsequently cleared, could suffer great damage to its reputation--indeed, once it was known that a firm was being investigated, that in itself could drive customers away. It is a most important power.

The Bill quite rightly uses the phrase "good reason" to place limits on how and in what circumstances investigators should be appointed; the catch is that all that has to be shown is that it appears to the authority or to the Secretary of State that there is a good reason for their appointment. It will be very difficult for anyone to prove that it did not appear to the authority or the Secretary of State that there was a good reason.

It would have been much better to require a good reason. If there was such a requirement, outside bodies and courts might be able to show that there were no good reasons. To try to get inside the mind of the Secretary of State or the chairman of the authority and show that, at the time, they did not believe that they had good reason would be a very difficult hurdle to jump, and would effectively preclude the possibility of judicial review unless it was blatantly clear to everyone that the Secretary of State could not have had any good reason.

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