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I maintain that the wording throughout the Bill makes it very difficult for anyone to second-guess the judgments. I believe that it is right that we have tabled a new clause to ensure that nothing in the Bill makes it difficult to undertake such a judicial review. New clause 43 does exactly that, by requiring that nothing in the Act
Amendment No. 13 adds a general requirement that the authority acts in a way that is
There is no absolute requirement because clause 2 says that that should be done only
Amendment No. 397 again adds the "reasonably" requirement to the FSA powers to request information in relation to applications by recognised investment exchanges and clearing houses. On this, too, the Minister has assured us that the FSA will always act reasonably, and therefore he cannot object to our inserting the word in accordance with amendment No. 397.
Amendment No. 398 relates to clause 283, which deals with the way in which the Director General of Fair Trading can investigate matters, and proposes that the
director general's power to require documents to be produced to him can be exercised only where he reasonably believes that the document relates to a matter relevant to his investigations. That is a useful check on the exercise of the director general's powers.
Amendment No. 399 relates also to the information which the Director General of Fair Trading can require, as provided by clause 283. The amendment seeks to limit his power by providing that the information must in his view reasonably relate to a matter relevant to the investigation.
This is a comparatively modest package of amendments, which go no further than the assurances that the Government have given us. We have heard warm words about the openness in which matters will be conducted, the accountability that exists and the reasonable way in which the authority will exercise its powers. We want to upgrade and emphasise those assurances, and safeguard our liberties by ensuring that if this powerful and independent authority exceeds its powers, there will at least be provision for judicial review.
Sir Nicholas Lyell (North-East Bedfordshire):
I am glad to follow my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who has given a comprehensive introduction to the new clause and amendments. I endorse and support what he said.
The Government should not be afraid of judicial review in relation to the Bill, but I have a nasty feeling that they are unnecessarily so. I request Ministers to have the Bill examined, between the conclusion of our proceedings and its consideration in the other place, because judicial review is a safeguard for the citizen. Everybody accepts that the regulation of the City of London is a detailed and complex matter that requires great skill, and nobody would deny that the Bill will give immense powers to the Financial Services Authority and immense supervisory powers to the Treasury. The explanatory notes to the Bill make it clear that it seeks to provide for the accountability of the authority. However, those notes are slightly alarming when set against the detailed drafting of the Bill, which seems to be more concerned to make the Bill judicial review-proof than to make the authority accountable through the courts.
When I was in government, I had responsibility for the questions of judicial review in relation to legislation, and I certainly do not want the FSA to be hamstrung by over-easy and unnecessary applications for judicial review. I do not believe that there is a serious risk that that will happen. I accept that those who are being regulated are often financially powerful and might seek to use the weapon of judicial review, but the way that the courts operate judicial review rightly gives a wide discretion to the regulator.
The courts are reluctant to step in and second-guess a regulator when he decides that some piece of regulation is reasonable. However, the language of the Bill appears to be specifically designed to stop the courts doing that. It is to try to counter that that we have tabled new clause 43 and amendment No. 13. New clause 43 is designed more to flag up that serious issue than to provide perfect drafting. It would be much better to go through the Bill and insert the word "reasonably" where we suggest it is necessary, or to take out expressions such as "in the Authority's view", which seek to exclude the intervention of the courts and give an even wider discretion to the FSA than the courts would leave to it.
I commend the thought behind new clause 43:
I commend amendment No. 13 strongly on its own account. It is reasonable and sensibly drafted and states what we would wish to achieve. Clause 2 states:
Sir Nicholas Lyell:
The Minister nods sympathetically to those suggestions. I hope that he will respond in similar fashion to this valuable amendment. It would be nice to have the good intentions manifested on the Government Front Bench expressed in the Bill, rather than paving the way to hell.
I shall go into more detail about the words "accountable" and "proportionate". I commend them to the Government with special confidence, as a new paper by Howard Davies, no less, has been sent by his director of public affairs, Mr. Christopher Boyce, to all stakeholders. I received it, although I am not sure how I am a stakeholder in the FSA.
On page 10, paragraph 18, the document makes it clear that the authority intends to act with proportionality. It states:
The reference to accountability on page 35 of the document is slightly less comforting, as it seems to confine accountability to the annual report. Although annual reports are nice, in this case the contents would be controlled by the authority. Moreover, accountability is to include what are described as "'clusters' of performance indicators"--a dangerous phrase, as one man's performance indicator is another man's nightmare. Clusters of performance indicators are not necessarily the ideal way for the FSA to be accountable, but the notion of accountability is clearly accepted in principle, and I commend its inclusion in the Bill.
Clause 2 sets out the authority's general duties, and specifies that
"shall restrict, impede or prevent a judicial review".
That would provide a safeguard against the claim that judicial review would always fail because the detailed and rather cunning wording in some parts of the Bill would make it so difficult.
"reasonable, fair, open, accountable and proportionate".
Again, the background is clear. We are dealing with a powerful body with a great many discretionary powers: it can make rules; it can authorise people--or decide not to; it can investigate; it can intervene in the market; and it can fine people.
"so far as is reasonably possible".
In the circumstances, the Government should find it difficult to oppose our proposal, as they have assured us throughout the Committee, and more recently, that the authority will always act in those ways. If that is the case, let us put it in the Bill.
"Nothing in . . . 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".
However, I ask the Government to consider the individual clauses in the light of that thought and not necessarily to agree to include the new clause as the perfect way to achieve that aim. In fact, the new clause would look a little stark set against the constant examples of restriction, of which my right hon. Friend gave several useful instances.
"In discharging its general functions the Authority must, so far as is reasonably possible, act in a way . . . which is compatible with the regulatory objectives; and . . . which the Authority considers most appropriate for the purpose of meeting those objectives."
The amendment would add a new paragraph (c), stating that the above would be done in a way that was
"reasonable, fair, open, accountable and proportionate."
I cannot believe that any Minister would say that the Government intended to be anything other than reasonable, or that the authority intended to be anything other than fair. I think that it would intend to be open, as well as accountable and proportionate.
"The restrictions imposed on firms and markets should be in proportion to the expected benefits for consumers and the industry."
Those wise words should be included in the Bill, as they embody what "proportionate" means.
"the Authority must, so far as is reasonably possible, act in a way . . . which the Authority considers most appropriate for the purpose of meeting those objectives."
The slightly inelegant legal description of such wording is that it is a "self-reference" clause. I suggest that the words "which the Authority considers" have been expressly used to try to oust the jurisdiction of the courts in the exercise of judicial review.
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