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Miss Melanie Johnson: I shall deal first with the takeover panel and return to the other points later.

The hon. Member for Twickenham (Dr. Cable) is no longer here as he has had to go home because of a family illness. However, he rightly sketched out the two issues involved and pointed out that the remaining problem was overlap. He explained what would happen if there were conflict. It is interesting that the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) admitted that overlap would not often occur. The implication of his remarks was that it would, as we believe, occur rarely. It will certainly be a rare event, so

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the question is who, ultimately, will determine an issue if there is any dispute about it which relates to market abuse. We say, as we have always said, that the FSA must take such decisions at it is the statutory regulator and the accountable body. People have recourse to definitions of market abuse in the Bill and to the independent tribunal. Those matters contribute to the provision on the work of the market abuse regime and stop it being something that it should not be.

9 pm

Sir Nicholas Lyell: Perhaps I did not make myself clear, but the hon. Lady has taken one part of my speech and transferred it to another. I said that there would not be many prosecutions for market abuse, which is entirely different from the turmoil that can be created by players in the market seeking to frustrate takeovers by contrasting the views of the FSA with those of the takeover panel. I certainly did not say that that would not be frequent. My hon. Friends frequently make the important point that it is one of the dangers of the current position, about which the takeover panel rightly warns.

Miss Johnson: I apologise if I misunderstood the right hon. and learned Gentleman. None the less, we believe that such disputes will be rare. We can be persuaded to believe that, because so far there have been few problems with judicial review--even though there is currently an overlap between the regulatory regime and the takeover panel's code, and between that code and the criminal offences of insider dealing, market manipulation and misleading statements and practices.

Those overlaps could be used in the takeover process in the same way that Opposition Members and the takeover panel worry that they could be used in the market abuse regime. To date, people have not sought to frustrate takeover bids by such means. The only thing that will change after the introduction of the new market abuse regime is the potential degree of overlap, not its nature or form.

It is hard to see how involving the FSA will have any impact on the bid's timetable. That is the panel's main concern, but no one has given a plausible explanation of the way in which that might occur. The panel said that it is worried about injunctions for market abuse, but they would be aimed at the abuse, not the merits or otherwise of the bid, and would not interfere in the takeover process. Indeed, under current provisions there has been no interference in the overlap between the takeover panel and certain areas of legislation.

I therefore presume that no has ever pressed the FSA to seek injunctions under section 61 of the Financial Services Act 1986 alleging possible breach of the market manipulation offence. That course is open to people who are in the process of takeovers, but to my knowledge it has never been taken.

Mr. Loughton: Surely there could be real change to the timetable for a bid if it became known that the FSA was looking into market abuse regulations. Acceptances of a takeover would inevitably fall off so that, at the first acceptance date, the required number of acceptances would not be forthcoming and the bid would be pushed

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further back. Indeed, a takeover could be suspended if it was surrounded by uncertainty caused by the FSA, which would surely affect the timetable.

Miss Johnson: The hon. Gentleman used the word "surely", but he did not give any reasons why that situation should arise. Concern has been expressed that the courts will force the FSA to intervene. However, it has a stated policy of not seeking to intervene, except in exceptional circumstances. As Lord McIntosh explained in another place, it is clear to us, as it is to the FSA, that it could adopt a policy of not intervening where it thought that it was being dragged in for tactical reasons. There is no reason for it not to take that course of action. It is clear that it could adopt a policy of leaving it to the panel to take action where it is satisfied that the panel can deal with the mischief adequately.

Mr. Heathcoat-Amory: Did not the hon. Lady listen to my points about that? She is just reading out her brief without responding to the points that we have made. The authority's self-denying ordinance will not work. If it has the ability to intervene, it is vulnerable to a judicial proceeding that requires it to intervene. It is no good the Minister simply saying that the FSA may decide that, in general, it will not intervene. Provided that it has the power to do so, it will have to examine the circumstances when it is requested to do so, and that will cause the delay and the possibility of litigation about which we have been complaining.

Miss Johnson: I do not know who is not listening to whom. I have just explained that although there is already a significant overlap in legislation which could cause people to interfere in the work of the takeover panel--as the right hon. Gentleman fears might occur--that course of action has not been taken. So, there is no reason to believe that it will be taken any more often in the case of market abuse than it has in matters that might be more vigorously pursued and which certainly count as more serious legally.

Mr. Tyrie: If what the Minister says is correct, she is effectively stating that there will be no overall effect on takeover practice as a consequence of the Government's decisions and this legislation. Is that her view? Does she expect no change in the number of takeovers?

Miss Johnson: I expect that the FSA and the takeover panel will need to work closely together to sort out the practical arrangements. Indeed, they are in the process of doing so. Those practical arrangements need to be sorted out, but I expect very little or no change in the takeover panel's ability to work. As I said in my opening remarks, none of us differs in the objective. The only question is how best to achieve it given the problems lucidly set out by the hon. Member for Twickenham.

Mr. Tyrie: I was trying to draw out the Minister on the point made by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). He said that the threat of judicial review could generate a change in behaviour and that that would lead to a change in the number of takeovers that eventually go through. Is it the Minister's considered view that there will be no change in behaviour and in the number of takeovers as a consequence?

Miss Johnson: I think that I have already answered that point. The right hon. Member for Wells

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(Mr. Heathcoat-Amory) touched on the Datafin case. I cannot recall his exact remarks, but that case obviously formed the basis of the position that the courts have adopted on judicial interference in takeovers. As a result, the courts may not look kindly on parties to a bid and others involved in the bid seeking to circumvent such an approach.

Again, I refer Opposition Members to the remarks of Lord Donaldson. He said that the amendment that we tabled in the Lords, which was very similar to the slightly enhanced one before us, was all that was necessary. He has had a considerable amount to do with these matters. If we are seeking legal justification for which way things are likely to go, Lord Donaldson's views are important and should be taken into account.

Questions were asked about the way in which safe harbour would work in relation to the existing takeover panel provision. Part of Lords amendment No. 180 states:


in conformity with the City code


Therefore, in respect of takeovers, the panel would be able to say what is not market abuse. The crux of the issue is the fuss that would have arisen had we said that market abuse is whatever the FSA says it is, and that, at least in respect of takeovers, the FSA can change its mind case by case, without consulting anyone or being accountable to anyone. Had we made such proposals, extreme concerns would, rightly, have been expressed in Committee, in the House of Commons and in another place.

There are practical problems with the Lords amendment which have not been properly thought through. In addition, there are significant differences between Lords amendment No. 180 and the Opposition amendment in lieu, and I am not clear which is the preferred approach. The two amendments would not have the same force. The Lords amendment makes no provision for a gatekeeper role, which arises in the amendment in lieu. I am not clear how the Opposition want to pursue their case.

The right hon. and learned Member for North-East Bedfordshire asked about the takeover panel and the precedents for subsection (3) of the Government's proposed new clause, and he said that the provision is unusual. I refer him to clauses 307 and 316 of the Bill as it stands, which relate to Lloyd's and the designated professional bodies.

The hon. Member for Arundel and South Downs (Mr. Flight) asked precisely what weight the FSA would attach to the panel's rulings. We expect the FSA to attach considerable weight to them. The panel's view will be highly persuasive in takeover matters. If disagreement arises, we believe that, as the statutory regulator in respect of market abuse, the FSA's view should be the determining view; however, we also believe that disagreement is most unlikely in such cases.

We have spent a long time debating the ingredients of a good market abuse regime--one in which people clearly understand the definition of market abuse, the means by

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which that definition has been reached, what safe harbours exist in respect of market abuse and, therefore, how they can comply with the regime and so ensure that they do not engage in market abuse. Such provisions will be considerably undermined if we accept the Lords amendment or the Opposition's amendment in lieu, as to do so would leave many issues open to further debate. In addition, there would be not one but two bodies with effective responsibility in respect of market abuse; it is easy to foresee the consequences of that.

The right hon. and learned Member for North-East Bedfordshire also raised the issue of the European convention on human rights. The ECHR institutions regard the classification of provisions in national law as not conclusive in respect of our categorisation for convention purposes. A person who engages in market abuse will not commit an offence under UK law and will not have a criminal record. That is an important point to emphasise. Intent is not a necessary element of a criminal offence, as I am sure I do not need to point out to the right hon. and learned Gentleman.


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