|Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (Electronic Commerce Directive) Order 2002
Mr. Richard Allan (Sheffield, Hallam): I apologise to you, Mr. Chidgey, and to the Minister for having arrived a couple of minutes late. I am juggling the Committee with duties on the Floor of the House.
I have followed the orders that implemented the e-commerce directive in general, and we have expressed support for the country of origin principle, which each order has tried to achieve. We understand that it is difficult to try to balance the objectives. One objective is clearly to promote trade among EEA countries. Individuals should be comfortable setting up a business selling services electronically to people throughout the whole European market rather than simply in the home country. Part of the order's purpose is that vendors can be clear that they must comply only with their own regulatory regime.
I want the Minister to clarify the consumer protection aspect of the order, which is the other objective. Technical matters mean little to the citizen, but what happens when something goes wrong matters to everyone involved. What will happen if a United Kingdom citizen has problems with a financial promotion from another EEA state, such as a German or Italian investment product? Under the order, such a promotion is exempt from the UK regulatory framework under the Financial Services and Markets Act 2000 because the German or Italian vendor need not comply with the UK framework. Presumably, the citizen must make a complaint under the communications regulatory framework of the country of origin. However, it might be difficult to access that. How near are we to setting up a framework? I understand that discussions are under way to allow individuals to be able to seek redress more easily.
Vice versa, if an individual in Germany or Italy has received a financial promotion from a UK company that is covered by the order under home country legislation, how is he to pursue his complaint? That is
Column Number: 9the bit in which the citizens will be interested, although the technicalities may fly past them. If a person has a problem or believes that he has been sold a duff product and thinks that the promotion is in breach of legislation, the key aspect of the implementation of the e-commerce directive must be that the citizen feels that he can access genuinely easy redress mechanisms. That will ultimately promote confidence in buying services electronically from other EU states.
Ruth Kelly: I enjoyed the contributions of both Opposition spokesmen and I welcome their constructive spirit. They were different in tone, because one was more technical, but I shall do my best to respond to both. I welcome the fact that all parties agree on the general approach that we should aim for a Europewide financial services area. The best way to achieve that is to have a system in which the home state has regulatory authority and for mutual recognition to exist throughout the EEA of a system that has core standards of information and protection as its basis.
Before I respond to specific questions, I shall add several comments on the directive and the opportunities that it affords UK businesses in the financial services sector. E-commerce is likely to play a major role in the future performance of the economy. The Government are committed to making the UK the best place in the world for e-commerce. The UK already has one of the most connected economies in the world, with higher internet use than any other major European country.
The financial services sector is at the forefront of the e-revolution and is leading the way by taking advantage of new technology to communicate with both existing and prospective customers. Financial services firms account for 77 per cent. of all e-commerce sales by UK businesses, both at home and abroad. Despite that, overseas e-commerce sales remain small. I believe that the directive should help to change that by removing many of the barriers that the UK established providers of information society services face when undertaking business within the EEA. It provides the UK financial services sector with a major opportunity. Financial services firms are well placed to grasp that opportunity, not only because they have shown a strong commitment to using new technology to generate new business but because London is a strong international financial centre.
If the hon. Member for Arundel and South Downs (Mr. Flight) will forgive me, I shall deal first with the more general points that were raised. The hon. Member for Sheffield, Hallam (Mr. Allan) talked about the confidence that consumers need when they operate in a more diverse and open market. That points to an important aspect of the new regime. For the full potential of the single market in financial services to be realised, consumers must have confidence not only that they are buying good products but that they know what the products are and the terms under which they are buying them and are
Column Number: 10clear about the redress mechanisms that are in place. They just need to feel safe when they are making a purchase online.
I am personally committed to pushing that at the European level, and the Government are also committed to pushing it. We strongly argue that there should be a system whereby if a UK consumerfor examplebuys a product in another EU state, they know exactly where to turn to get the appropriate redress, and that that should be facilitated as far as possible by the institutional structures that are in place.
One way of doing that is to beef up the fledgling FIN-NET system at the European level. It acts as a co-ordinating mechanism for redress systems across Europe. However, how and where to obtain redress is part of the core standards that we want to be in place. We expect consumers to have that information when they operate under the new regime, so we are pushing a dual approach, by focusing on making available the required information, and by acting as advocates for a much more coherent regime at the European level.
Mr. Allan: I want to point to one of the areas of potential confusion that I hope that the Minister is seeking to avoid. A citizen is likely to go to a UK-based authority, such as the Financial Services Authority, if they have a problem with anybody from anywhere, and it might not be in such an authority's domain to police something that has come from another member state. Will there be clear routes through for the UK regulating authorities, so that when they say ''It's not our bag,'' they can helpfully direct people to whose bag it is, because we do not want such people to feel that they have been shoved aside?
Ruth Kelly: That is an important aspect of the proposals that we are seeking to pursue at the European level. The operation of FIN-NET at that level is one way of ensuring that the appropriate co-ordination between regulators takes place. That is the mechanism through which UK consumers would passpresumably through the FSAif they wanted to pursue a claim in another member state.
Mr. Flight: I think that I am right in saying that the same point ultimately obtains with compensation funds, and that the same principles apply regardless of whether something has been bought through e-commerce or through other permitted routes.
Ruth Kelly: The hon. Gentleman is right. When the distance marketing directive comes into force, it will also define other standards, of which redress will be a part, and it will take this concept further, and develop it.
I turn to some of the other points that the hon. Gentleman madealthough many of them will be more appropriately dealt with through correspondence, so Committee members need not be detained. [Hon. Members: ''Hear, hear.''] I am glad that I am appreciated on the Back Benches.
The hon. Gentleman has suggested that the order might unnecessarily remove protections that are currently available under the 2000 Act, and he pointed
Column Number: 11in particular to the definition of incoming information society services. I disagree with him on that point. Article 3(2) does not require us to limit the definition as he suggested, so it is difficult to see how a full definition could be included. The approach that we have taken in the directive is the same as that taken in general regulations to be promulgated by my right hon. Friend the Secretary of State for Trade and Industry. The approach that we have taken is our general one to such matters.
The hon. Gentleman suggested that we should apply the directive to only one limb of article 12 of the original order. We agree with the point made, but do not believe that a change to the draft order is necessary. It is clear from the directive that information society services are restricted to services provided at individual request. However, the concepts in the original order of ''made'' and ''directed at'' were
Column Number: 12not drafted with the e-commerce directive in mind. The more general reference avoids any risk of improper implementation.
The hon. Gentleman also pointed to unsolicited communications and suggested that we should use wording in article 8(3)(a) of the original order. We clearly appreciate his point, but by using the directive definition, our approach avoids any legal risk of improper implementation.
With those general points, I urge the Committee to accept the order. I will certainly take up the more detailed points made by the hon. Gentleman through correspondence.
Question put and agreed to.
Chidgey, Mr. (Chairman)
Field, Mr. Mark
The following Member also attended, pursuant to Standing Order No. 118(2):
Southworth, Helen (Warrington, South)
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