Ian Pearson: The clause makes provision in relation to the effect of a property transfer instrument. Its purpose is to ensure that a transfer of property is effective in law and takes place in spite of any restrictions
Subsections (3) and (4) of the clause, which the hon. Gentleman wants to amend, are drafted in deliberately broad terms. Once the authorities have decided to intervene in the public interest to resolve a failing bank and the necessary general and specific conditions have been met, the Government consider it appropriate that a transfer should take effect despite any restriction. That is to maximise the chances of a successful resolution in so far as is feasible.
For that reason I do not consider that the changes proposed in amendments Nos. 133 and 134 would be appropriate. They would restrict the breadth of restrictions relating to contracts, legislation and common law. The changes would be likely to be a subject of interest for people seeking to pick holes in the transfers; for example, a party could argue that a restriction that was ignored did not technically relate to a contract, legislation or common law and that it would, therefore, get in the way of a successful transfer and resolution under the SRR.
Of course, notwithstanding the provisions of the clause, a transfer may not take effect in a manner that contravenes Community lawa point highlighted in the debate prompted by the amendment tabled by the hon. Member for Wellingborough. In addition the Treasury has reserve powers, which we will consider in the debate on clause 66, to ensure that international obligations that do not have effect in domestic law are nevertheless not contravened by the exercise of powers under the SRR. Subject to those constraints, the Government consider it appropriate that a transfer should take effect despite any other restriction.
The hon. Member for Wellingborough raised the issue of compatibility with the European convention on human rights. It would not be normal for Secretaries of State to give detailed justification as to why they think a complete Bill is compatible with convention rights. It is important for me to respond directly to amendment No. 135, which appears to narrow the definition of what may be deemed a requirement for consent.
Mr. Bone: I thought that the Minister was about to explain why the Government thought that the convention was not under threat from the Bill. It seems clear to me that it is, because rights under contract are being torn up. That is the whole purpose of the clause. The argument that the Minister will not tell me will not do. The Government must explain; there must be some general reason why they think that the Bill complies with the convention.
Ian Pearson: Let me have another try to see if we can go further in response to the hon. Member for Wellingborough. It is normal practice that if a Bill confers powers, they must be exercised in a way that is compatible with the convention. It is clear that that can be done in a way that is compatible with convention rights, so personal property rights can be overridden if
Amendment No. 135 appears to narrow the definition of what may be deemed a requirement for consent. One of the principal rationales for the stabilisation tools is that it may be necessary to circumvent the usual mechanisms for transferring shares or property, if it is in the public interest. Given that it is imperative that a transfer occurs immediately and with full effect, it is right that there are no restrictions on making the transfer once the general and specific conditions have been met.
If the provisions of the clause were narrowed, private sector transferees might be deterred from acquiring a failing deposit takers business, as they may perceive that a significant execution risk is attached to the transfer. A transfer to a private sector purchaser is unlikely to be arranged unless commercial counterparties are certain that they will obtain complete control over the property transferred to them. I hope that clarifies the points that have been raised by hon. Members, and that the amendment can be withdrawn.
Mr. Gauke: We have strayed on to the European convention on human rights and I will return to it in the stand part debate. On the Ministers comments on my amendments, I am not clear about what in any other way, for amendment No. 134, or by any name, for amendment No. 135, might mean. I am not sure what those words add to the clause. I take the Ministers point that it is important that the transferorthe private sector purchaseris certain of complete control, but I do not see how by any name assists in that process. Equally, however, I do not see how the phrase does any harm, so I shall not press for a Division.
Reluctantly, I shall not press for a Division on anything else, even though I do not think that the Minister gave the Committee a full answer as to why the wording is necessary, but we are in bipartisan times. I do not know whether the Minister wants to intervene and have another crack at it.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr. Gauke: The heart of clause 31 is about providing certainty in a transferensuring that it occurs and that the Government go as far as they can to provide certainty. Does the Minister acknowledge that the effect of clause 31 is deeply constrained, by necessity, for the reasons that my hon. Friend the Member for Wellingborough identified. First, European Union law overrides the provisions of subsection (3), and, secondly, convention rights and, in particular, the Human Rights Act 1998, contain provisions about respecting private property.
Does the Minister agree that challenges to the effects of the Bill, regardless of the provisions set out in clause 31, are likely to come from European law or the Human Rights Act? The provisions will not be effective in dealing with such challenges and will not provide the certainties for the transferor that the Government seek. I do not make that point in a particularly hostile or antagonistic way, and no doubt the Minister will assert that he is confident that nothing that occurs under the
Mr. Bone: I should like to follow up on what my hon. Friend has said. If we accept the clause, we shall be doing something that is probably unique. We will definitely be passing, in common parlance, a piece of legislation that states it will overrule EU Acts. That is clearly the Governments intention. If the Bills provisions had to be implemented following a disaster, the national emergency would clearly be such that we would not care two hoots what the EU said and would carry on doing what was in the interests of the British nation. The Government are correct in that view and should be congratulated on it, but they should not be congratulated on pretending that such an emergency would not happen, because it clearly could. Members on the Conservative Benches have given the Government an opportunity to spell that out, but they have declined to do so. However one reads things, we are clearly saying that we will do what is right in the national interest to protect the financial system and we will ignore what the EU says.
Equally, the Chancellors statement that the Bill is compatible with the convention on human rights is clearly contrary to the facts. Those rights cannot be taken away in such a manner, for the protection of financial stability in a crisis, without affecting the individuals human rights. I am afraid that is neither proportional, nor a proper manner, and for that reason the statement should not be on the front page of the Bill. I congratulate the Government on what they are about to do, but I am afraid that I do not congratulate them on lacking the courage to put in the Bill what they actually mean. The Government, whichever party was in power, would stick up for the rights of the nation, but it is a shame that this Government will not put that in the Bill.
Ian Pearson: Clause 31 describes the effect of a transfer of a failing banks property rights and liabilities, and its real purpose is to ensure that the transfer of property is able to provide certainty of outcome and speed of execution, in spite of any restrictions that might otherwise exist. Despite the comments of the hon. Member for South-West Hertfordshire, I believe that the clause and the Bill as a whole help to provide certainty of outcome.
The clause makes similar provisions to those in clause 16, which provides for the effect of a share transfer instrument or order, and members of the Committee will recall that we discussed that in the light of the amendments tabled by the hon. Member for Wellingborough regarding European Community law. As I said then, we believe that the Bill is compatible with European Community law and with our responsibilities under the convention on human rights.
The Chairman: Order. In a moment I shall suspend the Committee for two minutes. For the benefit of Members who were not present at the start, Members will be invited to rise. If any Member does not wish to participate, given that they are already in the Room, I suggest that they remain seated.
The Committee observed a two-minute silence.
Ian Pearson: Discussing the amendments to clause 31 a few moments ago, I mentioned the importance of acting in a proportionate manner and in the public interest. Article 1 of the first protocol of the European convention on human rights provides for the protection of property rights, but that protection is not absolute. Property rights may be interfered with where it is in the public interest and proportionate to the aim pursued.
Very powerful public interests are demonstrated by the satisfaction of the general and specific conditions in the SRR. In addition, the Bill makes provision for the assessment of compensation that would demonstrate that a fair balance has been struck when intervening under the SRR to protect financial stability and depositors. We believe that the actions we are taking are very much proportionate and in the public interest. We have consulted on them extensively, as the Committee is aware.
Mr. Gauke: I am grateful to the Minister for his comments and am not surprised by what he said. Will a court ultimately determine whether the actions taken under the Bill are proportionate? I expect the Government to say that those actions will, of course, be proportionate and will need to comply with the European convention on human rights, but does the Minister recogniseI do not attack the Government on thisthat there will always be a slight question, because of the nature of the European convention on human rights and the Human Rights Act 1998?
Ian Pearson: I understand the point that the hon. Gentleman makes. We think that the actions that we propose are in the public interest and are needed to protect depositors, and we believe strongly that they are proportionate. It may be possible to construct a legal opinion that suggests otherwise, but that would be quite difficult, as we feel very confident of our grounds. There is widespread recognition that we need powers to deal with failing banks and building societies. That is why we are discussing the Bill and why we had to take action under the Banking (Special Provisions) Act 2008. It would be difficult to construct an argument that we are not acting in a proportionate way through the Bill. It is vital that provision be made to make it clear that a transfer takes effect notwithstanding any restrictions in contract, legislation or any other form, which is why we have phrased the clause in the way we have.
Question put and agreed to.
Clause 31 ordered to stand part of the Bill.
Mr. Gauke: I beg to move amendment No. 136, in clause 32, page 14, line 23, leave out (including legislation of the European Union).
The amendment relates to subsection (1)(e), which is one of those pieces of drafting where one suspects that the draftsman and the Government have something in mind. The aim of the amendment is to find out what
The subsection refers to a property transfer instrument transferring property rights or liabilities, including rights and liabilities under an enactment
(including legislation of the European Union)
the words that I seek to remove. What EU legislation do the Government have in mind? Do they have in mind passport rights under the markets in financial instruments directive or the banking co-ordination directive? The passport rights in those directives enable a branch of a European economic area institution to locate in the UK. Are those the sort of rights and liabilities that the Government envisage? If not, what do they have in mind? The amendment is intended to press the Government to elaborate on what they are seeking to address, with a view to tightening up the Bill so that we know what sort of enactment under EU legislation they mean.
Mr. Bone: I support my hon. Friends amendment. It is clear that the idea of the parliamentary draftsman and his interpretation of the Ministers wish was that the provision would be governed by the sovereignty of Parliament, otherwise there was no need to put those words in. We were told earlier that the Government believe that the measure complies with EU law, so it is not necessary to say that because it is implicit. If that is the case, the additional words are not necessary and my hon. Friends amendment is correct.
I suspect that the draftsman included those words because he intended in the previous clause that we would override EU law. The Bill does not seem to match the Governments intentions and my hon. Friends amendment is most helpful to the Government. I expect the Minister to accept it.
Ian Pearson: No, I am afraid that I shall not do so. The hon. Member for South-West Hertfordshire asks a good question. If I explain the intention behind the wording, perhaps matters will become a little clearer.
Clause 32 provides that a property transfer instrument may transfer any property, rights and liabilities, and gives specific examples of the types of property that that may include. For instance, the instrument may transfer property acquired between the making of the instrument and the transfer date. It may also make provision for foreign property owned by the bank to be transferred. Having consulted those who prepared the Bill, I want to make it clear that the intention is to enable the transfer of the broadest possible range of property, rights and liabilities. As we explained elsewhere during the passage of the Bill, we have tried to future-proof it, which is a matter of course in legislation, so that we do not have to keep revising it.
The final example of what transferable property may be, as the hon. Gentleman noted, is rights and liabilities under the enactment, including legislation of the European Union. The hon. Gentleman seeks to probe us by removing that reference to Community law. I tried to
Why is there a problem with including EU legislation, given the possibility that something might be applicable and could be transferred if the special resolution regime was engaged? It seems a sensible and logical thing to do. It would be rather perverse to exclude something because it originated in EU legislation.
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