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
that might otherwise exist, such as a requirement to secure the consent
of a person who does business with a bank. The hon. Member for
South-West Hertfordshire has proposed a set of amendments that would
narrow the interpretation of the clause. I will seek to explain why we
believe they are unnecessary and
unhelpful. 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 law—a 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
the Government’s action is proportionate and in the public
interest. That is the case with the Bill, which is why the statement
has been made.
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 taker’s
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
Minister’s 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 Minister’s point that
it is important that the transferor—the private sector
purchaser—is 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 transfer—ensuring 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
Bill, once enacted, will breach the Human Rights Act, but that will be
for the courts to determine. I merely raise what appears to be an
unavoidable situation. Clause 31 contains some holes and does not
provide complete certainty of control because of the structure of our
law, the Human Rights Act and European Union
law. 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 Government’s intention. If the Bill’s
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
Chancellor’s 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
individual’s 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 bank’s 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.
11
am 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 recognise—I do not attack
the Government on this—that 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.
Clause
32Transferable
property
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
that is and whether it is possible for the clause to be more explicit.
My amendment would remove some wording, which I am keen to replace with
more specific wording, but until we know what the Government have in
mind it is not possible to propose an amendment that is more
specific. 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. Friend’s amendment. It is
clear that the idea of the parliamentary draftsman and his
interpretation of the Minister’s 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. Friend’s 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 Government’s intentions and my hon. Friend’s
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
think of examples in which that might be appropriate. The first example
that my officials came up with was milk quotas, which would not
normally apply to the banking sector, but it is an example of a
property right under European law. Carbon trading permits under the EU
emissions trading scheme may well be an appropriate example. We do not
know what instruments may be included in the
future. 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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