Ian Pearson: I beg to move amendment No. 98, in clause 44, page 21, line 6, leave out establishing a scheme for.
The Chairman: With this it will be convenient to discuss Government amendments Nos. 99 to 101 and 112.
Ian Pearson: Amendments Nos. 98 to 101 make several modifications to provision for compensation scheme orders under subsection (2). The purpose of the amendments is to enable the Treasury, where appropriate, to make provision in a compensation scheme order for a sum of compensation to be paid, rather than to make provision for establishing a scheme for determining whether transferors should be paid compensation.
I will explain why I think that that modification is essential. As I have already stated in debates on earlier clauses, in most circumstances the preferable stabilisation option for the authorities will be to effect a sale to a private sector purchaser. In such circumstances, a price will be agreed between the purchaser and the Bank of England. That price may have been determined in one of a number of ways, including an auction process.
In such circumstances, the price agreed reflects a market rate, and the Government therefore believe that there is no need to appoint an independent valuer to determine the compensation due to the transferors as the basic principle under article 1, protocol 1 of the European convention on human rights is that compensation must normally bear a reasonable relation to the property expropriated. In such circumstances, the Government believe that the process of selling the institution would have determined the fair market value, and that there is therefore no need to appoint an independent valuer. The compensation scheme order should simply state the
Let me also be clear that there is still a means for transferors and other interested parties to appeal against the provision for compensation made in the order. That would be by way of the appeals process set out in the order, or by way of judicial review. I would also like to point out that compensation scheme orders are subject to the draft affirmative procedure. Therefore, Parliament can scrutinise the order and assess whether the provision for compensation is appropriate.
The Government are committed to ensuring that the fair value of compensation is paid to parties who have suffered a compensatable interference in their property rights as a result of an exercise of the stabilisation powers. While in many cases that will be done through an appointment of an independent valuer, in some circumstances the appropriate level of compensation can be determined through the process of resolution itself, and it is in those circumstances that I believe the Treasury should be able to specify the sum of compensation due in the compensation order. Amendments Nos. 98 to 101 make incidental appropriate technical provision that allows that. Finally, amendment No. 112 makes it clear that a compensation order is a statutory instrument.
I hope that hon. Members will agree to the amendments to clauses 44 and 56.
Amendment agreed to.
Amendments made: No. 99, in clause 44, page 21, line 7, leave out determining and insert establishing a scheme for determining.
No. 100, in clause 44, page 21, line 7, after compensation,, insert
or providing for transferors to be paid compensation,.
No. 101, in clause 44, page 21, line 8, at beginning insert establishing a scheme for.[Ian Pearson.]
Mr. Gauke: I beg to move amendment No. 145, in clause 44, page 21, line 10, leave out things transferred and insert
the bridge bank or bank in public ownership, or any property or rights of the bridge bank or bank in public ownership.
The amendment refers to the wording in subsection (3) about a resolution fund order. As the Minister has set out, there are essentially two stages in a typical transactionif there is such a thing in these circumstances. The first stage is the transfer of the assets into a bridge bank or temporary public ownership, and the second stage is the transfer of the assets out to a private sector purchaser. It is not clear whether the resolution fund order applies to just the first stage, just the second stage or both. The purpose of the amendment is to probe what the Government seek to achieve.
The subsection states that a resolution fund order is
an order establishing a scheme under which transferors become entitled to the proceeds of the disposal of things transferred.
I seek clarity as to what disposal of things transferred means. The amendment breaks that down into the two stages, which would provide greater clarity if the Governments intention was to cover both stages. If the Governments interpretation of disposal of things
Ian Pearson: Clause 44, which the hon. Gentleman seeks to amend, sets out three types of compensation provision that can be made to compensatable persons. The first provision is the compensation scheme order, which requires a scheme, involving the appointment of an independent valuer to assess compensation due, to be put in place for the purposes of compensating a bank or its shareholders. Members will recall that a similar compensation order was put in place in respect of powers under the 2008 Act to bring Northern Rock into temporary public ownership. The Government amendments to clause 44 also need to be borne in mind.
Clause 44 also provides for a resolution fund order, which creates a scheme whereby transferorsthe bank or its shareholders, depending on whether property or share transfer powers have been usedbecome entitled to the net proceeds of the resolution, subject to the deduction of the costs of the resolution. The scheme will include the method of calculation and distribution. Finally, the clause includes a third party compensation order, which provides for compensation to be provided to persons other than the transferors who have their termination rights interfered with by a partial transfer.
The Bill requires all compensation orders to be subject to the affirmative procedure, as set out under clause 56, which is in line with the recommendations of the Delegated Powers and Regulatory Reform Committee in respect of the 2008 Act. The compensation provisions in the Bill will provide suitable mechanisms for determining compensation. I hope that that background explanation was helpful.
I appreciate that the amendment tabled by the hon. Member for South-West Hertfordshire is a probing one. The clause does not refer specifically to the disposal of a whole bank in public ownership, but to the proceeds of disposal of things transferred, so a broad definition is provided for. The clause encompasses the meaning that he desires, as it does not refer to any particular method of disposal. His amendment, therefore, is not necessary. With that clarification, I hope that he will seek leave to withdraw it.
Mr. Gauke: The purpose of my amendment was to seek clarification, and I am grateful to the Minister for providing it. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 44, as amended, ordered to stand part of the Bill.
Clauses 45 to 47 ordered to stand part of the Bill.
(aa) the Treasury makes a reverse share transfer order under section [Reverse share transfer],.
Ian Pearson: These are technical amendments to ensure that compensation provisions are in place for the new transfer powers that we have taken under Government amendments Nos. 92 to 97 and new clauses 10 to 13. The amendments ensure that compensation orders and third party compensation orders can be made for supplemental and reverse share and property transferswhich I spoke about last Thursday and earlier todayas is the case where onward transfer powers are exercised. The amendments are necessary to ensure that consistent compensation provisions are in place throughout the Bill. I request, therefore, that hon. Members support the amendments, which I stress are technical and for consistency purposes.
Amendment agreed to.
Amendments made: No. 103, in clause 48, page 22, line 15, at end insert
(ba) the Bank of England makes a bridge bank reverse share transfer instrument under section [Bridge bank: reverse share transfer],.
No. 104, in clause 48, page 22, line 17, leave out or and insert
(ca) the Bank of England makes a reverse property transfer instrument under section [Reverse property transfer],.
No. 105, in clause 48, page 22, line 18, at end insert
(da) the Treasury make a reverse property transfer order under section [Temporary public ownership: reverse property transfer],.[Ian Pearson.]
(which may, in particular, make provision in respect of specified classes of creditor, for rights in addition to any they may have by virtue of any resolution order)..
The Chairman: With this it will be convenient to discuss amendment No. 147, in clause 52, page 24, line 40, at end insert or to third parties..
Mr. Gauke: The amendments are largely a drafting matter. There is no a particular dispute about the policy element. Amendment No. 146 relates to clause 48 and attempts to elaborate further what should be contained within a third-party compensation order. It aims to be helpful and provide some clarity to the existing wording. Amendment No. 147 is a rather short amendment to clause 52(5), which reads:
There is nothing to prevent the application of the valuation principles in an order from resulting in no compensation being payable to a transferor.
Presumably the same point applies to third parties, which is why the amendment would add the phrase or to third parties. Both amendments add something to the Bill, particularly amendment No. 147, which provides helpful clarification.
Ian Pearson: I believe that the purpose of amendment No. 146 is to ensure that rights arising from provision made for compensation by way of a third-party compensation order are in addition to those rights conferred on a third party under a bank resolution scheme order. The amendment is inappropriate as the Treasury does not have the power to make provision for bank resolution funds for onward transfers.
In addition, in relation to any rights arising by way of a bank resolution fund that has been put in place in respect of the initial transfer of property to the bridge bank or bank in temporary public ownership, any provision for compensation for interferences in third-party rights arising under an onward transfer compensation scheme order will relate to separate and unrelated interferences in property rights.
Amendment No. 147 proposes that clause 52(5) should also make reference to third parties. However, as subsection (5) is applied to third parties by clause 54(3), the courts would construe that clause to refer to third parties. The amendment is simply not needed, so I ask the hon. Gentleman to consider withdrawing it.
Mr. Gauke: I will take the Minister at his word on amendment No. 146 but I am not sure that I quite understand his argument on amendment No. 147. If he is saying that the courts will interpret subsection (5) as applying to third parties, notwithstanding the fact that the clause specifically mentions the transferor but does not say or to third parties, the amendment seems helpful. I do not see why he does not accept it. It seems that subsection (5) will apply to third parties, and if it does I see no reason why it should not say so, given that it specifies transferors.
I am loth to divide the Committee on this point, because it does not seem to be anything other than a technical one, and I am surprised that the Minister has not accepted it. However, I am in a generous mood. Perhaps I will allow him to ponder whether he might reconsider later and accept my amendment.
Ian Pearson: I am happy to ponder, and I appreciate the hon. Gentlemans generosity. It is our view at the moment that the amendment is otiose
Amendment, by leave, withdrawn.
Clause 48, as amended, ordered to stand part of the Bill.
Ian Pearson: I beg to move Government amendment No. 106, in clause 49, page 22, line 23, leave out must and insert may.
Ian Pearson: As the Committee will be aware, the determination of compensation under a compensation scheme order or a third party compensation scheme order will constitute a determination of a civil right for
Accordingly, clause 49 provides for the amount of any compensation to be determined by an independent valuer. We touched on that point in a previous debate. The clause also sets out the process for appointing and removing the independent valuer. The Bill ensures that the valuer will be seen to be independent and impartial, as required by article 6 of the ECHR.
The clause sets out an appointments process whereby an order must require an independent valuer to be appointed by a person who is, and is seen to be, fully independent, as stated in subsection (2). The independent appointing person may appoint an independent valuer either from a list of suitable candidates supplied by the Treasury or by way of an appointment made with regard to criteria specified in the order. The clause specifies a number of other safeguards on the independent valuers security of tenure. For example, the independent valuer may be removed from office only on grounds of incapacity or serious misconduct, and only by an independent person.
The purpose of Government amendment No. 106 is the same as that of the Government amendments to clause 44: to remove the requirement that a compensation scheme order must always make provision for the assessment of compensation by an independent valuer. To summarise the arguments briefly, in some situationsfor example, a sale through auction to a private sector purchaserthe rate agreed would reflect a market rate. In those circumstances, as I outlined about half an hour ago, the Government believe that there is no need to appoint an independent valuer to determine the compensation due. The compensation scheme order should simply state the level of compensationthat is, the price agreedrather than providing for a mechanism to determine the compensation payable.
Government amendment No. 107 makes technical changes to clause 49 so that where an independent valuer is to determine compensation under a compensation scheme order, the provisions in clause 49 regarding his appointment, resignation and dismissal, and the appointment of any replacement independent valuer also apply. Again, I remind hon. Members that there is still a means for transferors and other parties to appeal against the compensation amount decided in accordance with the order.
I hope with that explanation and the read-across to the previous debate
Dr. John Pugh (Southport) (LD): I am not sure that the Minister referred to Government amendment No. 106; I only heard him refer to Government amendment No. 107. However, to return to the point made by the hon. Member for South Derbyshire about the use of the word may, if must is substituted, as the Government wish to do, within the terms of the legislation a compensation scheme could presumably provide, in theory, for the amount of any compensation payable to be determined by somebody other than the independent
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