Clause
44Orders
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
level of compensation—the price agreed—rather than
providing for a mechanism to determine the compensation
payable. 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 transaction—if 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 Government’s intention was to
cover both stages. If the Government’s interpretation of
“disposal of things
transferred” is broad, the amendment incorporates that; if it is
narrow then it does not. I should be grateful for the Minister’s
reply. 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 transferors—the bank or its
shareholders, depending on whether property or share transfer powers
have been used—become 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.
Clause
48Onward
transfer
Ian
Pearson: I beg to move amendment No. 102, in
clause 48, page 22, line 13, at
end insert— ‘(aa) the
Treasury makes a reverse share transfer order under section [Reverse
share
transfer],’.
The
Chairman: With this it will be convenient to discuss
Government amendments Nos. 103 to
105.
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 transfers—which I spoke about last Thursday
and earlier today—as 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— ‘,
or (da) the Treasury make a
reverse property transfer order under section [Temporary public
ownership: reverse property transfer],’.—[Ian
Pearson.] 5.30
pm
Mr.
Gauke: I beg to move amendment No. 146, in
clause 48, page 22, line 21, at
end insert ‘(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.
Gentleman’s generosity. It is our view at the moment that the
amendment is
otiose—
Mr.
Todd: A splendid
word.
Ian
Pearson: —and superfluous, but we will
reflect on
it.
Mr.
Gauke: I beg to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Clause
48, as amended, ordered to stand part of the
Bill.
Clause
49Independent
valuer
Ian
Pearson: I beg to move Government amendment No. 106, in
clause 49, page 22, line 23, leave
out ‘must’ and insert
‘may’.
The
Chairman: With this it will be convenient to discuss
Government amendment No.
107.
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
the purposes of the European convention on human rights, and the
requirements of article 6 of the convention will therefore apply. In
particular, the compensation must be assessed by an independent and
impartial
person. 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
valuer’s 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 situations—for example, a sale through auction
to a private sector purchaser—the 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 compensation—that
is, the price agreed—rather 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
valuer, or in some other way than by a method of independent valuation.
Is that a correct reading of Government amendment No. 106? There is a
significant change of gear from “must” to
“may”.
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