Memorandum from The Right Honourable The
By letter dated Friday, 14 May the Secretary
of the Joint Committee on Financial Services and Markets wrote
to me in the following terms:
"Lord Burns, the Committee's Chairman, invites
you to consider the memorandum and to give the Committee your
views, preferably in the form of brief written submission suitable
for publication, to reach me by Friday, 21 May. The essential
question is, whether in your view the Treasury's memorandum makes
it more likely that the eventual legislation will stand up to
legal challenge on human rights grounds."
I received a copy of the First Report and, at
my request, certain additional information on Monday, 17 May.
I received the Bill on Tuesday, 18 May. Given the need to respond
by Friday, 21 May, and my involvement every day this week in sittings
of the Appellate Committee, time for consideration of this important
matter has been extremely limited. Nevertheless, I would like
to help so far as I am able to do so.
I respond in my capacity as a judge. In doing
so I am expressing provisional views on proposed law reform the
effectiveness of which will no doubt be tested in the courts after
the Human Rights Act 1998 comes into force. I may have to revise
such provisional views in the light of arguments in a concrete
case. I write this letter on the understanding that my response
will be a matter of public record.
Except for one point, I do not propose to comment
on the principles the courts will have to apply after the Human
Rights Act 1998 comes into force. It is important to bear in mind
that a basic theme of the jurisprudence of the European Court
of Human Rights is to find a fair balance between conflicting
values and interests. That is how an English court will probably
approach the matter when the Human Rights Act comes into force.
It is likely to take as a starting point that the new regulatory
system must be just and must protect Convention rights, but also
to accept as a basis premise that in order to serve the interests
of the public it must be effective. In my view the courts are
therefore likely to accept the importance of the objective as
it is described in paragraph 4 of the Treasury Memorandum dated
14 May 1999. But it may be useful to spell out the twin objectives
in the long title to the Bill.
The only specific comments that I am able to
make on the somewhat fluid and developing shape of the proposed
legislation are as follows:
1. INDEPENDENT TRIBUNAL
It is of vital importance that the precise nature
and role of the Tribunal, and the insulation of Tribunal from
the FSA's internal procedures, should be clearly spelt out in
the legislation. This is an indispensable requirement for the
effectiveness of the new system. Paragraph 6 of the Memorandum
suggests that the necessary changes will be made. This is reassuring.
2. DISCIPLINE: PARTS
V AND XII OF
It is an important question whether the disciplinary
system is likely to be classified in Convention terms as criminal
proceedings. While I recognise the force of the contrary arguments
(and notably the point about the potential size of fine) my present
view is that it is likely that the courts will generally speaking
treat the disciplinary system as involving civil proceedings.
But where the disciplinary matters closely overlap serious species
of market abuse I regard the position as entirely open.
3. MARKET ABUSE:
PART VI OF
For reasons given by Lord Lester of Herne Hill
it is probable that the courts will classify the market abuse
provisions as criminal proceedings. I am glad to see that the
Government has decided to ensure that additional Convention procedures
are put in place in the new Bill. I have not seen those changes
nor any changes designed to deal with Lord Hobhouse's comments
in his recent letter on the flaws in clause 56. At present it
is apparently intended that the proposed system will continue
to be underpinned by a vaguely worded Code, such as is contained
in the document headed Part 2: Draft Code of Market Conduct (dated
June 1998). In these circumstances there is a substantial risk
that in respect of market abuse the system will be held not to
comply with the Convention principle of certainty.
My answer to the question put to me is that
the Treasury's Memorandum represents considerable progress. But
there is clearly much work to be done.
20 May 1999