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The Deputy Speaker (Baroness Gardner of Parkes): My Lords, I should point out to the House that there is one word misprinted on the Marshalled List. The amendment should read:
- "A joint committee of both Houses of Parliament shall examine all the reports submitted under this paragraph at least once a year".
At present, parliamentary scrutiny is strictly limited. The Bill before us envisages that it should be the Treasury rather than Parliament to which the authority is accountable. But, given the importance of the financial services market and the powers wielded by the authority, it is appropriate that there should be a greater degree of parliamentary scrutiny. For that reason, we wholly support the amendment.
Lord McIntosh of Haringey: My Lords, I have spoken to the Deputy Chief Whip and he has upbraided me for my levity. Indeed, he had very good reason to do so because I did not really appreciate, when they were debated at an earlier stage, the constitutional importance of these amendments.
If the amendments were carried, the House of Lords and the House of Commons would be told in legislation how to organise their business. That is not acceptable. Noble Lords who read the article by the noble Lord, Lord Rees-Mogg, in The Times on Monday, the response by the noble Lord, Lord Neill of Bladen, on Wednesday and the further contribution of the noble Viscount, Lord Cranborne, this morning will realise that both Houses of Parliament guard very jealously their own decision-making power in relation to how they consider matters which come before them.
The Bill provides that there shall be a report to Parliament. I have already made it clear that the Treasury Select Committee and any committee which this House may choose to set up have the right to have before them any official of the FSA, any of the regulated persons, authorised persons or anyone they wish to interrogate about the working of the Bill. Nothing in legislation can or should detract from that.
Standing Order No. 67 of this House makes it clear that we can set up a Select Committee or any sub-committee appointed by a Select Committee to confer and meet concurrently with a committee or sub-committee of another place, which covers the point about Joint Committees. If a committee of this House wished to confer with a Treasury committee, the other place could give its committee the necessary powers. There is nothing to prevent this House proposing to another place that it is expedient to establish a Joint Committee, whatever appears on the face of the Bill.
We in government are entirely supportive of any proposal for parliamentary scrutiny which may come from either House of Parliament but we would think it entirely inappropriate to place an obligation on the face of the Bill.
Lord Newby: My Lords, I am grateful to the Minister for that reply. It goes somewhat further than his earlier reply and his consultations have, indeed, borne limited fruit. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 25 to 27 not moved.]
Lord Sharman moved Amendment No. 28:
- Page 234, line 19, after ("Authority") insert ("or any person acting in the capacity of an agent of the Authority under any provision of this Act").
The noble Lord said: My Lords, Amendment No. 28 is very similar to that which was debated in Committee. It seeks to square off the circle, as it were, on statutory immunity. Part IV of Schedule 1, at paragraph 19(1), provides for exemption from liability in damages for the authority and its staff. Paragraph 19(2) provides a similar exemption for,
- "a person appointed to conduct an investigation".
Paragraph 6(2) of Schedule 1 provides the ability for the functions of the FSA to be carried out, on appointment by the FSA, by people who are competent in its opinion to do so. There is thereby a category of people functioning in discharging the duties of the FSA who are not the beneficiaries of the statutory immunity to which I referred earlier. If all the other categories of activity should enjoy statutory immunity, it seems that it should be extended to persons appointed under paragraph 6(2) of Schedule 1. I beg to move.
Lord McIntosh of Haringey: My Lords, clearly statutory immunity from liability in damages is a matter of great importance in the Bill. It was considered in detail by the Joint Committee which broadly approved the degree of immunity proposed by the Bill, subject to certain proposals to strengthen the complaints arrangements, which we have broadly followed. Therefore, I believe that I can safely say in the absence of the noble Lord, Lord Burns--indeed, I would have said it in his presence if he had been here--that the Bill as amended now meets the requirements of the Joint Committee.
It is not as if there is anything new about statutory immunity. The Financial Services Act and the Banking Act provide for it, as do the provisions of the Companies Act 1989 relating to the regulation of company auditors. The Pensions Act 1995 gives the Occupational Pensions Regulatory Authority the same statutory immunity as the FSA will have under the Bill. It was, after all, a Conservative government
who introduced that immunity. Immunity for the FSA was supported in Committee by a number of noble Lords: the noble and learned Lord, Lord Donaldson, the noble Lords, Lord Bagri and Lord Burns, and my noble friends Lord Grabiner and Lord Goldsmith. I am pleased to see that, although amendments have been tabled, they are on a somewhat narrower basis than before.Perhaps I may therefore turn to Amendment No. 28, rather than set out the more general case for immunity. Amendment No. 28 would extend immunity to those acting as an agent of the authority. That is not a feature of any of the existing immunities which the Bill will replace and it is difficult to see why it should be a feature of the Bill. If the authority chooses to employ an agent, the agent will have a right to be indemnified by the authority for expenses and liabilities incurred within the scope of his authority. That right will extend, for example, to tortious action, as long as the action was not manifestly tortious or tortious to the agent's knowledge. That seems a not unreasonable position and, of course, the authority could offer further indemnity if it wished to do so.
I have already spoken about the limits of immunity in any case. It does not prevent actions for damages where the FSA has acted in bad faith. It certainly does not provide protection against an agent for criminal action. I do not believe that the amendment would add anything to the protection of agents or to the Bill.
Lord Fraser of Carmyllie: My Lords, before the Minister sits down, perhaps I may ask him a question. He may recollect that on the last day of Committee I raised the rather curious position whereby the Law Society of England and Wales might be invited by the FSA to carry out a monitoring function in relation to solicitors in Scotland. We may return to that issue at a later stage. What came through from that interesting exchange was that the FSA seemed to be intending--and I do not object to this--to use the powers granted to it under paragraph 6 of Schedule 1 to get a number of other people to carry out that responsibility on its behalf.
That may be a good idea, because it may have the effect of keeping down the fees that would be charged to those within the FSA's regulation, but I should be grateful if the Minister could give me some indication, if not now, at some later stage--possibly by letter--of whether it is the intention of the FSA to put out its monitoring function to other persons. I do not want to extend the statutory immunity wider than necessary, but, if there is to be a wholesale use of such a technique, it might be necessary to consider it carefully.
5.45 p.m.
Lord McIntosh of Haringey: My Lords, with the leave of the House, I do not believe that the noble and learned Lord's question strictly follows from the amendment, but I reassure him that my noble friend
Lord Bach has signed a letter to him about the matter which he raised in Committee. He should be receiving it any moment now.
Lord Sharman: My Lords, I listened with interest to what the Minister had to say on the amendment. I draw some comfort from what he was saying about the FSA indemnifying people appointed under the provision. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Kingsland moved Amendment No. 29:
- Page 234, line 26, after ("faith") insert ("or reckless").
The noble Lord said: My Lords, paragraph 19(3) of Schedule 1 provides that the authority, its officers and members of staff shall not be,
- "liable in damages for anything done or omitted in the discharge, or purported discharge, of [the authority's] functions",
- "the act or omission is shown to have been in bad faith".
In Committee, the principal objection to the addition of the words, "or reckless" was that they were of uncertain meaning and that to use them would lead to endless litigation. In my view, those arguments seriously overstate the problem. First, the words "reckless" or "recklessly" are commonplace in statutes. A quick review of this Bill alone shows that they are used at least 11 times: in Clauses 69(2); 91(2); 120(2); 173(4); 206(2); 250(1); 253(1); 341(1); 392(1) and (2); and 393(1). There are probably more examples.
If "reckless" is a word so fraught with uncertainty, why does the draftsman use it so freely? That cannot be a credible argument. In any event, reckless behaviour is a well understood concept in English law. The following dictum illustrates the point. My noble and learned friend Lord Hailsham said, in R v Lawrence:
- "It only surprises me that there should have been any question regarding the existence of mens rea in relation to the words "reckless", "recklessly" or "recklessness". Unlike most English words it has been in the English language as a word in general use at least since the eighth century AD almost with the same meaning, applied to a person or conduct evincing a state of mind stopping short of deliberate intention, and going beyond mere inadvertence or, in its modern though not its etymological and original sense, mere carelessness".
The second point I should like to address is the fear of endless litigation. The evidence points in the other direction. At present, under the Financial Services Act the recognised investment exchanges do not benefit from any form of statutory immunity. So far as I am aware, they have not been swamped with litigation; far from it. The reality is that no one willingly embarks upon litigation. It is usually the last resort.
Statutory immunity, on the other hand, is a huge privilege and should not be granted unless it is absolutely necessary. We can see the argument for the FSA to be immune from actions and damages relating to matters caused by its own negligence or carelessness. But, in our opinion, immunity from the consequences of reckless behaviour goes too far.
In summary, I believe the fears expressed in your Lordships' House and by the authority that its effectiveness as a regulator would be seriously impaired if immunity in respect of reckless behaviour was removed are exaggerated and, indeed, do not stand up to scrutiny. Undoubtedly, if the authority was to be liable in damages for the consequences of its own reckless behaviour, that would require the authority to think more carefully about the actions it proposes to take. That is what we are trying to achieve. The authority has enormous powers. We believe that among the checks and balances we should include in the Bill are provisions which will have the effect of requiring the authority to think carefully about the way in which it exercises these powers. The amendment would be a useful measure to that end. I beg to move.
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