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Lord Elton: My Lords, I merely wish to add one reminder to your Lordships in considering the present situation. A takeover battle is not like a game of chess; it is a game of tennis. One cannot have the umpire on the centre court ringing up for a second opinion. It is necessary to have an authority during a takeover battle. No one seeks to deny the FSA the final word, in the way that the noble and learned Lord, Lord Donaldson, said could happen. But if the FSA is to be given the final word in a takeover battle when the panel is already involved the result is bound to be chaos and the thing will not work.
Lord Stewartby: My Lords, I rise briefly to support Amendment No. 42. It appeared that the Minister sought to argue that, on the basis of the new clause, the final decision would not rest with the authority. It would. It is only during the course of an offer that its activities are constrained. I said at Report stage it was a pity that noble Lords had not received a fuller explanation of the thinking of the Government and the authority on this matter at an earlier stage so that noble Lords could avoid having to deal with it at the last minute. When I said that the matter had been under discussion for a long time the noble Lord told me that the panel had raised its concerns only recently. I am advised by the panel that it first made known its concerns to the Treasury and the FSA as long ago as March 1998. It is better to have before us the working paper as to the nature of the discussions between the Treasury, the authority and panel, but it is still in an unformulated state.
The noble Lord, Lord Borrie, again emphasised that the final decision on this issue should rest with the authority, not a non-statutory body like the panel. That is exactly what new Clause 42 does.
Lord Borrie: My Lords, I apologise for interrupting the noble Lord. If I did say that I did not mean that the authority should have the final decision. I meant that the matter should not be dealt with on the face of the
Bill as the noble Lord suggested, for the reasons that I sought to elaborate, but that, instead, the result he sought could be achieved by agreement between the statutory and non-statutory bodies.
Lord Stewartby: My Lords, I am grateful to the noble Lord for that explanation of his argument. It would be helpful if there was an agreement between the parties that the authority would not exercise its powers during the course of an offer. That would not remove its final responsibility. However, no undertaking has been received from the authority, nor is there an assurance from the Government at this stage, that such a self-denying ordinance is in prospect. Therefore, I hope that the House accepts the very powerful case made by the noble and learned Lord, Lord Donaldson, that on practical grounds we should follow the course suggested in Amendment No. 42.
Lord McIntosh of Haringey: My Lords, procedurally we are debating Amendment No. 41 as an amendment to Amendment No. 40. Therefore, on behalf of the Government Front Bench I shall reply to Amendment No. 41 as an amendment to Amendment No. 40. It will then be open to the noble Lord to decide what to do about that amendment and, in due course, Amendment No. 42. Perhaps I may first put to rest the mind of the noble Lord, Lord Forsyth. The noble Lord believes that there is something sinister about the reference to the Treasury. If he looks back at the legislation for which he was responsible he will discover that it was always called "the Treasury". The Treasury is defined in the Interpretation Act as "the Lords Commissioners of the Treasury". The Lords Commissioners include the Prime Minister and the Chancellor but not any Treasury officials. I am sure that if necessary the noble Lord, Lord Renton, can convince his noble friend of that.
My first duty is to refer to Amendment No. 41 as an amendment to Amendment No. 40. I shall in due course refer to Amendment No. 42 which we have been told is to be pressed to a Division. Finally, I seek to persuade your Lordships that Amendment No. 40, with or without Amendment No. 41, is worthy of the support of the House.
Amendment No. 41 would provide the additional words,
- "one or more specified rules or notes in" [the code].
I feel extremely strongly about Amendment No. 42. That would not give the FSA any discretion at all. It would provide that it could not take any action during
a bid situation, using any of the powers under any part of the Act--not just market abuse powers, but powers, for example, to take action against authorised persons because of fitness and "properness" issues except with the consent of the panel. That goes much further than anything we have had before and much further than anything that noble Lords have produced in amendments. It provides a statutory carve-out for a non-statutory body. That cannot be acceptable.As regards Amendment No. 40, there have been some very useful and valuable contributions to the debate. I refer to that of the noble and learned Lord, Lord Donaldson. He asked for a safety valve. Our amendment provides the kind of safety valve that he described. As he said, it would not prejudice the next round. The issue of whether there had been a breach of the City code in the context of the safe harbour, which the amendment provides, will ultimately be a matter for the tribunal and the courts. We would expect the issue to arise rarely, but when it does, as is the case when exchange rules are breached, it will be for the tribunal to decide.
Lord Donaldson of Lymington: My Lords, I supported Amendment No. 40. Although support for Amendment No. 42 has been attributed to me, I believe that all that is necessary could be achieved under Amendment No. 40.
Lord McIntosh of Haringey: My Lords, I am most grateful to the noble and learned Lord. His name has been taken in vain by a number of speakers on the Benches opposite in the false assumption that he was supporting them.
As regards the basic issue of gatekeepers and safe harbours, I believe that what the noble Lord, Lord Newby, wants, and I am sure that what we want, is a safe harbour and not a gatekeeper. I believe that we agree on that. The problem with Amendment No. 63, to which the noble Lord put his name, is that it lets the gatekeeper into the safe harbour through a back route. Perhaps I am going too far ahead in the Marshalled List. The point is that our Amendment No. 40, for which I am delighted to have the support of the noble and learned Lord, Lord Donaldson, preserves the distinction. I entirely understand this dislike of the noble Lord, Lord Newby, for the gatekeeper role, and I share it. Inserting words of the kind suggested into subsection (4), as suggested in Amendment No. 41, would give the panel a quasi-gatekeeper role. The FSA would be unable to act unless it consulted the panel. In a case where it disagreed, it would be the panel's view which prevailed. That could be the case whether or not a bid was in process.
The only other substantive point made by noble Lords is the argument that somehow the role of the FSA in Amendment No. 40 could bring a takeover bid to a halt or enable it to be halted for undesirable reasons. I believe that that has now been fully answered by the analogy with the courts which the noble and learned Lord, Lord Donaldson, gave. An injunction would be against abuse and not against the continuation of the takeover. The fears which have
been expressed by the Takeover Panel are entirely unjustified. There is nothing stopping the panel taking instant decisions. If judicial review proceedings are brought, I cannot see what difference that can make to the process of the bid. The issue is only whether or not market abuse has occurred. That would not call a halt to the bid. There is no conceivable reason why it should.I repeat the point that I was asked to make earlier on, whether "in conformity with the City code" in our amendment means "as applied by the panel". The answer is "yes" in the sense that the City code is the code which is drafted and applied by the panel. There can be no other answer. If I am wrong and it can be shown that I am wrong, my honourable and right honourable friends in another place will look at that issue again. I cannot see how in commonsense language that is not the case.
My objection in principle to Amendment No. 42, which is the worst of all the amendments before us, is to the suggestion that it is entirely open to a non-statutory body, the Takeover Panel, to determine on a case-by-case basis, without any responsibility towards tribunals or the courts, what is or what is not market abuse. The market abuse procedures which The market abuse procedures which have been accepted by this House as being the right way to extend the powers of financial services regulations would be shot through if it were possible for a non-statutory, non-accountable body to determine how it should be interpreted on a case-by-case basis. Since the fears expressed by noble Lords opposite and by the Takeover Panel have not been substantiated, I ask your Lordships to accept Amendment No. 40 and I ask the noble Lord, Lord Saatchi, to withdraw Amendment No. 41.
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