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The Attorney-General (Lord Goldsmith) moved Amendment No. 449:
Page 304, line 35, leave out from beginning to "had" in line 38 and insert "in the City Code on Takeovers and Mergers as it"
The noble and learned Lord said: My Lords, I shall also speak to Amendments Nos. 462 and 463. The noble Lord, Lord Hodgson, will recognise the substance of Amendment No. 449. It follows an amendment he proposed in Committee to delete the reference to the rules governing substantial acquisitions of shares, the SARs, from the description of the proposed rule-making power to be provided to the Takeover Panel by Clause 625. We could not accept the amendment at that time, not because of any substantive difference of opinion between us but because the Takeover Panel was still in the process of considering the responses received to its own consultation on the relevance of the SARs. The panel announced the outcome of its deliberations on 21 April and the SARs will go from 20 May, so the reference to them in Clause 625 becomes redundant.
There is still latitude within Clause 625 to enable the panel, should they so choose in the future, to make rules having statutory effect about the sort of matters that were subject to the SARs. I draw attention to that because Clause 625(2)(c) enables the panel to make rules about cases where a takeover bid or other similar transaction is or has been contemplated or apprehended, but that is for the future.
So far as Amendments Nos. 462 and 463 in this group are concerned, they are simply minor tidying-up exercises as a result of changes we agreed in Committee. I beg to move.
Lord Hodgson of Astley Abbotts: My Lords, we are very grateful to the noble and learned Lord for making this change. A number of practitioners were saying
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what a shame it was that we were beginning with a Bill that was already slightly out of date. It is therefore good news that we can remove that particular line.
On Question, amendment agreed to.
Clause 630 [Restrictions on disclosure]:
[Amendment No. 450 not moved.]
Baroness Noakes moved Amendment No. 451:
On Question, amendment agreed to.
[Amendments Nos. 452 to 456 not moved.]
[Amendment No. 457 had been withdrawn from the Marshalled List.]
[Amendment No. 457A not moved.]
Schedule 2 [Specified persons, descriptions of disclosures etc for the purposes of section 630]:
Lord Sainsbury of Turville moved Amendment No. 458:
Page 438, line 32, leave out "Commissioners to exercise their" and insert "Commission to exercise its"
On Question, amendment agreed to.
Lord Goldsmith moved Amendment No. 459:
The noble and learned Lord said: My Lords, this is a minor technical amendment to the disclosure gateways list that applies to information held by the Takeover Panel. The present reference to the gateway with regard to enabling or assisting a person approved under the Uncertificated Securities Regulations 1995 is updated. Those regulations make a provision regarding the transfer of securities in accordance with a computer-based system. All procedures have now been repealed and replaced by a 2001 instrument. I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 460 and 461 not moved.]
Clause 633 [Hearings and appeals]:
Lord Sainsbury of Turville moved Amendments Nos. 462 and 463:
On Question, amendments agreed to.
Lord Hodgson of Astley Abbotts moved Amendment No. 464:
( ) failed to comply with rules about documentation by virtue of section 635"
The noble Lord said: My Lords, I rise to move Amendment No. 464 and speak to Amendments Nos. 465, 468, 471, 472, 473 and 475, which concern Clauses 634 and 635. I must apologise to the House, as
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Amendment No. 469 somehow got tabled in error. I do not think it should be in this group at all, and we will not be seeking to move it.
This takes us to a proposal that we believe still looks suspiciously like gold-plating of the EU takeovers directive. We have just discussed this in Grand Committee, and the noble and learned Lord the Attorney-General said:
"The starting point is Article 17 of the takeovers directive, which requires member states to put in place sanctions which are 'effective, proportionate and dissuasive'. That is to ensure the rules of the directive are complied with".—[Official Report, 28/3/06; col. GC 304.]
The directive therefore requires that a failure to comply with the rules about bid documentation must be subject to sanctions of the kind that satisfy Article 17. The Government have so far taken the approach that only a criminal offence will do, stating that they do not believe the panel will otherwise have sufficient power to take effective action, in directive terms, against any such failure.
The sanctions attributed to the panel, which the Government believe are insufficient for this purpose, are these: public and private censure or reporting of conduct to another regulatory body, as well as action to issue directions to those responsible to put the matter right. This list has overlooked a further power the panel has under the Bill that I believe would adequately satisfy the requirements of Article 17: the power to order a person to pay compensation under Clause 636. In conjunction with the sanctions I have just listed, that seems to be ample penalty to provide an adequate deterrent as required by Article 17 of the directive.
There is another reason why we on these Benches say this is not an appropriate area for a criminal offence. The proposed offence would be for failing to comply with offer document rules. Those rules are made by the Takeover Panel itself. As we discussed at length in Grand Committee, the panel is now to become a statutory body, with all the associated powers that come with that status. However, it will retain much of its independence. We will have a situation where an independent body, subject to very little formal parliamentary scrutiny, will be able, by altering its rules, to create new forms of criminal offences. We wonder whether that is a desirable outcome.
For those noble Lords who were not present in Grand Committee, I am not arguing for greater control of the panel. As I said then, the panel has been a great success, and we do not wish to clip its wings with unnecessary bureaucracy. We would therefore argue strongly against limiting the independence of the panel simply to permit a criminal offence for failure to meet the rules about bid documentation in order to comply—or, in our view, to over-comply—with the EU takeovers directive. Surely, the simpler and correct approach is to allow the panel to deal with such a breach by means of the sanctions under the Bill, which more than adequately meet the requirements of Article 17.
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Since Grand Committee, we have carried out a little research into how other European states have implemented the directive. Our advisers tell us that in Ireland, for example, where they already have a statutory framework, when rules on offer document contents are breached it appears to be a civil liability. We are told that the same is true in Germany. If these states, which are subject to the same directive as this country, do not see the need to implement this as a criminal offence, there is no reason why the Government should feel so compelled. Therefore, in light of this new information, I beg to move Amendment No. 464, which I hope the Government will feel able to accept.
6 pm
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