HC Deb 05 June 2000 vol 351 cc128-33

Lords amendment: No. 592, in page 229, leave out line 19 to 23 and insert— ("12.—(1)Once an EEA firm which is seeking to establish a branch in the United Kingdom in exercise of an EEA right satisfies the establishment conditions, it qualifies for authorisation (2) Once an EEA firm which is seeking to provide services in the United Kingdom in exercise of an EEA right satisfies the service conditions, it")

Motion made, and question proposed, That this House agrees with the Lords in the said amendment.—[Miss Melanie Johnson.]

Mr. Deputy Speaker

With this we may discuss Lords amendments Nos. 593, 594 and the amendment thereto, 595 to 603 and 606 to 615.

Mr. Flight

We come to a subject beloved at the Committee stage: the territory of European Union passporting. Our amendment relates to the use of the incoming single European passport by non-United Kingdom firms that are passporting into the UK under EU law, and schedule 3, which reflects that.

Amendment No. 594 as it stands is helpful, but we fear that it gives rise to some possible confusions, which our amendment seeks to prevent. Amendment No. 594 looks at the position of a European Economic Area firm that wants to do business under its passport, but that does not comply with the notification requirements imposed by schedule 3. The amendment tries to lessen the consequences of that failure by the passporting firm by providing that, although it is as a result unauthorised, its contracts will not be unenforceable, even though otherwise they would be. One of the reasons why we feel that it is desirable to be sensitive in this area and in the case of EEA firms using the passport where technical breaches are committed, is that the more aggressive our treatment of EEA firms here, the worse our firms are likely to find European regulators treat them about Europe.

Our amendment tries to prevent the confusion that is likely to arise from amendment No. 594. The question of enforceability arises under the sections listed in amendment No. 594 only if the firm is not authorised under the legislation. The policy, which is the same as the policy that we adopted in the Financial Services Act 1986, is that an authorised firm will not be committing a criminal offence if it acts outside its permitted business, although private investors who suffer as a result can sue the firm for compensation. Accordingly, the sections listed apply only in relation to a firm that is not authorised.

A firm can, however, be authorised under the legislation as a result of the normal authorisation process—getting permission under part IV—for some regulated activities, even though it wants to use the passport for others. Most firms may try to do that because the passport is by no means comprehensive. Therefore, the first change to Lords amendment No. 594 would ensure that the paragraph applies initially only to a firm that is not an authorised person, albeit in relation to non-passported activities.

The second change that we propose making to Lords amendment No. 594 is to provide that the disapplication of the unenforceability provision should apply only in relation to passported activities. The Lords amendment provides that the unenforceability provisions do not apply to an agreement entered into by the firm. The firm may enter into other agreements, and not only into agreements covered by the passport. The Lords amendment therefore provides that any agreement entered into by the firm is covered.

Accordingly, the unenforceability provisions would not apply even in the case of agreements that had nothing at all to do with the passport. Although we support the unenforceability provisions already made in the 1986 Act, we would not like what is admittedly a helpful amendment to have that potentially undesirable result.

The subject—like that of the EEA passporting territory—is extremely technical and obscure, and we had hoped that, by now, it had been entirely put to bed. However, if Ministers are not willing to accept our amendment to Lords amendment No. 594, an unsatisfactory situation will develop in a territory in which many British businesses are EU-EEA passported.

Miss Melanie Johnson

In the course of our debates, we have given much further thought to the enforcement provisions, and we have made various amendments to meet the concerns expressed by Opposition Members and by their colleagues in another place. We have also reconsidered their application in this context, but concluded that their amendment is probably disproportionate and possibly discriminatory.

If an outgoing United Kingdom authorised person conducts activities covered by the relevant directive in another European economic area state without having gone through the relevant procedures, the Bill would not render unenforceable transactions effected by that person in the course of conducting those activities. Therefore, to apply the enforcement of agreements provisions to incoming firms that fail to follow the proper procedures might be discriminatory.

The new paragraph that we propose to insert after paragraph 15 therefore disapplies clauses 24, 25 and 27 in relation to any agreement entered into by an EEA firm in the course of, or any agreement entered into by an authorised person as a result of, regulated activity conducted without the relevant procedures having been completed.

Conversely, the Opposition amendment would apply the non-enforcement provisions of those clauses in most circumstances. Although I am not sure that that is the intention, use of the term "permitted activity" might be intended to narrow the paragraph's effect to activities covered by the directives, rather than to any regulated activity. However, if that is the intention, it does not work.

The definitions of "permitted activity" in paragraphs 13 and 14 are related to the activities specified in the "consent notices" provided for in those paragraphs. A "permitted activity" is therefore only an activity for which notification has been received by the FSA from the home state regulator or the firm concerned. The effect of the Opposition amendment would be to disapply the non-enforcement clauses only when the home state regulator or the firm concerned has begun the procedure which leads up to the firm qualifying for authorisation. However, it is just as necessary to cover cases in which that first step has not been taken as well as cases in which it has been taken.

Additionally, the Opposition amendment simply would not work in certain cases. A credit institution, for example, that wishes to do business on a services basis only has to give a notice of intention. Once it has given such a notice, it qualifies for authorisation. The Opposition amendment would apply to a credit institution that has not given a notice of intention, but would define that institution's "permitted activities" in terms that depend upon it having given a notice of intention. That does not make sense.

The Opposition amendment—for reasons that I do not quite understand—also fails to deal with the effect of the provisions of clause 27. As I explained, we believe that the amendments made in another place are necessary if the UK is not to be open to charges of discrimination. We also believe that the Opposition's amendment is inconsistent with that and is defective in any event. For that reason, I hope that they will withdraw it, but if they do not, I urge the House to vote against it.

It being Eleven o'clock, MR. DEPUTY SPEAKER put the remaining Questions required to be put at that hour, pursuant to Order [this day].

Lords amendment No. 592 agreed to.

Question put, That this House agrees with the Lords in the remaining Lords amendments:—

The House divided: Ayes 287, Noes 114.

Division No. 216] [11.1 pm
AYES
Adams, Mrs Irene (Paisley N) Cann, Jamie
Ainger, Nick Caplin, Ivor
Allen, Graham Casale, Roger
Anderson, Janet (Rossendale) Caton, Martin
Atherton, Ms Candy Chapman, Ben (Wirral S)
Austin, John Clapham, Michael
Battle, John Clark, Rt Hon Dr David (S Shields)
Bayley, Hugh Clark, Paul (Gillingham)
Beard, Nigel Clarke, Charles (Norwich S)
Begg, Miss Anne Clarke, Eric (Midlothian)
Benn, Hilary (Leeds C) Clarke, Rt Hon Tom (Coatbridge)
Benn, Rt Hon Tony (Chesterfield)
Clarke, Tony (Northampton S)
Bennett, Andrew F Clelland, David
Benton, Joe Clwyd, Ann
Bermingham, Gerald Coffey, Ms Ann
Berry, Roger Coleman, lain
Best, Harold Connarty, Michael
Blackman, Liz Cook, Frank (Stockton N)
Blears, Ms Hazel Corbett, Robin
Blizzard, Bob Corbyn, Jeremy
Boateng, Rt Hon Paul Cotter, Brian
Borrow, David Cousins, Jim
Bradley, Keith (Withington) Crausby, David
Bradley, Peter (The Wrekin) Cryer, Mrs Ann (Keighley)
Bradshaw, Ben Cryer, John (Hornchurch)
Brand, Dr Peter Cummings, John
Brinton, Mrs Helen Cunningham, Rt Hon Dr Jack (Copeland)
Brown, Russell (Dumfries)
Buck, Ms Karen Cunningham, Jim (Cov'try S)
Burgon, Colin Darvill, Keith
Burstow, Paul Davey, Valerie (Bristol W)
Butler, Mrs Christine Davidson, Ian
Byers, Rt Hon Stephen Davies, Rt Hon Denzil (Llanelli)
Cabom, Rt Hon Richard Davies, Geraint (Croydon C)
Campbell, Rt Hon Menzies (NE Fife) Dawson, Hilton
Dean, Mrs Janet
Campbell—Savours, Dale Denham, John
Dismore, Andrew King, Ms Oona (Bethnal Green)
Dobbin, Jim Kirkwood, Archy
Donohoe, Brian H Ladyman, Dr Stephen
Doran, Frank Lawrence, Mrs Jackie
Dowd, Jim Laxton, Bob
Drew, David Lepper, David
Eagle, Maria (L'pool Garston) Leslie, Christopher
Edwards, Huw Levitt, Tom
Efford, Clive Lewis, Ivan (Bury S)
Ellman, Mrs Louise Linton, Martin
Ennis, Jeff Llwyd, Elfyn
Feam, Ronnie Lock, David
Field, Rt Hon Frank Love, Andrew
Fisher, Mark McAvoy, Thomas
Fitzpatrick, Jim McCabe, Steve
Foster, Michael J (Worcester) McCartney, Rt Hon Ian (Makerfield)
Foulkes, George
Galloway, George McDonagh, Siobhain
Gardiner, Barry Macdonald, Calum
Gerrard, Neil McDonnell, John
Gibson, Dr Ian McGuire, Mrs Anne
Gilroy, Mrs Linda McIsaac, Shona
Godman, Dr Norman A McKenna, Mrs Rosemary
Godsiff, Roger McNamara, Kevin
Goggins, Paul McNulty, Tony
Golding, Mrs Llin MacShane, Denis
Gordon, Mrs Eileen Mactaggart, Fiona
Griffiths, Jane (Reading E) McWilliam, John
Griffiths, Nigel (Edinburgh S) Mahon, Mrs Alice
Grocott, Bruce Marsden, Gordon (Blackpool S)
Grogan, John Marsden, Paul (Shrewsbury)
Hain, Peter Martlew, Eric
Hall, Mike (Weaver Vale) Maxton, John
Hall, Patrick (Bedford) Meacher, Rt Hon Michael
Hamilton, Fabian (Leeds NE) Michael, Rt Hon Alun
Hanson, David Michie, Bill (Shef'ld Heeley)
Heal, Mrs Sylvia Miller, Andrew
Healey, John Moffatt, Laura
Heath, David (Somerton & Frome) Moonie, Dr Lewis
Henderson, Ivan (Harwich) Moran, Ms Margaret
Heppell, John Morley, Elliot
Hinchliffe, David Mountford, Kali
Hodge, Ms Margaret Mowlam, Rt Hon Marjorie
Hoey, Kate Mudie, George
Hoon, Rt Hon Geoffrey Mullin, Chris
Hope, Phil Murphy, Jim (Eastwood)
Hopkins, Kelvin Murphy, Rt Hon Paul (Torfaen)
Howarth, George (Knowsley N) Naysmith, Dr Doug
Howells, Dr Kim O'Brien, Mike (N Warks)
Hughes, Kevin (Doncaster N) Olner, Bill
Humble, Mrs Joan Organ, Mrs Diana
Hurst, Alan Palmer, Dr Nick
Hutton, John Pearson, Ian
Iddon, Dr Brian Pendry, Tom
Illsley, Eric Perham, Ms Linda
Ingram, Rt Hon Adam Pickthall, Colin
Jackson, Ms Glenda (Hampstead) Pike, Peter L
Jackson, Helen (Hillsborough) Plaskitt, James
Jamieson, David Pollard, Kerry
Jenkins, Brian Pond, Chris
Johnson, Alan (Hull W & Hessle) Pope, Greg
Johnson, Miss Melanie (Welwyn Hatfield) Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Jones, Rt Hon Barry (Alyn) Prentice, Gordon (Pendle)
Jones, Jon Owen (Cardiff C) Prescott, Rt Hon John
Jones, Dr Lynne (Selly Oak) Purchase, Ken
Jones, Martyn (Clwyd S) Quinn, Lawrie
Keeble, Ms Sally Radice, Rt Hon Giles
Keen, Alan (Feltham & Heston) Reed, Andrew (Loughborough)
Keen, Ann (Brentford & Isleworth) Reid, Rt Hon Dr John (Hamilton N)
Keetch, Paul Rendel, David
Kemp, Fraser Roche, Mrs Barbara
Khabra, Piara S Rooker, Rt Hon Jeff
Kidney, David Rooney, Terry
Kilfoyle, Peter Ross, Ernie (Dundee W)
King, Andy (Rugby & Kenilworth) Rowlands, Ted
Roy, Frank Thomas, Gareth R (Harrow W)
Ruddock, Joan Thomas, Simon (Ceredigion)
Russell, Bob (Colchester) Timms, Stephen
Russell, Ms Christine (Chester) Tipping, Paddy
Ryan, Ms Joan Todd, Mark
Salter, Martin Touhig, Don
Sanders, Adrian Trickett, Jon
Sarwar, Mohammad Turner, Dennis (Wolverh'ton SE)
Savidge, Malcolm Turner, Dr Desmond (Kemptown)
Sawford, Phil Turner, Dr George (NW Norfolk)
Sedgemore, Brian Turner, Neil (Wigan)
Shaw, Jonathan Twigg, Derek (Halton)
Simpson, Alan (Nottingham S) Twigg, Stephen (Enfield)
Singh, Marsha Tyler, Paul
Skinner, Dennis Tynan, Bill
Smith, Rt Hon Andrew (Oxford E) Walley, Ms Joan
Smith, Angela (Basildon) Ward, Ms Claire
Smith, John (Glamorgan) Wareing, Robert N
Smith, Llew (Blaenau Gwent) White, Brian
Soley Clive Whitehead, Dr Alan
Southworth, Ms Helen Williams, Rt Hon Alan (Swansea W)
Spellar John
Steinberg, Gerry Williams, Alan W (E Carmarthen)
Stewart, Ian (Eccles) Williams, Mrs Betty (Conwy)
Stoate, Dr Howard Wills, Michael
Strang, Rt Hon Dr Gavin Winnick, David
Stringer, Graham Winterton, Ms Rosie (Doncaster C)
Stunell, Andrew Wood, Mike
Sutcliffe, Gerry Woodward, Shaun
Swinney, John Woolas, Phil
Taylor, Rt Hon Mrs Ann (Dewsbury) Worthington, Tony
Wright, Anthony D (Gt Yarmouth)
Taylor, Ms Dari (Stockton S) Tellers for the Ayes:
Taylor, David (NW Leics) Mr. Robert Ainsworth and
Temple-Morris, Peter Mr. Clive Betts.
NOES
Ainsworth, Peter (E Surrey) Grieve, Dominic
Amess, David Hammond, Philip
Arbuthnot, Rt Hon James Hawkins, Nick
Baldry, Tony Heald, Oliver
Bercow, John Heathcoat-Amory, Rt Hon David
Beresford, Sir Paul Hogg, Rt Hon Douglas
Blunt, Crispin Horam, John
Boswell, Tim Howard, Rt Hon Michael
Bottomley, Peter (Worthing W) Howarth, Gerald (Aldershot)
Bottomley, Rt Hon Mrs Virginia Jack, Rt Hon Michael
Brady, Graham Jenkin, Bernard
Brazier, Julian Key, Robert
Brooke, Rt Hon Peter King, Rt Hon Tom (Bridgwater)
Browning, Mrs Angela Laing, Mrs Eleanor
Bruce, Ian (S Dorset) Lansley, Andrew
Bums, Simon Leigh, Edward
Butterfill, John Letwin, Oliver
Cash, William Lewis, Dr Julian (New Forest E)
Clappison, James Lidington, David
Collins, Tim Lloyd, Rt Hon Sir Peter (Fareham)
Cran, James Loughton, Tim
Davies, Quentin (Grantham) Luff, Peter
Day, Stephen Lyell, Rt Hon Sir Nicholas
Duncan Smith, lain MacGregor, Rt Hon John
Evans, Nigel Mclntosh, Miss Anne
Faber, David Maclean, Rt Hon David
Fabricant, Michael McLoughlin, Patrick
Fallon, Michael Madel, Sir David
Flight, Howard Mates, Michael
Forth, Rt Hon Eric Maude, Rt Hon Francis
Fowler, Rt Hon Sir Norman Mawhinney, Rt Hon Sir Brian
Fox, Dr Liam May, Mrs Theresa
Fraser, Christopher Moss, Malcolm
Gale, Roger Nicholls, Patrick
Gill, Christopher Norman, Archie
Gillan, Mrs Cheryl O'Brien, Stephen (Eddisbury)
Gray, James Ottaway, Richard
Greenway, John Page, Richard
Paice, James Taylor, Ian (Esher & Walton)
Paterson, Owen Taylor, John M (Solihull)
Pickles, Eric Taylor, Sir Teddy
Portillo, Rt Hon Michael Tredinnick, David
Redwood, Rt Hon John Trend, Michael
Robathan, Andrew Tyrie, Andrew
Robertson, Laurence Viggers, Peter
Roe, Mrs Marion (Broxbourne) Walter, Robert
Ruffley, David Wells, Bowen
Shepherd, Rt Hon Mrs Gillian Whitney, Sir Raymond
Shepherd, Richard Whittingdale, John
Simpson, Keith (Mid-Norfolk) Widdecombe, Rt Hon Miss Ann
Soames, Nicholas Willetts, David
Spelman, Mrs Caroline Winterton, Mrs Ann (Congleton)
Spicer, Sir Michael Winterton, Nicholas (Macclesfield)
Spring, Richard Yeo, Tim
Stanley, Rt Hon Sir John Young, Rt Hon Sir George
Steen, Anthony Tellers for the Noes:
Swayne, Desmond Mr. Geoffrey Clifton-Brown
Syms, Robert and
Tapsell, Sir Peter Mr. John Randall.

Question accordingly agreed to.