Sitting of 29 July 1986

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Sheffield.

European Airlines: Competition
Baroness Burton of Coventry: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, as the Secretary of State for Transport on 30th June called for more consumer pressure to bring down air fares and increase competition between European airlines, they will indicate how consumer organisations can best be of assistance; and what dates are envisaged for future meetings of the council of Transport Ministers.
Viscount Davidson: My Lords, the most effective action British consumer organisations can take is to help and encourage their European counterparts to bring pressure to bear on those governments who remain unwilling to liberalise. The next formal meeting of the Transport Council is on 10th and 11th November. My right honourable friend the Secretary of State for Transport plans, however, to hold an earlier informal meeting on 3rd October to speed up progress.
Baroness Burton of Coventry: My Lords, I do not wish to discourage the Minister, but is he aware that the first part of his reply gets us nowhere because generalities do not make progress?
Perhaps I may ask him some specific questions. Is he aware that the Airline Users' Committee, in which I must declare an interest, the National Consumer Council and the Consumers' Association have spent months and in some cases years dealing with the problem of European air fares? Is he further aware that the National Consumer Council has relatively recently published a first-class report on that subject? Will the Minister ask the Minister of Aviation if he will bring together the representatives of those British organisations so that some real pressure may be engendered?
Viscount Davidson: My Lords, I am aware of the interest the noble Baroness has in this matter. We have already sent copies of the National Consumer Council's report Air Transport and the Consumer to all member states of the European civil aviation conference, and have asked British embassies in those countries to do all that they can to draw attention to the report. Our objective is to ensure that real progress is made towards the agreed target date of 1992 for the liberalisation of the whole internal market, including air transport.
Baroness Burton of Coventry: My Lords, I do not want to be a nuisance; I want to help. Is it at all possible to inject some life into those proceedings? In view of his reply to me about the European associations, is the Minister aware that Mr. Spicer has praised the work of the Federation of Air Transport User Representatives in the European Community? Will the Minister ask the Secretary of State whether he realises the great advantage that there would be in bringing together those four organisations under the chairmanship of a Minister to bring some real pressure to bear upon the people in the European Community who do not wish to make progress?
Viscount Davidson: My Lords, I think that the noble Baroness injects life into our proceedings here. We can only follow her example. I shall certainly bring her remarks to the attention of my right honourable friend. I do not think that there is anything further that I can add except perhaps to say that we should of course welcome any support the noble Baroness can give us in our efforts to speed up liberalisation in that sector.

Falkland Islands: Fish Conservation
2.32 p.m.
Lord Campbell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress has been made in international arrangements to rationalise fisheries in the seas around the Falkland Islands in order to conserve stocks of fish.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, pending agreement on a multilateral conservation and management regime under FAO auspices, voluntary restraint arrangements were made with the nations principally fishing for squid. International recognition of the need for conservation has grown. Meanwhile, the FAO study, an essential preliminary for negotiations in a multilateral regime, has made progress. The first draft is expected in the autumn.
Lord Campbell of Croy: My Lords, I thank my noble friend for her reply. It is disappointing that little progress appears to have been made. For more than a year now, my noble friend has had to give more or less the same reply. Will the Government now try to accelerate the proceedings or take another initiative? Fishing fleets of many other nations have been sailing long distances to plunder the riches of those seas without any control. Even Argentina now appears to have reached agreement with the Soviet Union and Japan. Unless some action is taken soon, there will be few fish left to protect.
Baroness Young: My Lords, my noble friend asked a number of questions which I realise are of interest not only to him but to many of your Lordships. We are actively continuing our efforts to achieve any early discussion and agreement on a multilateral regime. We are expecting the technical study under FAO

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auspices this autumn. We have also considered measures to prevent overfishing and we reached voluntary restraint agreements this season which protected the fisheries.
On my noble friend's last point about whether we should take other measures—by implication, impose a unilateral exclusive fishing limit—we retain that right. We believe that it is best to work for the establishment of an effective conservation management regime in the south-west Atlantic and for the widest possible measure of international support.
Lord Shackleton: My Lords, I acknowledge the patience that the Government have shown, but does the Minister now realise that the propects of reaching a multinational agreement have practically disappeared? Is she aware that an exclusive agreement has been initialled between the Argentine and the Soviet Union which will bring the Soviet Union into bases in the Antarctic? Is the matter not now so serious that the Government should apply customary law and extend fishing rights at least to within the exclusion zone? Does the noble Baronesss recognise that a dangerous situation exists?
Baroness Young: My Lords, of course I take note of what the noble Lord, Lord Shackleton, has said. It is true that a bilateral agreement on fisheries was initial-led by the governments of Argentina and the Soviet Union earlier this month. I think that it is unfair and untrue to say that we have done nothing, because we are still waiting for the FAO study, which I think will be valuable and wil tell us what is happening as opposed to what people assume is happening.
Lord Harmar-Nieholls: My Lords—
Lord Kennet: My Lords—
Lord Denham: My Lords, I think that it is usual to alternate between the two sides of the House during Question Time. Of course the noble Lord, Lord Kennet, has the right to speak next.
Lord Harmar-Nicholls: My Lords, will my noble friend tell the House what British representation there is on the FAO investigatory team? Are they putting on pressure to see that all the facts that concern this country will be taken into account?
Baroness Young: My Lords, the FAO study is a technical study to which we have indirectly made an input on this matter. The study is supported and accepted by all the nations involved in fisheries in the south-west Atlantic and contributions are being made by all the nations. I think that it will give us a good basis for knowing what is happening to the fish stocks in that part of the world.
Lord Kennet: My Lords, what is the Government's opinion of the new Argentine-Soviet agreement under which 10 per cent. of the crews of Soviet fishing boats will be Argentine nationals; every Soviet fishing boat will have an Argentine Government official on board; and, according to the designation of sea areas by the
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Argentine Government, Soviet fishing boats will be entitled to fish within our exclusion zone? Have the Government not accepted the four-year delay in achieving an international regime in the hope of excluding the Soviet Union from those fisheries? Have they not now delayed so long that they are getting not only the Soviet Union but boats of the Soviet Union with Argentine officials on board? Did they talk to Mr. Shevardnadze about that matter when he was here this month?
Baroness Young: My Lords, the answer to the last point is, yes, this matter was raised with Mr. Shevardnadze when he was in London. On the first point that the noble Lord, Lord Kennet, raised, it is, of course, a protection zone and not an exclusion zone that we are talking about, and only Argentine warships and military aircraft are excluded from the zone. It has always been possible for Argentine fishing vessels to enter it. They have had to ask permission to do so. but there is no reason for thinking that they would not be given that permission if they so wished. Peaceful activities by Soviet fishing vessels and Argentine fishing vessels pose no threat to the security of the islands. By definition, therefore, the actual crew is not a major consideration in this matter.
Lord Orr-Ewing: My Lords, can my noble friend say whether maritime aircraft deployed in the area are keeping a careful survey of the ships being deployed in fishing not only outside the exclusion zone but inside the zone? Is this not preparatory to showing how outrageous it is that everyone is now poaching fish in this area to the great disadvantage of the future fish stocks of that zone?
Baroness Young: My Lords, the answer is, of course, that the protection zone is covered by aircraft, and an account is taken of ships in the zone. The answer to the second point, as I have already indicated, is that we shall not be clear about the full picture until we get the FAO study in the autumn. Preliminary indications are that while one of the main species of squid has come under heavy pressure, the other squid species and the main species of fin fish appear to be holding up well.
Lord Gladwyn: My Lords, is it not probable that progress in this important direction would be much more likely if the Government now agreed to negotiate with the Argentine Government on all outstanding points including not necessarily the vexed question of sovereignty but at any rate the political future of the islands?
Baroness Young: My Lords, the noble Lord will be aware that we should like very much to have better relations with Argentina and to negotiate many matters with that country. What we have said is that we are not prepared to negotiate sovereignty.
Lord Shackleton: My Lords, does the noble Baroness really believe in the FAO solution? She will acknowledge that I have not harassed her on this subject in the past. Does she recall that the head of the Argentine foreign affairs committee in the Argentine Senate has said that they will never sign a multi-

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national agreement and that an attempt to drag in sovereignty, as the noble Lord has just done, is quite disastrous to the peace of the South Atlantic? Will the noble Baroness now consider whether we should not apply customary law and extend fishing rights to the limit of the zone that we have declared?
Baroness Young: My Lords, we retain this right. Our aim is the establishment of an effective conservation and management regime in the south-west Atlantic. I believe, however, that we still need to look at establishing workable arrangements for fisheries conservation and management in the south-west Atlantic. The disposition of fish stocks makes it strongly preferable to apply conservation measures over a wide area of the south-west Atlantic extending beyond the waters around the Falklands. It is an international issue, and we believe that it requires an international solution.
Baroness Nicol: My Lords, is the Minister aware that squid and fin fish are being fished up to the limit of sustainable yield and that urgent action is necessary? Is she aware that it is not possible to go on waiting? Will the Minister not consider that a straight-forward licensing system could be applied? Is she aware that the Poles and the Japanese would certainly find this acceptable?
Baroness Young: My Lords, I am well aware of the point that the noble Baroness makes. Pressure on the fishery makes it all the more important that we should secure a multilateral regime. In the meantime, we have negotiated with some of the principal fishing nations voluntary restraint arrangements that have operated during the last fishing season. These have helped, I believe, to reduce the threat. I accept, however, that they cannot be a long-term solution.
Lord Cledwyn of Penrhos: My Lords, I apologise for prolonging this exchange. Can the noble Baroness say whether the USSR is a party to the FAO study? Secondly, what arrangements are being made to establish a schedule of talks immediately on publica-tion of the report?
Baroness Young: My Lords, the USSR has agreed to take part in the FAO study and to contribute to finding out what the case is. Of course, once we get that study, we shall have to look rapidly at the next phase, which will be some agreement.
Lord Cledwyn of Penrhos: My Lords, should we not really be pressing for arrangements for talks now and not waiting until publication?
Baroness Young: My Lords, I believe there is no doubt that all the countries fishing in this part of the world are very well aware of the British position on the matter and of the importance that we attach to reaching a solution. I am certain that the remarks made in your Lordships' House today will not be lost on other countries.

"Guardian" and "Observer": Injunction
2.45 p.m.
Lord Jenkins of Putney: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why they sought and gained an injunction to restrain the Guardian and Observer newspapers from publishing information concerning Mr. Wright and his book and why other newspapers may publish that which these two may not.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I understand that the action to which the noble Lord refers is sub judice. Although the Court of Appeal has given judgment on the interlocutory application, the substantive action is still before the court and remains to be heard. It would therefore be inappropriate for me to comment.
Lord Jenkins of Putney: My Lords, in these circumstances, I would not press the main point of the Question. It may be, however, that the noble and learned Lord feels able to answer the second part of the Question. This asks why other newspapers may publish that which the two newspapers referred to, the Guardian and the Observer, may not?
The Lord Chancellor: My Lords, that is a perfectly fair point. I did not answer the second part of the Question because, frankly, I did not understand it. Of course, it is true that other newspapers are not parties to the proceedings and are therefore not affected directly by the injunction. But it does not follow that they can publish anything they like simply because of that. If they threatened to do so, they might themselves be made the subject of proceedings. I cannot answer hypothetical questions.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Financial Services Bill will be adjourned at approximately 7.30 p.m. for approximately one hour and that during this adjournment the Drivers' Hours (Goods Vehicles) (Modifications) Order 1986, the Drivers' Hours (Harmonisation with Community Rules) Regulations 1986, the Community Drivers' Hours and Recording Equipment Regulations 1986 and the Community Drivers' Hours and Recording Equipment (Exemptions and Supplementary Provisions) Regulations 1986 will be taken.

Financial Services Bill
2.48 p.m.
The Parliamentary Under-Secretary of State Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.
House in Committee accordingly.
[THE EARL OF LISTOWEL in the Chair.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 344A:
Before clause 142, insert the following new clause:
("Takeover panel
.The Secretary of State shall appoint a panel to regulate the conduct of takeover offers.").
The noble Lord said: We come to a particularly important point in the regulation of financial services—the status of the Takeover Panel. As the Committee will be aware, the Takeover Panel was set up by the Bank of England in 1968. It was set up in response to a certain amount of public disquiet about the conduct of takeover offers. It was at the time headed by the noble and learned Lord, Lord Shawcross; and I think that all Members of this Committee would recognise that over the years the Takeover Panel has performed a significant and valuable function in the conduct of takeover offers. Indeed, it still does.
There are, however, three difficulties with the present Takeover Panel in relation to the Bill which is before the Committee. The first is that as time has gone on the panel, and the panel executive working for the panel, has had to codify its rules much more closely. This is perfectly normal procedure. One starts off with a relatively flexible arrangement, and then as one goes on one has to codify the rules, in the form of what is known as the takeover code, so that they are clear. As new practices develop in the market, so those rules change. However, we are now faced with a takeover code together with practice notes which are issued by the panel from time to time and which are in many ways exceedingly complex. Nevertheless, I still hold the view that these notes are necessary.
The second difficulty is that with the rise of takeover activity which we have seen in the last year or so, and the new and more aggressive techniques that have been adopted, in particular by hostile bidders, the Takeover Panel has, in the views of many people in the city, become somewhat overwhelmed with the responsibilities laid on it. Indeed, the whole question that was raised about advertising in connection with takeovers was one which led the panel into considerable difficulties. I think that they probably came to the right conclusion, but they had quite a lot of agonising before they came to that conclusion.
The third difficulty is that we now have before us a Bill in which a Securities and Investments Board is proposed which is on a much wider canvas than that on which the Takeover Panel operates. The Takeover Panel is restricted, I would remind the Committee, to the conduct of takeover offers, while the Securities and Investments Board (assuming that is the designated agency under the Bill) has a very wide role in investor protection of a very general nature.
There is a fourth difficulty, which is the main point of what I shall say. Offer documents which are issued
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in connection with takeover bids are not subject to the authority of the Stock Exchange at present, and, as I understand it from the Bill, would not be subject to the Securities and Investments Board or the self-regulating organisations that will be set up under its aegis. In other words, we are moving to a system where we have effectively a statutory Securities and Investments Board with derived authority from the Secretary of State and from Parliament. Then we have a voluntary body, which is the Takeover Panel, supervised by the Bank of England, whose decisions carry no status in law but status in influence. It is that difficulty to which this amendment addresses itself. There is no doubt that the Takeover Panel, like the Securities and Investments Board as proposed, is there for the protection of investors. Both have the same objectives. It seems to us an anomaly that whereas protection of investors on certain matters should derive authority from statute, protection of investors on other matters should not have that same authority. The amendment seeks very simply, and in very simple terms, to rectify that anomaly.
There has recently been a very glaring example of how the difference between statutory provision and voluntary provision can work in some cases—and in this particular case which I am about to describe—to the detriment of investors. I refer first to the case of the Guinness acquisition of Bell's plc in June 1985, and secondly to the Guinness acquisition of the Distillers Company earlier this year. In connection with this offer the Guinness company issued certain documents. I mean no crusade against the Guinness Company—I have no axe to grind one way or the other—and I mean to make, and I shall make, no speculation on whether or not the statements made in these documents were deliberately misleading. Neverthless, certain assurances were given by the Guinness Company in respect of the offer which were believed at the time shareholders accepted, and were advised by the board of Distillers to accept, the Guinness offer.
For instance, on page 5 of the recommended offer document which was produced by Guinness plc it states quite clearly under a paragraph entitled "Good News for Scotland" that the headquarters of the company would be in Scotland; that the group chief executive's office would be in Scotland; and that the group headquarters would be moved to Edinburgh. It also goes on to say that there would be strong Scottish representation on the board; and in the earlier offer document which was produced before the recommended offer it went on, on page 6 of that document, to specify exactly what that Scottish representation would be. I quote from the document. It said:
"Following the merger. Sir Thomas Risk. Governor of the Bank of Scotland, will be appointed non-executive Chairman for the combined group and Mr. John Connell, the Earl of Iveagh and Mr Ernest Saunders will be appointed as Vice-Chairmen"—
and so it goes on. It later went on to say (and 1 quote again):
"On implementation of the merger Guinness will change its name"
None of these assurances has yet been met. There is word going around, reported in the Scottish newspapers, that, through various agencies, there is a search going on for premises in Scotland. The invitation to Sir Thomas Risk to become non-executive chairman of the combined group has

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disappeared and has apparently been withdrawn in circumstances about which I am unclear. The Scottish representation on the board has not yet been put into effect. Indeed, the board at the moment, with its supposed Scottish representation, consists of one Swiss German, one American, one Frenchman the chief executive, and the noble Earl, Lord Iveagh.
There has been considerable public disquiet about these events. The Bank of England, in its capacity as supervisor of the Takeover Panel, had what is described in one newspaper as "a severe interview" with the chief executive of the Guinness Group. As a result of that there is a circular to shareholders which is under preparation which, to my knowledge as of half an hour ago, has not yet been published. The Stock Exchange reserve the right to comment and indeed vet that circular before it goes to shareholders. Shareholders will be invited, as I understand it, under that new circular to approve the arrangements.
Again, I am not trying to mount a crusade against the Guinness Company. Nevertheless, I understand from one newspaper that it went as far as the chief executive of Guinness being summoned by the honourable friend of the noble Lord opposite and being told, as I understand it, that the company would be threatened with an investigation if he did not meet the requirements of the Stock Exchange and if he did not meet to the satisfaction of the department the promises that were made in the offer documents. I say very clearly that that was a newspaper report. I have no evidence one way or the other about whether the newspaper was telling the truth. I simply mention it as part of the point that I am making.
3 p.m.
The point I am making is this. If the Guinness Company had not put some of these assurances in the listing particulars which went with the offer document, there would have been no status for criticising the promises that were made. It was because they were in the listing particulars that the Stock Exchange had a locus in the matter and were able to say, "Unless you live up to what you have put in the listing particulars we can, if necessary, operate the ultimate sanction, which is delisting of the Guinness securities on the stock market". I am sure that noble Lords will know that that is a kind of nuclear deterrent and not something which the Stock Exchange would drop lightly.
I ask this question. What would have happened if that offer or, indeed, any offer had been for cash? If the offer had been for cash, there would have been no listing particulars because no securities would have been issued. The offer document would have made the same promises and given the same undertakings. If those undertakings were unfulfilled then the Stock Exchange would have had no authority to intervene. Indeed, under the Bill before us, the Stock Exchange, as a self-regulating organisation, would equally have no authority to intervene.
It was perhaps rather unwise of Guinness to put all that material in the listing particulars rather than confining it to the offer document, which has no legal status. Nevertheless, they did so. I shall quote from the Guardian of 19th July, which said:
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"Luckily for the exchange, it will not have to argue the case, because it has now emerged that Guinness repeated the offer document promises in the listing particulars it sent in for the new shares it issued to buy Distillers".
The Guardian goes on to say:
"If there had been no new shares issued, and only an offer document, the exchange's formal powers to put pressure on Guinness would have been considerably less, although a lot stronger than those on the panel'".
Clearly the Stock Exchange has the ultimate sanction on any company of dropping its nuclear deterrent and delisting the company.
This amendment seeks very simply to give the Takeover Panel the authority of the statute which is being discussed at present in the Committee. We are not seeking at all to change the mode of operation of the Takeover Panel; we believe that it does a good job. We are not seeking to change the personnel. It is up to the Secretary of State whether he wants to keep the same personnel. We are seeking very simply to do two things.
First, we are seeking to bring the Takeover Panel within the ambit of this Bill so that Clause 167, relating to misleading statements, applies to offer documents as well as to the listing particulars so that a company cannot, simply by making a cash offer, evade the statutory obligation not to make misleading statements. Secondly, we seek to give to the Takeover Panel the full authority of delegation under the statute to make sure that it does not have to rely on, if I may say so, informal interviews with the governor of the Bank of England: it can rely on proper investigation by the Securities and Investments Board delegated from the Secretary of State and from Parliament.
I shall quote again from the Guardian article of 19th July, which says:
"Offer documents would have much greater weight if they were policed by a statutory body and had the force of law, but it would mean closing down Old City School".
That is the thrust of the amendment. I beg to move.
Lord Denning: I should like to say a few words in favour of the amendment. We all remember the trouble in about 1968 when takeovers were rampant and when, just by changing shareholders, you could change the directorate and the running of a company. The workers had no say in the matter at all. The shareholders controlled the companies and changed the directorate and the like. It is very important that there should be a panel to control the operation of takeovers.
As members of the Committee will all know, our dear noble and learned friend Lord Shawcross made a brilliant success of the Takeover Panel. In a way, it is a quasi-judicial body. He exercised almost judicial functions in hearing both sides and ensuring that the takeover was properly regulated and conducted. He did it admirably and so have his successors to the full confidence of the City of London. Let us hope that it will continue.
However, we are now entering a new era in the City of London whereby its affairs are to be regulated in pursuance of statute. That is a very good thing. Schedule 10 deals with all the principles applying to takeovers and sets out what the offer must contain and so forth. However, we shall certainly require the

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Takeover Panel more than ever if we are to fulfil the whole of that code. Surely in this new situation we need it to be regulated by statute. That is all that the amendment seeks. It says:
"The Secretary of Stale shall appoint a panel to regulate the conduct of takeover offers".
This panel is to operate under the authority of statute, under the authority of the Secretary of State. I wholeheartedly support the amendment.
Lord O'Brien of Lothbury: Before I address the Committee on the amendment perhaps I should declare an interest in that I am a member of the international advisory council of Morgan Grenfell. Nevertheless, I have nothing whatever to do with activities in the takeover field of that distinguished merchant bank.
As the noble and learned Lord, Lord Denning, has said, there was a good deal of turmoil in 1968, when I created the Takeover Panel. As the noble and learned Lord also said, the noble and learned Lord, Lord Shawcross, saw to it that it became a highly respected mechanism in the City, and so I believe it has remained even though it is now 13 years since I had any direct connection with it. It is a mechanism whereby the practitioners in the field discipline themselves through a panel which they themselves elect and which, under the guidance of the governor of the Bank of England, performs a very essential function.
It is true that over the years there have been troubles from time to time, but on the whole I think that the Takeover Panel has succeeded as much as any human mechanism of its kind (whether statutory or not) could be expected to succeed. I believe that it will continue to do so. Certainly in the earlier days it was perhaps more frequently the case that not very strong support-ers of the panel were inclined to call it a kangaroo court. That has helped to give rise to the desire to put it on a statutory basis. Indeed, there may be something to be said for that. However, I hope that if it is put on a statutory basis and appointed by the Secretary of State, there will be no question of appointing people from the Boilermakers' Union or the Mothers' Union to serve on the panel. Its great strength is that it is a panel of professionals who understand the business that they are seeking to control. That undoubtedly should continue.
If it were decided that the Secretary of State should in future appoint the panel, I believe that he should appoint it only in consultation with the Governor of the Bank of England, and I think now in consultation with the chairman of the SIB. I would be content to leave things as they are, but if it were decided to bring it within the statutory framework more than it already is in this present Bill, I would seek to secure that modification of the present amendment.
Lord Sanderson of Bowden: I look forward to hearing what the Minister has to say in reply to this amendment. I do not even know myself whether the wording of this amendment is the correct wording to deal with the situation that has been described by the noble Lord, Lord Williams, but it is clear to the
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layman that the activities of the Guinness-Distillers takeover of recent times have caused extreme disquiet.
Whether or not a Class 1 document is a legal document—and we have heard the explanation that it is not—in the eyes of the general public it is an important document. It is put out so that people are then attracted to do a certain thing, or not, as the case may be, and it is then turned over in a matter of months after the bid has been successful.
Surely in the course of this Financial Services Bill it is important that the Government take notice of that particular situation, which does not do anything to enhance wider share ownership or enhance the general good standing of the City of London. It is something to which this Government ought to pay attention. Whether in fact through this amendment or in another way they deal with the matter I know not, but I look forward to hearing what the Minister has to say because something really ought to be done.
Lord Grimond: I wholly agree with what has been said by the noble Lord who has just addressed the Committee. Like him, I am not in a position to say whether this is the correct way of dealing with what is undoubtedly a problem, nor whether the wording of this amendment is the correct wording. But I am sure that there is a problem—and a problem which was outlined clearly in relation to the Guinness-Distillers affair by the noble Lord, Lord Williams. 1 do not intend to go over those details again. It is a problem which goes far beyond the City of London, and I do not believe that decisions in these matters can be left exclusively to those who are engaged in finance.
It may be that the problem can to some extent be dealt with through the courts. Again, I do not know about that. There are the company laws; there is the common law and various statutes dealing with false prospectuses, etc. But assuming that it means action outside the courts, there appears to me to be a gap in the present legislation dealing with take-overs.
As I have said before, the workers are intimately concerned about takeovers, but so far as I can see their interests are not explicitly catered for. Furthermore, takeovers can be of great importance to the communities affected. In the case of the takeover of Distillers it was a takeover of the best-known company in Scotland, and it had, or could have, wide social repercussions throughout Scotland. Hence the anxiety of both bidders to assure everybody that they meant to base the operations in Scotland and appoint Scotsmen to senior positions on the board.
Why that became impossible I do not know, but it appears that having made these promises—and no doubt they had some effect upon those who held the shares in Distillers—the Guinness board apparently found it impossible to carry them out. It may be that they discovered, after they had examined the situation at Distillers, that they were impossible to carry out. Whatever the reason, it has caused great anxiety not only in Scotland but I think throughout Great Britain. It does not seem satisfactory that there is no body, so far as I can find out, which is empowered to look into this matter other than the Stock Exchange.
The Monopolies and Mergers Commission I suppose might be involved, but I think on the whole

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they would say that it is not their business. The Office of Fair Trading were involved before the takeover, but I think now would say that it is not their business either. But it remains of prime importance both to the good name of the financial centres of this country and Scotland.
It may be that there are other ways of dealing with it, but it is undoubtedly a problem that needs to be dealt with. If this is an inappropriate method of dealing with it, as it may well be, the Government should tell us what steps they propose to take to deal with situations such as that which arose when Guinness made all these promises in taking over the Distillers company and then found that they were unable to carry them out.
3.15 p.m.
Lord Taylor of Gryfe: I too declare an interest. I am a colleague of the noble Lord, Lord O'Brien, on the International Advisory Council of Morgan Grenfell. Therefore, I shall refrain from any comment in connection with the Guinness takeover. I listened carefully to what the noble Lord, Lord Williams, said and I am not sure that I was convinced by his arguments.
As has been said, the Takeover Panel was set up in order to have a first look at takeovers. It is a totally self-regulating body. The Committee may be interested to know the bodies which are represented on the Takeover Panel. They are the investment trusts; the Institute of British Insurers; the English and Scottish banks; the CBI; the Council of the Stock Exchange: the Institute of Chartered Accountants; The Issuing Houses Association; the National Association of Pension Funds; and the Unit Trusts Association. It is broadly representative of all who would be seriously affected in a takeover situation.
The noble Lord, Lord Williams of Elvel, has produced the topical and interesting case of Guinness, but what we are talking about is changing the structure of an institution which has operated for 20 years obviously quite effectively. The noble Lord, Lord Williams, has not been able to give a record of a disappointing performance of this interesting and authoritative organisation.
The important feature of it, too, is that it is quick. When you are involved in a takeover it is a sensitive situation. It affects people in their work place, it affects the value of stocks and shares, and you have to get quick decisions if at all possible. The present statutory arrangements for takeovers provide that you have the Office of Fair Trading, which has a first look at proposed takeovers, and it may recommend a reference to the Monopolies and Mergers Commission. It takes into account the impact of takeovers on the total economy of the United Kingdom, and not simply the effect on the two companies concerned. It has broader considerations than that. It considers matters of public interest.
However, if the OFT looks at a takeover situation and refers it to the Monopolies and Mergers Commission, you can expect that that takeover will be frozen for six months, and all kinds of things can happen in that six months. You may find a white knight, someone else bidding a higher price, and so on.
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There are fairly adequate statutory protection provisions in the area of takeovers.
The advantage of this body is that you can get decisions on a first look by the interested parties very quickly. 1 recall only a few months ago that there was a case where again a Scottish company—the Scottish and Newcastle Brewery Company—bid for a brewery company in the north of England. There was some doubt as to the closing time on that bid. The Takeover Panel gave a ruling on the matter. Within 24 hours—
Lord Jacques: What is the evidence that a statutory panel would not do the same thing?
Lord Taylor of Gryfe: All I am saying is that the case has not been proved that a statutory body would do it better, or more effectively or more quickly. All I am saying is that once one introduces the statutory element, one may change the character of this body. It calls on the Secretary of State to make appointments to the body rather than the broad representation which presently exists and obviously operates satisfactorily. I am arguing that we have an institution which has operated quickly, effectively and satisfactorily over 20 years. I am not convinced that there is an argument for changing the basis of that organisation.
Lord NoeI-Buxton: I agree with the noble Lord who has just spoken. I do not believe in change for the sake of change. The noble Lord, Lord Williams, said much about the Guinness and Distillers affair. Nobody can be happy about that. What the noble Lord did not seem to me to establish was that problems such as those arising in the Guinness affair would be better dealt with if the Takeover Panel was appointed by the Secretary of State rather than as at present. Without establishing this, surely there is no reason to support the amendment.
Lord Lucas of Chilworth: I start by thanking the noble Lord, Lord Williams, for the very clear way in which he described, first, his basic thinking behind this amendment, and, secondly, some of the reasons that have brought him to this particular position. It might be helpful to the Committee if I started by describing the background, as the Government see it, to this position.
This amendment would bring the whole question of the regulation of takeovers within the ambit of the Bill. Certain matters to do with takeovers are of course already touched on in the Bill. The noble Lord, Lord Williams, mentioned this during the course of his address to the Committee when he implied (or he implied to me) that offer documents on takeovers would be subject to the SIB. Yes, contrary to what the noble Lord said, the offer documents are subject, particularly in advertising and Part IV of the Bill, for example, to the provisions concerning the issue of securities. I believe the intention is, however, to go much further and to bring in all the matters which are currently dealt with by the Panel on Takeovers and Mergers. The Government have taken a specific decision not to provide statutory backing to the work of the panel, and it may be helpful if I explain why we have reached that conclusion before I turn to the amendment itself.

729
The Government stated in the White Paper on financial services the view that the Panel on Takeovers and Mergers has been,
"a good example of self-regulation working in an important area of the securities market in the United Kingdom. The Government wish it to continue to do so. If practitioners in. and users of. the securities market felt that statutory backing would be helpful, the Government would be willing to consider it".
The noble Lord, Lord Taylor of Gryfe, made this point. There has been no indication to date that this is what is required.
Following the White Paper, representations on this issue were received from various bodies. A degree of statutory backing found favour, as it found favour with the noble and learned Lord, Lord Denning. But many were opposed to it. The panel itself, on which many City organisations are represented, came out against statutory backing, as did the governor of the Bank of England. The noble Lord. Lord O'Brien, in his very helpful intervention, made a point this afternoon, as he did when we touched on this matter a day or two ago, that the strength of the Takeover Panel is its constituent members. He would like to leave things as they are. The noble Lord, Lord Taylor of Gryfe, again referred to the constituent members of that body as being best able to meet the needs. My noble friend Lord Noel-Buxton also suggested in his remarks that giving authority to the Secretary of State would undoubtedly change not only the composition but the character of the Takeover Panel. He did not think that was desirable.
We took due account of all the consultations. We took due account of all the comments that were made to us. We decided against including in the Bill provisions to regulate takeovers. We believed then, and we continue to believe today, that the panel is doing a good job on a non-statutory basis and that it enjoys the support of the City. This decision was announced when the Bill was published in December. I repeat that we have had no reason to change our view between December and now, in late July. Since then, although the Opposition have sought to pursue the point in another place, we have received no representations from those actually concerned with takeovers arguing that the decision should be reversed.
Experience has indicated that the conduct of takeovers is an area which is best left, so far as possible, to self-regulation rather than to statutory provision. The City code on takeovers and mergers and its administration by the panel compares favourably with the more legalistic approach adopted in the USA. There are few in the City or in industry and commerce who would wish to move towards the American model if we can possibly avoid it.
We have looked carefully at the argument that the legislation should nevertheless cater for the fear that the existing voluntary system may break down. There are those who would argue that we should seek reserve powers in the Bill which could be brought into operation if the panel's effectiveness began to be underminded. But reserve powers would carry a very real danger of provoking precisely the decline in the panel's authority which we are keen to avoid. We therefore had to look very carefully at whether the risks of taking reserve powers outweigh the risks of
730
being caught without them in the event of a deterio-ration in the panel's effectiveness and we concluded that the balance of risk was against taking reserve powers.
If would be right if I now turned to the illustration that the noble Lord, Lord Williams, has used in support of his amendment. As a number of other noble Lords have spoken about this matter, I owe it to the Committee to give some explanations or some response to the points that have been raised in the case of Guinness. The noble Lord. Lord Williams, said that there is a difference between statements in listing particulars and other offer documents. But both are covered by the Bill as, indeed, they are covered by the present law.
There are special rules for listing particulars in Part IV of the Bill, and we discussed these last night. But certainly both are covered. So far as concerns the suggestion that we might extend Clause 167 to offer documents, perhaps I may say at this time that Clause 167 is not relevant. It is Clause 44 (which we have already discussed) which applies to offer documents. Noble Lords will recall that Clause 44 deals with the conduct of investment business.
As a number of noble Lords have said, there is widespread concern—and I am aware of that widespread concern—about the extent to which Guinness plc's recent proposals departed from statements of their intention at the time of their offer to Distillers' shareholders. Following discussions with my right honourable friend the Secretary of State for Scotland, the Governor of the Bank of England, and the Stock Exchange, I understand that Guinness now intend to put fresh proposals to their shareholders. I further understand that the panel are looking into whether what has happened has been consistent with the rules or the spirit of the takeover code.
My noble friend Lord Sanderson in his intervention said that he would wait to listen to what I had to say about this matter. If I did not misunderstand him—and he will correct me if I am wrong—he said that he hoped that the Government had taken note of these matters. It is the case that we have taken note. My honourable friend the Minister in another place has seen representatives of Guinness, and I hope that the Committee will accept from me that at this stage I really cannot make any further comment.
The noble Lord, Lord Grimond, expressed his feeling of disturbance. He suggested that Guinness shows that there is a problem. That may be so; but it certainly has not been established that there is a problem which undermines the authority of the Takeover Panel. Only Guinness has been referred to the panel. No decision has yet been taken by any authority at all on this question.
I have gone as far as I think sensible in the interests of our debate this afternoon, in the interests of the parties who are involved in this matter, and I should perhaps finish by saying that we have looked at what is described as a problem and we shall see whether it is a problem or not. But we have also looked most carefully at whether the risks of taking powers, as the noble Lord, Lord Williams, seeks to do by way of his amendment, outweigh the risks of being caught without them in the event of a deterioration in the

731
effectivenes of the panel. We have concluded that the balance of risk was against taking reserve powers. I would invite the Committee to reject the amendment that has been proposed.
Lord Williams of Elvel: I am grateful to noble Lords who have taken part in the debate, which has been very interesting. Perhaps I may summarise some of the things that noble Lords have said and make my own comments on them. I was very grateful for the support of the noble and learned Lord, Lord Denning. He put his finger, as always, right on the main problem which is that we have on a wide canvas statutory provisions for controlling securities and yet in this very narrow area we have a voluntary body. This gives rise, in the noble and learned Lord's view and in my view, to a major anomaly. The noble Lord, Lord O'Brien, quite rightly referred, as he has on previous occasions, to the history of the Takeover Panel. I hope that I made it abundantly clear to the Committee that I personally and we on this side had no particular complaints about the job that the Takeover Panel had done over the years. We think that it has done a good job, and we think that it is still doing a good job. But that is not the point that I was trying to make.
I thought that the noble Lord, Lord O'Brien, perhaps offered me a crumb of comfort in saying that if powers were to be taken, he would hope that it would be a panel of professionals and not boilermakers, I think he said, or others. I would certainly agree with that. I think that he himself possibly is now moving a little, if I may say so, towards the possibility that we might have some sort of statutory backing for a Takeover Panel. I say, "boilermakers" deliberately because of an interest which has to be declared. I must declare an interest in that I am a member of the General and Municipal Boilermakers' Allied Trade Unions and, under the formula of the noble Lord, Lord O'Brien, I would be disqualified from serving on the Takeover Panel.
The noble Lord, Lord Sanderson, made an interesting point and raised the general question that I have been trying to put before the Committee as to whether the powers that were at present in the hands of the Takeover Panel and in the hands of the Government, even the powers as proposed in the Bill, were sufficient to deal with the very important matters to which the noble Lord referred.
I was particularly grateful to the noble Lord, Lord Grimond, on this, if I may say so, his happy day, his birthday; and I am sure that your Lordships would wish to congratulate him on that. He raised the important point of the interests of workers and communities in the business of takeovers. Indeed, it is a statutory responsibility under the companies' legislation that directors should have regard to the interests of employees as well as shareholders. I think that he makes that very important point that offer documents ought to reflect.
The noble Lord, Lord Taylor of Gryfe, I am bound to say unusually and uncharacteristically for him, strayed rather off the point. I was not, and deliberately not, referring to competition law. I think that I have a certain experience of competition law. I think that I know from my past activities what are the arrangements for the Office of Fair Trading and the Merger
732
Panel and the Monopolies and Mergers Commission to study these various matters. This has nothing to do with the conduct of takeovers in the market and in the City of London. However, the noble Lord made the point that the panel as at present constituted is a representative body of institutions in the City of London. Some of us might feel that it is perhaps a little too representative of institutions in the City of London; but I shall let that pass for the time being.
Nevertheless, my amendment does not seek—and I emphasised this in moving it—to affect the way that the panel is chosen or appointed. The Secretary of State is within his rights to say that everything is going to go on exactly as before. There is nothing in my amendment which stops that, if that is what he wants to do. The noble Lord, Lord Noel-Buxton, asked me whether there would be any change if what I was proposing actually took place. I must assure the noble Lord that there would be considerable change if the takeover code were backed by the statutory authority derived from the Secretary of State and from Parliament.
I now come to the noble Lord, Lord Lucas of Chilworth, who very kindly spent a considerable time discussing this matter. If I may say so, I think he did it with great clarity. However, I noticed that in what he said he was perhaps somewhat more guarded than he very often is. He talked about the balance of risk and said that the problems had been carefully studied and carefully weighed and that the Government had decided to come down on this side rather than on that side. I am glad that the noble Lord recognised that there are major problems which I am seeking to address in this amendment. He also said that the Takeover Panel had done a good job, and again I agree with him.
He also said that the listing particulars in the Bill would cover all the arrangements which were concerned with the listing of securities, a point which I think I also made in my introduction. I have never been happy about subsection (2) of Clause 44, which was the subsection to which the noble Lord referred me. I think it is extremely difficult, and my legal advisers advise me that it is an extremely difficult clause to interpret. I am not entirely happy that it covers the offer documents that are sent out, but it may do so. I am slightly up in the air on that.
Nevertheless, when coming to the whole question of Guinness, the noble Lord, Lord Lucas, recognised very frankly, I think, that there is a problem, and he explained to the Committee what the Government were proposing to do about that problem. I find his explanation, if I may say so, somewhat less than convincing. The fact that the Takeover Panel is looking into the matter to see whether there may or may not have been a breach in the code and the fact that other people are looking at various parts to see whether certain things, certain undertakings have or have not been breached, I do not find a very convincing response to the Guinness affair. It would be very much easier, in my view, if in these circumstances there was a clear authority from the Secretary of State, through the Securities and Investments Board, to mount an investigation straight away into the operation to see exactly where the responsibility lay. In

733
view of that, I think I must press this amendment and ask the view of the Committee.
3.41 p.m.
On Question, Whether the said Amendment (No. 344A) shall be agreed to?
Their Lordships divided: Contents, 79; Not-Contents. 161.

DIVISION NO.1

CONTENTS

Alport, L.

Listowel, E.

Ampthill, L.

Llewelyn-Davies of Hastoe, B.

Ardwick, L.

Lloyd of Hampstead, L.

Beaumont of Whitley, L.

Lockwood, B.

Beswick, L.

McIntosh of Haringey, L.

Birk. B.

Merrivale, L.

Blyton. L.

Milford. L.

Bottomley, L.

Mishcon, L.

Brockway, L.

Molloy, L.

Bruce of Donington. L.

Morton of Shuna, L.

Burton of Coventry. B.

Nicol, B.

Carmichael of Kelvingrove, L.

Northfield, L.

Cledwyn of Penrhos, L.

Oram, L.

David B. [Teller.]

Paget of Northampton, L.

Davies of Penrhys, L.

Parry, L.

Dean of Beswick, L.

Phillips, B.

Denington, B.

Pitt of Hampstead, L.

Denning, L.

Plant, L.

Elwyn-Jones, L.

Ponsonby of Shulbrede, L.

Ennals. L.

[Teller.]

Fisher of Rednal, B.

Prys-Davies, L.

Fitt. L.

Rea. L.

Gallacher, L.

Reilly, L.

Graham of Edmonton. L.

Rhodes, L.

Hacking, L.

Rugby, L.

Hampden. V.

Sefton of Garston, L.

Hatch of Lusby, L.

Serota, B.

Hayter, L.

Shepherd, L.

Heycock. L.

Silkin of Dulwich, L.

Hirshfield, L.

Stallard, L.

Houghton of Sowerby, L.

Stoddart of Swindon. L.

Hughes, L.

Strabolgi, L.

Ilchester, E.

Taylor of Blackburn, L.

Jacques, L.

Taylor of Mansfield, L.

Jenkins of Putney. L.

Underhill, L.

John-Mackie, L.

Wallace of Coslany, L.

Kearton. L.

Wells-Pestell, L.

Kiibracken. L.

Williams of Elvel, L.

Kinloss, Ly.

Willis, L.

Leatherland. L.

Wilson of Rievaulx, L.

NOT-CONTENTS

Aldington. L.

Buckinghamshire, E.

Allerton. I.

Butterworth, L.

Arran, E.

Buxton of Alsa, L.

Auckland, L.

Byron, L.

Bauer, L.

Caccia, L.

Belhaven and Stenton, L.

Caithness, E.

Bellwin, L.

Campbell of Alloway, L.

Belolf, L.

Carnegy of Lour, B.

Belstead, L.

Carnock, L.

Benson, L.

Chorley, L.

Bessborough, E.

Colville of Culross, V.

Birdwood, L.

Constantine of Stanmore, L.

Blake, L.

Cork and Orrery, E.

Boardman. L.

Cornwallis, L.

Boyd-Carpenter, L.

Cottesloe, L.

Brabazon of Tara. L.

Craigton. L.

Braye, B.

Crathorne, L.

Brightman, L.

Cross, V.

Brocket, L.

Cullen of Ashbourne, L.

Brougham and Vaux. L.

Davidson, V.

Broxbourne, L.

De Freyne. L.

Bruce-Gardyne, L.

De La Warr, E.

734

Denham, L.[Teller.]

Mowbray and Stourton, L.

Derwent, L.

Moyne, L.

Dilhorne, V.

Munster. E.

Drumalbyn, L.

Murton of Lindisfarne. L.

Dundee, E.

Newall, L.

Ebbisham, L.

Noel-Buxton, L.

Eden of Winton, L.

Norfolk, D.

Effingham, E.

Northesk, E.

Ellenborough, L.

Nugent of Guildford, L.

Elles, B.

O'Brien of Lothbury, L.

Elliot of Harwood, B.

Orkney, E.

Elliott of Morpeth, L.

Orr-Ewing, L.

Elton. L.

Penrhyn, L.

Enniskillen, E.

Peyton of Yeovil, L.

Faithfull, B.

Plummer of St Marylebone,

Fanshawe of Richmond, L.

L.

Ferrers, E.

Quinton, L.

Gainford, L.

Radnor, E.

Gardner of Parkes, B.

Reigate, L.

Glanusk, L.

Renwick, L.

Glenarthur, L.

Rodney, L.

Gray of Contin, L.

Romney, E.

Gridley, L.

St. Davids, V.

Grimthorpe, L.

Saint Oswald, L.

Hailsham of Saint

Sanderson of Bowden, L.

Marylebone, L.

Sandys. L.

Hanson, L.

Savile, L.

Harmar-Nicholls, L.

Seebohm, L.

Henley, L.

Sempill, Ly.

Hesketh, L.

Shannon, E.

Hives, L.

Sharpies, B.

Holderness, L.

Shrewsbury, E.

Hooper, B.

Skelmersdale, L.

Hunter of Newington, L.

Slim, V.

Hylton-Foster, B.

Stanley of Alderley, L.

Jessel, L.

Stodart of Leaston, L

Killearn, L.

Strathcarron, L.

Kimball, L.

Strathcona and Mount Royal,

Kitchener, E.

L.

Lane-Fox, B.

Sudeley, L.

Lauderdale, E.

Swinfen, L.

Layton, L.

Swinton, E. [Teller.]

Long, V.

Taylor of Hadfield, L

Lucas of Chilworth, L.

Terrington, L.

Luke, L.

Thorneycroft, L.

McFadzean, L.

Thurlow, L.

MacLehose of Beoch, L.

Torphichen, L.

Macleod of Borve, B.

Tranmire, L.

Malmesbury, E.

Trenchard, V.

Mancroft, L.

Trumpington, B.

Manton, L.

Tryon, L.

Margadale. L.

Tweedsmuir, L.

Marshall of Leeds, L.

Ullswater, V.

Massereene and Ferrard, V.

Vaux of Harrowden, L

Maude of Stratford-upon-

Vickers, B.

Avon, L.

Vivian, L.

Middleton, L.

Whitelaw, V.

Milne, L.

Wynford, L.

Milverton, L.

Young, B.

Monk Bretton, L.

Zouche of Haryngworth, L.

Mottistone, L.

On Question, amendment agreed to. Clause 144, as amended, agreed to.

Clause 142 agreed to.
Schedule 10 [Takeover offers:provisions substituted for sections 428, 429 and 430 of Companies Act 1985]:
On Question, Whether Schedule 10 shall stand part of the Bill?
3.50 p.m.
Lord Morton of Shuna: At Second Reading, I raised the question of the definition of "takeover" which now appears in Schedule 10, which of course is sections

735
being inserted into the Companies Act. It is described as:
"In this Part of this Act 'a takeover offer' means an offer to acquire all the shares".
That is in distinction to the old Section 428, which applied to a scheme or contract involving the transfer of shares.
At the Second Reading I raised the possible difficulty of the habit in certain circles in Scotland, and perhaps elsewhere, of doing this form of transfer not by an offer and acceptance but by one document called an agreement. No doubt for obvious reasons that did not get an immediate response, but no amendment has been tabled by the Government. Is it intended that such an agreement falls outwith Schedule 10 or within it? If it is within it, are the Government satisfied that it would be caught by the definition?
Lord Lucas of Chilworth: I certainly recall the noble Lord, Lord Morton of Shuna, arguing on Second Reading that the scope of the schedule should be extended to cover situations where shares are acquired by private agreement rather than under the terms of a takeover offer. We very carefully considered the point made by the noble Lord, which had also been put to us by no less a body than the Law Society of Scotland. However, I fear it is not one which the Government can accept. Section 428(1) of Schedule 10 ties the application of the provisions to takeover offers. In so doing it follows Section 428 of the Companies Act and all its predecessors.
It has always been a cardinal principle of the provisions that some shares at least must be acquired under the terms of an offer and that only holders of shares to which an offer relates should be able to exercise the right to have their shares acquired by the offeror. Section 428(1) makes it clear that an offeror must offer for all the shares or all those of a class, but otherwise it confirms these ground rules.
We think that it is important to maintain those ground rules, both from the point of view of minority shareholders and from the point of view of the offeror. As regards the minority, unless there is a formal offer they are not in a position to judge the worth of the terms put to them and the 90 per cent, requirement cannot provide a true indication as to whether those terms are fair and reasonable.
So far as the offerors are concerned, tying compulsory acquisition to an offer means that they know where they stand in terms of their potential rights and obligations and can budget accordingly. The noble Lord suggests that there may be scope for abuse if Section 428(1) remains in its present form, but there is no evidence that any such abuse exists at present; nor, on the basis of our wide-ranging consultation with practitioners, is there any demand for an amendment on the lines proposed. What is clear is that changing the ground rules would make the operation of the provisions much more difficult and would create many more problems than it might solve. On that basis, I would urge the Committee to approve the schedule as it now stands.
Lord Morton of Shuna: That would be very interesting if it were accurate. Section 428 of the
736
Companies Act 1985, which repeats the Companies Act of the 1940s, says in subsection (1):
"This section applies where a scheme or contract involving the transfer of shares or any class of shares".
The Government have chosen in this Bill to change the wording, and that is what I am querying. They have changed the wording to say:
"In this part of this Act a takeover offer means an offer to acquire the shares".
It is changing from a scheme or contract to a takeover offer. What I was trying to find out from the Government was the reason for the change and whether the change covers what I previously understood was covered.
Lord Lucas of Chilworth: I am just a little disappointed that the noble Lord should suggest that I am guilty of an inaccuracy. My advice is well founded, and I believe it to be true, because Section 428 of the Companies Act refers to a scheme or a contract, and not just to offers. It is certainly true that Section 428 goes on to refer to offers; and the scope of the Bill, as I have sought to describe, is precisely the same.
Clause 143 agreed to.
Clause 144 [Market makers, off-market dealers etc.]:
Lord Hacking Lord Hacking moved Amendment 344AA:
Page 112, line 11. leave out ("a price") and insert ("prices")
The noble Lord said: The same point I am seeking to cover in my Amendment No. 344AA is covered in my Amendments Nos, 374 and 375A. With the leave of the Committee, I will address your Lordships on all three of my amendments at the same time. I should point out that Amendment No. 344AA refers to clause 144 of the Bill while Amendments Nos. 374 and 375 A relate to Clause 165. All these amendments cover a very simple point, and let me just explain the background to it.
Following the bringing into effect of the new Stock Exchange regulations, which I think are due to come into force on 27th October, the separate roles of jobber and broker will no longer exist. There will therefore be a new operator in the market who, roughly speaking, will carry on the merged roles of the present jobber and broker. Therefore it is necessary to define in two Acts, to which I shall draw the Committee's attention, the role of this new operator.
This new operator has been called a market maker, and for the purposes of the Company Securities (Insider Dealing) Act 1985 and for the purposes of the Companies Act 1985 this Bill defines the role and the meaning of a market maker. The Bill seeks to include in the two Acts to which I have just made reference further provisions, and those further provisions include the definition of the market maker.
The amendment I am seeking to persuade the Government to accept changes the words "a price" to "prices". The reason for that is that in the description given of the role of the market maker reference is made to his willingness to buy and sell securities at a price specified by him. The reality of the market will be that

737
the market maker will be willing to buy and sell securities at different prices. Therefore, in my respectful submission on each occasion when this reference occurs the plural should by used.
I hope the Minister will not start quoting the Interpretation Act at me. For reasons which I am perfectly prepared to enlarge upon it is not applicable here. However, I await with interest what the Minister has to say. I beg to move.
Lord Brabazon of Tara: The Committee will I think be glad to hear that I am not going to quote the Interpretation Act at the noble Lord, Lord Hacking —not that I am sure that the Committee would not like to hear what he has to say about it. It is far simpler to say to the noble Lord that, while I do not for a moment think that the wording at present in the Bill is unsatisfactory, I always welcome suggestions as to how the wording can be made better. This is one of them. I am pleased to accept the noble Lord's amendment.
4 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 345:
Page 1 12. line 21, after ("exchange") insert (" (other than an overseas investment exchange) ").
The noble Lord said: This amendment was spoken to with Amendment No. 111. I beg to move.
Clauses 145 to 147 agreed to.
Lord Silkin of Dulwich Lord Silkin of Dulwich moved Amendment No. 345ZA:-
After Clause 147, insert the following new clause:
("Grievances.
. Any person aggrieved by any requirement of an Inspector under section 147 above or by a report to the Secretary of State made by virtue of that section may apply to the court on the ground that anything done by or on the authority of the inspector was in breach of the rules of natural justice and upon such application the court may direct that such requirement or report shall be treated as having no effect and may make such other order as appears to be just and equitable.").
The noble and learned Lord said: We are now dealing with the process of investigation into insider dealings covered in particular by Clauses 147 and 148—clauses which follow the pattern of clauses in the Companies Act with regard to other circumstances which are dealt with in that Act. This amendment seeks to introduce into the procedure a requirement that it should be carried out in accordance with the rules of natural justice.
It may be said that such a requirement ought to form part of all the equivalent sections in the Companies Act and elsewhere; and if that were said, I should entirely agree with it. But this is the opportunity for dealing with the point in relation to this aspect of trading. I hope that if the proposal made by the amendment is successful, either in the form in which it has been made or in some other form, the equivalent clauses will be incorporated into other legislation.
Clause 147 gives enormous powers to inspectors appointed by the Secretary of State. It is desirable to look at the details of the clause to see how it operates. In the first place, the Secretary of State's power to appoint one or more competent inspectors to carry out investigations arises where there are circumstances suggesting that there may have been a contravention of the Company Securities (Insider Dealing) Act. That is the first point—circumstances suggesting that there may have been a contravention. Subsection (3) deals with the powers of the inspectors. It says:
"If the inspectors consider that any person is or may he able to give information concerning any such contravention".
Once again we have a very flimsy set of circumstances upon which the powers may be operated. In those circumstances the inspectors may require the person concerned to produce documents in his possession, to attend before them and otherwise to give them all assistance in connection with the investigation. It is his duty to comply. Among other things, under subsection (4) the inspector,
"may examine on oath any person who he considers is or may be able to give information"—
again we have the "may"—
"concerning any such contravention".
Incidentally, perhaps the Minister will look at the clause on a pure point of semantics. The plural and the singular seem to be mixed up—but that is not the point I am making on this amendment.
The very important subsection (6) provides that:
"A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him".
So given that it is thought that there may be a contravention and the inspectors think that somebody may be able to give information about that possible contravention, that person can be required to produce documents and to give evidence on oath, and any statement that he makes can be used in legal proceedings against him. That is a most unusual provision and is, I think, virtually unique to the Companies Act.
Under Clause 148 there are provisions which apply if such a person fails to comply with the inspectors' requests. If he does so fail to comply, they can certify that fact to the court. If the court is satisfied that he did so without reasonable excuse, the court can punish him, in effect, for contempt of court; and in addition to that penalty the court can direct the Secretary of State that he may exercise the powers of cancelling an authorisation under the Act and in other ways penalise him and his business. These are draconian powers. I would not for one moment suggest that in dealing with insider trading there should not be severe powers indeed. What I do suggest is that those powers should be exercised in accordance with the ordinary rules of natural justice which indeed the courts enforce in relation to a very wide range of judicial or quasi-judicial proceedings in other fields.
The question of whether the rules of natural justice apply in relation to investigations under the Companies Act has been the subject of litigation in the past—litigation with which I have had some small concern. My understanding of the position—and the Minister will correct me if that understanding is

739
wrong—is that although there is nothing in the legislation which requires that the rules of natural justice should be adhered to, nonetheless inspectors are given guidance by the department, the effect of that guidance being that they are asked to comply with the rules of natural justice.
If that is right, my submission to the Committee is that there is no reason why that should not be incorporated in the statutory provisions. Indeed, there is every reason why it should be incorporated, because it is only if it is so incorporated that the courts will be able to take cognisance of the rule. It is quite unfair and, I suggest, out of accord with the rules of national justice, that the inspectors should be told, "This is how you should operate", but that there should be no statutory sanction if they fail to operate in that way.
As I said at the outset, I appreciate that this amendment possibly has wide-ranging repercussions for the whole field of investigation by inspectors, and I do not shrink from that suggestion. Indeed, it is an advantage that that should be so, because we are here dealing with a basic principle that ought to apply generally. In other situations one comes across circumstances in which the statutory provision leaves out some procedure or principle that is regarded as being important. It is the stage at which one discovers that statutory omission that one should, when the opportunity arises, put it right. This is one of those occasions and I hope very much that the Committee will support the view that it ought to be put right now. I regret that the Benches opposite are somewhat denuded; possibly natural justice is being done elsewhere on this occasion. Despite that, I hope very much that the Minister will accept the principle that I have put forward. I beg to move.
4.15 p.m.
Lord Lucas of Chilworth: I am so grateful to the noble and learned Lord, Lord Silkin, for the way in which he has described the amendment. That has been very helpful to me, since the amendment was put down only yesterday. Considering that we did not finish our business until half-past twelve this morning, I have had very little time to give due consideration to the matter. I understand the noble Lord's concern, but his amendment appears to presuppose a procedure somewhat akin to that followed under the Companies Act, where the inspector's job is to unravel and explain for publication what is often a very complicated story.
Where Clause 147 is concerned, the inspector's task will be to establish facts of a straightforward kind and not to pass judgment. His report will not be published. To the extent that it contains elements of judgment they will never see the light of day; nor will they be tested in court in the normal manner. It is true that an inspector's powers under Clause 147 are the same as those of an inspector appointed under Section 432 of the Companies Act. That is because a large part of the problem is obtaining evidence. The Section 432 powers have proved effective in eliciting evidence.
However, it does not follow that every safeguard attaching to the existing power should be imported. Although the powers are the same, I stress the point that the circumstances in which they are exercised are very different. The job of Section 432 inspectors is
740
effectively to write the official history of what are usually episodes of considerable complexity. The witnesses who inspectors hear will often give sharply conflicting evidence. Reports will frequently criticise the conduct of individuals, not just expressly but implicitly, by preferring some witnesses' accounts to those of others. It is right and proper that special protection should be available to such individuals.
The circumstances of a Clause 147 investigation will be quite different. The inspector will start from a list of stock market transactions. His job will not be to explain them but, first, to discover as far as he can the individuals behind any that are anonymous, and, secondly, to form a view as to whether any of the people involved should be proceeded against. His findings will be known only to the Secretary of State. They will become public only in the event of action being taken. If action is taken, those against whom it is taken will have the normal opportunities to defend themselves.
I find it slightly surprising that the noble and learned Lord, Lord Silkin, should have put down this amendment and advanced the argument that he has, because the Official Opposition must decide whether or not they are against insider dealing. In another place the noble and learned Lord's honourable friend Mr. Gould was all in favour of the powers that the noble and learned Lord, Lord Silkin, is criticising. The Labour Opposition proposed the present power as an amendment to the Companies Act 1980, and so to my way of thinking the noble and learned Lord's argument does not lie too easily.
I urge the Committee to reject the amendment, but I wish to stress that in so doing the Committee would not be absolving inspectors from observing the requirements of natural justice—certainly to the extent that they are applicable to the job that the inspectors have in hand. The inspectors must observe the requirements, and they will do so without express provision to be answerable to the courts if they do not. However, I emphasise that inspectors should not, in that important task, be impeded by special requirements developed for a very different type of investigation. With that explanation I hope that the noble and learned Lord will see fit to withdraw his amendment.
Lord Silkin of Dulwich: I begin by apologising to the Minister for the short notice of this amendment. He will understand that it is not only the Government who have been put under great pressure by this legislation. It is not easy to absorb a very large number of amendments and new clauses emanating from the Government and at the same time to give careful scrutiny to the existing clauses in the Bill, so as to bring forward amendments in good time.
This is a very important amendment that raises an important principle. With great respect to the Minister, I thought it a little unworthy of him to suggest that because my honourable friend Mr. Gould is of the view, as I am, that there should be very stringent rules to give protection from the evil of insider dealing, either Mr.Gould or myself would wish those rules to be otherwise than conducted in accordance with the rules of natural justice to which the procedure would be subject in any event, as the

741
Minister himself said in the latter part of his remarks.
The difference between the Minister and myself, therefore, is that he accepts that those rules should apply—and it is right that they should apply—but suggests that it is wrong that they should form part of the statutory provision, the details of which are set out in the statute. Therefore, those details would contain, in practice, everything in the way of powers enabling the inspectors to hold their inquiry but nothing by way of protection for the people who are required to give evidence or to produce documents. That, in my view, is quite wrong.
It makes no difference at all that in the case of Clause 147 inquiries there may not be a public report, even though there appears to be nothing in the clause which prevents the report from being made public; but I accept that that in practice, may be the position. If anything, it assists the case I am making. If those who may be criticised in the interim or final report do not even know that they are being criticised, the case for them being dealt with prior to that criticism being formulated, in accordance with the rules of fairness, is that much stronger and certainly not weaker.
The fact is that once reports which may criticise individuals are in the hands of the Secretary of State, how the Secretary of State thereafter will deal with those individuals or with the organisation of which they are part is a matter within his own breast, and there is certainly no guarantee that in his dealings with them in relation to authorisation or otherwise he may not take into account the criticisms that have been made in reports which they have not had the opportunity of seeing.
It is not only the report which should be subject to the rules of natural justice, but the whole procedure of the inquiry; it is the opportunity to know what are the criticisms made about a person and it is the opportunity, at the end of the day and before the inspector finally makes up his mind, to know the sort of criticisms which the inspector is minded to make about a person. Again, my understanding is that the guidance given goes into those matters in detail. If it does, there is every reason why a person who is being questioned or required to produce material under Clause 147 should not only know that there is such guidance, but should be protected when he is answering the questions—or perhaps refusing to answer the questions, as he is entitled to do—and should be in a position to know that he is protected. The only way in which he can know that he is protected is if the principle is enshrined in the statute itself.
I am not satisfied with the reply that the Minister has given. I accept and I apologise for the fact that he has not had a great deal of time, and I would have hoped for a better reply had he more time, but in the circumstances—
Viscount Colville of Culross: Before the noble and learned Lord makes up his mind on this I wonder whether he will allow me to intervene? I have been following, professionally, the development of administrative law over a fairly long period. What the noble and learned Lord is now suggesting is entirely within the demesne of the rules of judicial review which are applying to an increasingly large number of
742
investigations and various other mechanisms which have arisen under statute law and others which have arisen out of domestic proceedings, as far as that goes.
I am extremely worried about this amendment. I am in charge of what is, I believe, technically a quango. It has various statutory duties to investigate complaints about a number of things, in a totally different field, though that makes no difference for the purposes of this debate. We are very well aware—and I have a large body of commissioners who work in this quango—that all these investigations, because they put people in peril in exactly the way that the noble and learned Lord has remarked upon, have to be conducted in accordance with the rules of natural justice. I have personally instructed people who are going to carry out investigations that they have to abide by the rules and I have explained what those rules are.
I am very concerned that if the noble and learned Lord is trying to insert a specific requirement in this Bill on account of the rules that he well knows, in a Latin phrase, there may be some doubt plated upon the activities of other people under statutes, albeit quite recent, which say nothing about this. The noble and learned Lord must realise that the whole process of judicial review does not depend upon the existence of a statutory remedy of the sort that he is seeking to insert in the Bill.
The noble and learned Lord is absolutely right. Of course these provisions have to be subject to natural justice, but it does not require a statute to say so, because it is inherent in the major statute which provides for judicial review and in the Rules of Court, particularly Order 53, that this shall be inherent in every single activity of this sort that goes on. If the noble and learned Lord insists on putting this into the Bill, he will undermine all sorts of other regimes and methods of investigation which are subject to these rules at the moment, and rightly so, but about whose activities there may be some doubt hereafter.
Lord Silkin of Dulwich: I am grateful to the noble Viscount for making that point which I do not suggest is an invalid one, but the fact is that investigations under the provisions of the Companies Act are a very different type of investigation from the majority of other investigations of this kind. They produce an entirely different result. What happens is that at the end of the day there is a report to a Minister. The Minister may, or may not, act upon it. That report may, or may not, be published. However, enormous harm can be done to people if reports containing a great deal of criticism are published.
In litigation some years ago on one such case the court, as I understood it, took the view that there was nothing that could be done to upset a report because a report is a report. It is not a document which has any direct effect. Indeed, it is on that basis that I believe in one case an interlocutory injunction was refused. That may, or may not, be on all fours with the sort of case to which the noble Viscount refers. I suspect that he is referring to bodies which have specific powers and which having conducted or organised the conduct of an investigation then operate their powers. In such cases I wholly agree with the noble Viscount. It may be quite unnecessary, because of the rules of judicial review, to incorporate specific provisions in the

743
statute. The very fact that they have certain powers implicit from that is the requirement that the rules of natural justice shall be followed.
This is a totally different situation. Under the Companies Act generally the procedure whereby people are given specific powers—very unusual powers, moreover—to conduct investigations and compel evidence, and then simply to make a report is, as far as I know, a unique situation. The noble Lord may know of others. If there are others, then the point applies equally to them, but certainly it is the example most within my own knowledge. It is for that reason that in my view there should be a specific provision in the section concerned which makes it quite clear—contrary to the doubts that may have existed in the past—that the requirement of natural justice is not merely something which the department considers fair to bring in but is something which Parliament has decided is necessary.
4.30 p.m.
Lord Lloyd of Kilgerran: Before the noble and learned Lord sits down, may I say that I have been trying to follow his answer to the noble Viscount, Lord Colville, as to why it is necessary in the context of this Bill to have a specific reference:
"that anything done by or on the authority of the inspector was in breach of the rules of natural justice."
As the noble and learned Lord may know, my expertise in these matters derives only from spending the whole of my adult life in the field of intellectual property. There are tribunals in that field, but one has been able to get at the tribunals, if that is the correct phrase, on the grounds that they have not behaved in accordance with the principles of natural justice.
As the Committee will know, the field of intellectual property is a very specialised field in which it has never been thought necessary—because patents and trade marks are so specialised and there are tribunals existing to deal with them: the Patent Office and so on—to state in an Act that there are principles of natural justice and that this must be put into the Act so that there should be a statutory reference.
The noble and learned Lord, Lord Silkin, has said that the situation mentioned by the noble Viscount, Lord Colville, is totally different. Of course it relates to company law but it is totally different from the position under this Bill. It is a situation that I cannot understand from the very persuasive arguments that the noble and learned Lord has put forward in support of his case. That may be my fault. Why is it necessary in this Bill to have a specific clause stating that the rules of natural justice will apply?
Viscount Colville of Culross: Hear, hear!
Lord Lloyd of Kilgerran: I am much obliged for that support.
Lord Lucas of Chilworth: I rather suspect that the noble and learned Lord, Lord Silkin, may wish to respond a little further, but I wonder whether at this moment he will allow me to answer a couple of the points which he raised. If a person declines to co-operate with an inspector, there is an element of protection for the person who has a reasonable excuse
744
for declining to co-operate with an inspector under Clause 148, which involves the courts. Additionally, under Clause 149(3)(g) the information can only be published in accordance with the Act. That of course is for purposes where there is adequate protection.
I am not sure whether I misled the noble and learned Lord, Lord Silkin, in my earlier remarks when I was discussing the inspector's task. I suspect that I probably did not, but in the event that I did may I just make sure that my meaning was clear? In regard to Clause 147 I was discussing the inspector's task, which would be to establish facts of a quite straightforward kind and not to pass judgments. I said that his report would not be published, but I correct myself in the remarks I have just made with regard to Clause 149. Normally, it would not be published—certainly to the extent that it contains elements of judgment, which would never see the light of day. I am fairly sure that I then said, "nor will they be tested in court in the normal manner". I should have said that whether or not there are elements of judgment, either this will never see the light of day or they will be tested in the normal manner. I may inadvertently have misled the Committee, and of course I apologise if I did.
I must say that in this regard we do not lightly seek the powers in the Bill. Experience shows that they are needed to enforce the legislation against insider dealing. I regret it, but it is what experience has suggested. It certainly represents an intrusion, but I expect that most people in fact will put up with it in the interest of preventing false markets, which is really what we are talking about.
I am sorry that the noble and learned Lord, Lord Silkin, has not found my answer satisfactory. I have to tell him that I am encouraged in my answer by my noble friend Lord Colville; and indeed the intervention of the noble Lord, Lord Lloyd of Kilgerran, suggests that what I was saying was reasonably fair. It addresses accurately the balance that we wish to strike. If I can advance any other argument I shall of course be happy to do so, but at the end of the day I believe that we have this matter right. As I suggested earlier, I think that the Committee should reject the noble Lord's amendment.
Lord Silkin of Dulwich: I do not intend to take up any more of the time of the Committee because I think that the issues are very clear. We are dealing here with a special procedure, which ends in a report which may never be seen by the person criticised. That is the vital difference between this and many other cases where there is no specific provision. In those circumstances, it seems to me to be right to test the feeling of the Committee and I shall do so.
4.37 p.m.
On Question, Whether the said amendment (No. 345ZA) shall be agreed to?
Their Lordships divided: Contents, 65; Not-Contents, 206.

DIVISION NO.2

CONTENTS

Ardwick, L.

Boston of Faversham, L.

Beaumont of Whitley, L.

Bottomley, L.

Beswick, L.

Brockway, L.

Blyton, L.

Bruce of Donington, L.

745

Caradon, L.

Lovell-Davis, L.

Carmichael of Kelvingrove, L.

McIntosh of Haringey. L.

Cledwyn of Penrhos, L.

Mishcon, L.

David B. [Teller.]

Molloy, L.

Davies of Penrhys, L.

Morton of Shuna, L.

Dean of Beswick, L.

Nicol, B.

Denington, B.

Oram, L.

Elwyn-Jones, L.

Paget of Northampton, L.

Ennals, L.

Parry, L.

Ewart-Biggs. B.

Phillips. B.

Fisher of Rednal, B.

Pitt of Hampstead, L.

Fitt, L.

Ponsonby of Shulbrede, L.

Gallacher, L.

[Teller.]

Graham of Edmonton, L.

Prys-Davies, L.

Hatch of Lusby, L.

Sefton of Garston, L.

Heycock, L.

Serota, B.

Hirshfield, L.

Shepherd, L.

Houghton of Sowerby, L.

Silkin of Dulwich, L.

Hughes, L.

Stallard, L.

Jacques, L.

Stoddart of Swindon, L.

Jeger, B.

Strabolgi, L.

Jenkins of Putney, L.

Taylor of Mansfield, L.

Kagan, L.

Underhill, L.

Kilbracken, L.

Wallace of Coslany, L.

Leatherland, L.

Wells-Pestell, L.

Listowel, E.

White, B.

Llewelyn-Davies of Hastoe, B.

Williams of Elvel, L.

Lockwood, B.

Willis, L.

Longford, E.

Wilson of Rievaulx, L.

NOT-CONTENTS

Abinger, L.

De La Warr, E.

Addington. L.

Denham, L. [Teller.]

Airedale, L

Denning, L.

Aldenham, L.

Derwent, L.

Aldington, L.

Diamond, L.

Allerton, L.

Dilhorne, V.

Ampthill, L.

Donaldson of Kingsbridge. L.

Arran, E.

Drumalbyn. L.

Bauer, L.

Dundee. E.

Belhaven and Stenton, L.

Eden of Winton. L.

Bcllwin, L.

Ellenborough, L.

Beloff, L.

Elles. B.

Belstead, L.

Elliot of Harwood, B.

Benson. L.

Elliott of Morpeth, L.

Bessborough, E.

Elton, L.

Birdwood, L.

Enniskillen, E.

Blake, L.

Ezra, L.

Boardman, L.

Faithfull, B.

Boyd-Carpenter, L.

Ferrers, E.

Brabazon of Tara, L.

Ferrier, L.

Braye. B.

Gainford, L.

Brentford, V.

Gardner of Parkes. B.

Bridgeman. L.

Gladwyn, L.

Brightman. L.

Glanusk, L.

Brocket, L.

Glenarthur, L.

Brookeborough, V.

Gray of Contin, L.

Brougham and Vaux, L.

Grey, E.

Broxbourne, L.

Gridley, L.

Bruce-Gardyne, L.

Grimond, L.

Buckinghamshire, E.

Grimthorpe. L.

Butterworth, L.

Hailsham of Saint

Buxton of Alsa, L.

Marylebone, L.

Caccia. L.

Hampden. V.

Caithness, E.

Hanson. L.

Campbell of Alloway, L.

Hanworth, V.

Campbell of Croy, L.

Harmar-Nicholls, L.

Carnegy of Lour, B.

Harris of Greenwich, L.

Carnock, L.

Harvington, L.

Chorley, L.

Hayter. L.

Colville of Culross, V.

Henley. L.

Constantine of Stanmore. L.

Hesketh, L.

Cork and Orrery, E.

Hives, L.

Cottesloe, L.

Holderness, L.

Craigton, L.

Hooper, B.

Crathorne. L.

Hooson. L.

Cross, V.

Hunter of Newington. L.

Cullen of Ashbourne, L.

Hylton-Foster, B.

Davidson, V.

llchester, E.

De Freyne. L.

Keilh of Castleacre, L.

746

Kilmarnock. L.

Roberthall, L.

Kimball L

Robson of Kiddington, B.

Kinloss.Ly.

Rochdale. V.

Kitchener, E.

Rochester, L.

Lane-Fox, B.

Rodney, L.

Lauderdale, E.

Romney, E.

Layton, L.

Rugby. L.

Limerick, E.

St. Davids, V.

Lloyd of Kilgerran, L

.Saint Oswald, L.

Lucas of Chilworth, L.

Sanderson of Bowden, L.

Luke, L.

Sandys, L.

McFadzean, L.

Savile. L.

Mackie of Benshie, L.

Seear, B.

McNair. L.

Seebohm. L.

Mais, L.

Sempill, Ly.

Malmesbury, E.

Shannon, E.

Mancroft, L.

Sharples, B.

Manton.L.

Sherwsbury, E.

Margadale. L.

Simon of Glaisdale. L.

Marshall of Leeds. L.

Skelmersdale, L.

Massereene and Ferrard, V.

Slim, V.

Maude of Stratford-upon-

Somers. L.

Avon, L.

Stanley of Alderley L.

Merrivale, L.

Stedman B.

Middleton L

Stodart of Leaston. L.

Milne, L.

Strathcarron, L.

Milverton, L.

Strathclyde, L.

Monk Bretton, L.

Strathcona and Mount Royal.

Mottistone, L.

L.

Mowbray and Stourton. L.

Sudeley. L.

Moyne L

Swinton. E. [Teller.]

Munster, E

Taylor of Gryfe, L.

Murton of Lindisfarne, L.

Taylor of Hadfield. L.

Newall L.

Terrington. L.

Noel-Buxton L

Thomas of Swynnerton. L.

Norfolk. D.

Thorneycroft, L.

Norrie, L.

Tordofl. L.

Northesk. E.

Torphichen, L.

Nugent of Guildford, L.

Tranmire. L.

O'Brien of Loth bury, L.

Trenchard. V.

Ogmore. L

Trumpington. B.

Onslow, E.

Tweedsmuir, L.

Orkney. E.

Ullswater, V.

Orr-Ewine, L

Vaux of Harrowden, L.

Penrhyn. L.

Vickers, B.

Peyton of Yeovil, L.

Vivian, L.

Platt of Writtle, B.

Walston, L.

Plummer of St Marylebone.

Westbury. L.

L.

Whaddon, L.

Quinton, L.

Whitelaw, V.

Radnor. E.

Wigoder, L.

Rankeillour, L.

Winstanley, L.

Reigate, L.

Wise, L.

Rennell, L.

Wynford, L.

Renwick, L.

Young, B.

Ritchie of Dundee, L.

Zouche of Harynguorth, L.

On Question, amendments agreed to.

4.47 p.m.
Clause 148 [Penalties for failure to co-operate with s. 147 investigations]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No 345A:
Page 115, line 13, leave out ("that") and insert ("a specified").
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 345B and 345C. I assure the Committee that the amendments are essentially drafting amendments. 1 beg to move.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 345B:
Page 115, line 15, leave out ("that") and insert ("a specified").
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 345C:
Page 115, line 26, leave out from beginning to ("and") in line 30 and insert—
("(4) The period mentioned in paragraphs (a) and (c) of subsection (3) above shall be such period as appears to the Secretary of State reasonable to enable the person on whom the notice is served to complete the performance of any contracts entered into before the notice comes into force").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 346:
Page 115. line 40, after ("or") insert ("certification by a ").
The noble Lord said: Amendments Nos. 346, 347 and 348 were spoken to with Amendment No. 79. I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 347:
Page 116, line 20, after ("or") insert ("certification by a").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 348:
Page 116, line 29, after first ("or") insert ("certification by a").
Clause 148, as amended, agreed to.
Clause 149 agreed to.
Clause 150 [Exceptions from restrictions on disclosure]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 349:
Page 119, line 29, at end insert—
("(oo) for the purpose of enabling or assisting an auditor of an authorised person or a person approved under section (Power to require second audit) above to discharge his functions;").
The noble Lord said: This amendment was spoken to with Amendment No. 239. I beg to move.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 350:
Page 120. line 29. leave out ("to")
The noble Lord said: If the Committee allows, I shall speak also to Amendments Nos. 351, 352, 353, 404. 406, 407 and 409.
The amendments are concerned primarily with the existing restrictions on disclosure of Banking Act information. In another place the Government announced their intention to widen the scope for disclosure. The development of financial conglomerates supervised under two or more statutory regimes makes it all the more important that financial and company regulators should be able to share informa-
748
tion. The Government's aim is to facilitate this for both domestic and overseas regulators while at the same time maintaining appropriate protection against undesirable disclosure. The Bill already provides for this in relation to information obtained under the Bill or under companies and insurance legislation. These amendments provide the banking piece of that jigsaw, if I may so call it. I beg to move.
Lord Williams of Elvel: As the noble Lord says, these are quite important amendments. They extend the ability to exchange information particularly, as the noble Lord said, in the banking sector. Amendment No. 351 sets out a table of persons and functions in great detail. This is something which we, on our side, have to consider. A rather delicate line has to be drawn between the responsibility of the auditor to his client and the responsibility of the auditor across a group in the new world that we are entering. I am not intending to oppose the amendments. I wish to look at them carefully and, if we have any problems, to come back on Report.
Clause 150, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 350A:
After Clause 150, insert the following new clause:
("Directions restricting disclosure of information overseas.

.—(1) If it appears to the Secretary of State to be in the public interest to do so. he may give a direction prohibiting the disclosure to any person in a country or territory outside the United Kingdom which is specified in the direction, or to such persons in such a country or territory as may be so specified, of such information to which this section applies as may be so specified.

(2) A direction under subsection (1) above—

(a) may prohibit disclosure of the information to which it applies by all persons or only by such persons or classes of person as may be specified in it: and

(b) may prohibit such disclosure absolutely or in such cases or subject to such conditions as to consent or otherwise as may be specified in it;

and a direction prohibiting disclosure by all persons shall be published by the Secretary of State in such manner as appears to him to be appropriate.

(3) This section applies to any information relating to the business or other affairs of any person which was obtained (whether or not by virtue of any requirement to supply it) directly or indirectly—

(a) by a designated agency, a transferee body, the competent authority or any person appointed or authorised to exercise any powers under section 81, 93 or 147 above (or any officer or servant of any such body or person) for the purposes or in the discharge of any functions of that body or person under this Act or any rules or regulations made under this Act or of any monitoring agency functions; or

(b) by a recognised self-regulating organisation, a recognised professional body, a recognised investment exchange or a clearing house other than an overseas investment exchange or clearing house (or any officer or servant of such an organisation, body, investment exchange or clearing house) for the purposes or in the discharge of any of its functions as such or of any monitoring agency functions.

(4) In subsection (3) above "monitoring agency functions" means any functions exercisable on behalf of another body by virtue of arrangements made pursuant to paragraph 4(2) of Schedule 2, paragraph 4(5) of Schedule (Requirements for recognition of professional body), paragraph 3(2) of Schedule 3 or paragraph 3(2) of Schedule 5 to this Act.

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(5) A direction under this section shall not prohibit the disclosure by any person other than a person mentioned in subsection (3) above of—

(a) information relating only to the affairs of that person; or

(b) information obtained by that person otherwise than directly or indirectly from a person mentioned in subsection (3) above.

(6) A direction under this section shall not prohibit the disclosure of information in pursuance of any Community obligation.

(7) A person who knowingly discloses information in contravention of direction under this section shall be guilty of an offence and liable—

(a) on conviction on indictment, to imprisonment to a term not exceeding two years or to a fine or to both:

(b) on summary conviction, to imprisonment for a term not exceeding three months or to a fine not exceeding the statutory maximum or to both.

(8) A person shall not be guilty of an offence under this section by virtue of anything done or omitted to be done by him outside the United Kingdom unless he is a British citizen, a British Dependent Territories citizen, a British Overseas citizen or a body corporate incorporated in the United Kingdom.").

The noble Lord said: The Bill, as I have suggested, provides wide powers to obtain information and requires recognised self-regulating and other organisations to monitor their members. The Bill makes specific provision for restricted information to be disclosed to assist overseas regulators of financial services. These provisions demonstrate, I believe, the Government's commitment to effective domestic regulation and to promoting international co-operation between financial regulators.
It is also important that sensitive information should be properly safeguarded. It should normally be used only for purposes broadly connected with the purposes for which it was obtained. That is why the new clause would give the Secretary of State a power to prevent disclosure overseas where it appears to him to be in the public interest to do so. In some cases it may be sufficient to ensure that disclosure overseas is subject to specified conditions. The clause provides for this. The conditions might, for example, be that there should be adequate arrangements to safeguard the information when it reached the person overseas for whom it was intended. The aim would be to prevent the information being passed on to others or to prevent it being used for unconnected or undesirable purposes.
It is intended to use this power sparingly. Although I could not give a comprehensive account of the circumstances in which it might be used, the cases we have primarily in mind concern the possibility that disclosure might prejudice criminal proceedings in the United Kingdom. It might damage the reputation of the City for handling its clients' affairs with discretion; or the information might be used in legal proceedings overseas unconnected with the regulation of financial services. We would also not wish to see our information used to further proceedings which infringed the sovereignty of the United Kingdom. This power does not in any way detract from the Government's firm intention to promote international co-operation between regulators. It is sought merely to ensure that the information United Kingdom regulators gather is not abused. I beg to move.
Lord Silkin of Dulwich: I wonder if I might ask the Minister one or two questions about the clause. Can he tell the Committee whether there is any precedent for
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it in other legislation? It appears to me, at any rate, to be a novel procedure. I do not think I have met it before. Secondly, is it intended to seek to prohibit by it disclosure to a person in another country of an action that prima facie would be within the competence of the courts of the other country concerned, so that by attempting to prohibit it we would appear to be exercising extra-territorial power? If so, that is something which we have eschewed in the case of other countries seeking do do similar things in respect of people in this country. I wonder whether the Minister can give me enlightenment on those matters.
Lord Lucas of Chilworth: The nearest precedent that I can think of is Section 2 of the Protection of Trading Interests Act 1980. It is not quite the same, but that is as near as I can get to it. So there is, in some respects, an element of novelty. To use the noble and learned Lord's words, yes, it is to an extent novel, as distinct from being a novelty. The noble and learned Lord asked about disclosure to another person in a different country. Yes, it is intended to cover this if the person overseas disclosing this information is a United Kingdom citizen, as indeed is the case in much the same way in the Protection of Trading Interests Act.
Lord Ezra: The noble Lord, Lord Lucas, in introducing the amendment, said that the proposed new clause was not intended to circumscribe the promotion of international co-operation between regulators. Of course, one of the important aspects of the whole Bill is that, while providing suitable safeguards for investors, the development of the financial services of this country should be continued in a world-wide sense. It is probably already known to the noble Lord that the Stock Exchange is a little concerned about some of the wording of the clause. It recognises that in certain cases information must be safeguarded; but it has notified certain noble Lords of its fears. I am reasonably convinced that it is justified in expressing some concern.
The Stock Exchange is developing in quite a big way to exchange with markets in other countries routine price and bargain data that form the basis of their commercial market information and settlement systems. It does not want this very positive and useful development that will strengthen the position of the Stock Exchange in this country in world terms to be in any way impeded or hindered. It is therefore suggested that it might be helpful if subsection (3)(a) of the new clause could be looked at again in order to overcome the fears that the present wording has created. I wonder whether the noble Lord is prepared to do that, so that we can look at the matter again at a later stage.
5 p.m.
Lord Silkin of Dulwich: I am grateful to the Minister for what he has told us about this Bill. We shall obviously need to look at it again. It is an important principle. The noble Lord tells us that it is not completely novel. He has cited one semi-precedent that we shall want to look at. Apart from that we shall certainly want to look at the extra-territorial aspect of the clause. On the face of what the Minister has said it would appear that if a prohibition were made, then if information were given by, say, one US citizen to

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another US citizen in the United States, this clause would be purporting to produce the result that the giver of information would be committing a criminal offence in this country. If that is so, it is a principle which certainly needs to be examined very closely and we shall take time between now and Report stage to look at it.
There is certainly no intention to wreck what may be an important provision. Perhaps the Minister in the meantime will write to tell us something about the thinking on this. On this aspect, which has been a source of litigation in this country in the past, the principle has been taken extremely seriously. Perhaps the noble Lord will write to tell us whether that has been fully considered and tell us what is the answer. That may well save time at a later stage.
Lord Lucas of Chilworth: I am grateful the noble Lord. I may very well take advantage of his invitation. On the point of extra-territoriality perhaps I may tell the noble and learned Lord that the clause is no more extra-territorial in its scope than the Protection of Trading Interests Act 1980. If I expand a little on that by way of a letter, that will probably put the doubts of the noble and learned Lord at rest.
He asked about where the power could be used. I can say that it cannot be used to prevent disclosure by a US citizen if he is in the United States.
Perhaps I may turn briefly to the point made by the noble Lord, Lord Ezra. I want again to stress that this is a power which would be used only sparingly. Where disclosure overseas would assist an overseas financial regulator that would be a factor that the Secretary of State would have to take into account in weighing up whether preventing that disclosure would be in the public interest. It is not a factor that he would lightly ignore.
I am sure that the noble Lord, Lord Ezra, accepts this point wholeheartedly. I want to emphasise that the Government are keen to promote international co-operation between regulators of financial services. We have specifically provided in this Bill for disclosure to assist overseas regulators. We have taken the opportunity afforded by the Bill to provide for the disclosure of information obtained under companies, insurance and banking legislation to overseas regulators. We are seeking to develop contacts between financial service regulators and are, for example, negotiating a memorandum of understanding on exchanging information with the American Securities and Exchange Commission and with the Commodities Futures Trading Commission.
I am aware of the concern that has been expressed by the chairman of the Stock Exchange. The noble Lord, Lord Ezra, will probably know that the chairman wrote to my honourable friend the Minister in another place a day or two ago. My honourable friend has replied. In his letter he specifically says to the Stock Exchange that the Government have deliberately gone for a wide power of discussion to ensure that if we should ever need to use it, we have all the necessary powers to act quickly and flexibly. We would want to assure the chairman of the Stock Exchange that it is intended to use the power only sparingly.
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In my earlier speech to the Committee I sought to identify some of the concerns that we have. I should perhaps add that these also include anti-trust actions. Accepting what the noble and learned Lord, Lord Silkin, had to say, on consideration I believe that these amendments are a useful addition to the Bill without impeding our international competitivenes or our ability to co-operate with other international financial centres.
Schedule 11 [Disclosure of information]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 351 to 353:
Page 198, line 10 at end insert—
("2A—(1) In section 19 of the Banking Act 1979 after subsection (2) there shall be inserted—
"(2A) Nothing in subsection (1) above prohibits the disclo-sure of information by the Bank to any person specified in the first column of the following Table if the Bank considers—

(a) that the disclosure would enable or assist the Bank to discharge its functions under this Act; or

(b) that it would enable or assist that person to discharge the functions specified in relation to him in the second column of that Table.

TABLE

Person

Functions

The Secretary of State.

Functions under the Insurance Companies Act 1982 or the Financial Services Act 1986.

The Chief Registrar of friendly societies or the Registrar of Friendly Societies for Northern Ireland.

Functions under the Financial Services Act 1986 or under the enactments relating to friendly societies.

A designated agency or transferee body or the competent authority (within the meaning of the Financial Services Act 1986).

Functions under the Financial Services Act 1986.

A recognised self-regulating organisation, recognised professional body, recognised investment exchange, recognised self-regulating organisation for friendly societies (within the meaning of the Financial Services Act 1986).

Functions in its capacity as an organisation, body, exchange or clearing house recognised under the Financial Services Act 1986.

A person appointed or authorised to exercise any powers under section 81, 93 or 147 of the Financial Services Act 1986.

Functions arising from his appointment or authorisation under that section.

(2B) Nothing in subsection (1) above prohibits the disclosure by a person specified in the first column of the Table in subsection (2A) above of information obtained by him by virtue of a disclosure authorised by that subsection if he makes the disclosure with the consent of the Bank and for the purpose of enabling or assisting himself to discharge any functions specified in relation to him in the second column of that Table; and before deciding whether to give its consent to such a disclosure by any person the Bank shall take account of any representations made by him as to the desirability of or the necessity for the disclosure.".
(2) For subsection (6) of that section there shall be substituted—
"(6) Nothing in subsection (1) above prohibits the disclosure of information by or with the consent of the Bank for the purpose of enabling or assisting an authority in a country or territory outside the United Kingdom to exercise functions corresponding to those of the Bank under this Act, or to those

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of the Secretary of State under the Insurance Companies Act 1982 or the Financial Services Act 1986 or to those of the competent authority under the said Act of 1986 or any other functions in connection with rules of law corresponding to the provisions of the Company Securities (Insider Dealing) Act 1985 or Part VII of the said Act of 1986.".
2B. In section 20(4) of that Act—

(a) for the words "in a country or territory outside the United Kingdom" there shall be substituted the words "in a member State other than the United Kingdom"; and

(b) in paragraph (b) for the words "subsections (4) to (6)" there shall be substituted the words "subsections (2A). (2B) and (4) to (6)".").

Page 198. line 43. leave out ("word "436" ") and insert ("words "to 436" ").
Page 198. line 44. leave out ("word "437" ") and insert ("words "to 437" ").
Clause 152 [Reciprocal facilities for financial business]:
On Question, Whether Clause 152 shall stand part of the Bill?
Lord Williams of Elvel: We now come to part of the Bill which concerns reciprocal arrangements, or "reciprocity" as the Title says. I confess to having one or two qualms—one under this clause and the other under Clause 154 to which I shall come later.
I wonder whether the noble Lord can help me with my qualms. We have in this world international organisations which, for one reason or another, wish to do business in countries which are not their countries of domicile. In general the way to prevent such businesses doing what we in the United Kingdom feel they should not do in our domicile has to date, I think I am right in saying, been by persuasion and by unwritten rules. Let us take, for instance, the case of a stockbroker. If the stockbroker is a member of the New York Stock Exchange, we say that on the whole the Stock Exchange rules and regulations will say that he cannot be a member of the London Stock Exchange unless similar facilities are granted to London stockbrokers in New York. I recognise that all that is changing with the changes in the City of London. Nevertheless, I have certain doubts—I hope that the Minister will be able to satisfy them—about putting that kind of provision in a statute in this country, because it is perfectly possible that when other countries see this in our statute they may wish to put similar provisions in their statutes. I wonder whether the noble Lord can tell me how many other countries have these kinds of provisions in their statutes. I shall continue to speak for a moment, although I am sure that the noble Lord has the answer in his head, in which case I may not have to continue.
When we are talking, as we have to do in relation to financial services, in terms of great flexibility and trying not to lay down precise rules about what should happen and who is where (indeed, we have already talked about differences and difficulties of interpretation of various matters such as investments and investment businesses). I am worried about
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whether that should go into the primary legislation of the land. I would welcome comments from other noble Lords who may share my doubts. However. I hope that the noble Lord opposite will be able to satisfy me.
Lord Lucas of Chilworth: I think that I could have provided the answer. I do not know whether I can settle the noble Lord's qualms in one go, but I shall most certainly try to do so. Indeed, I wonder why the noble Lord raises this particular question, because as I understand it when this matter was being considered on Report in the other place it received support from all parties. The Official Opposition spokesman said in broad terms: "As the Government know, we, the Opposition, welcome the reciprocity provisions." I refer the Committee to Hansard of 11th June, col. 436.
Lord Williams of Elvel: I am not quarrelling at all with the idea behind the legislation. I am just worried about whether certain matters should be in primary legislation or in another form. I am not quarreling with the principle. We support the principle and I support my honourable friend Mr. Gould in another place. However, I am a little concerned that it should be in primary legislation rather than in another form.
Lord Lucas of Chilworth: I am most grateful to the noble Lord, because that saves me, and indeed the Committee, a great deal of time. When financial market access is imperfectly reciprocated in a country abroad, this clause would enable the Secretary of State or the Treasury to serve a notice on a person connected with that country. Succeeding clauses—and I think that the noble Lord wants to discuss some of them in a moment or two—state the effect of different types of notice: disqualification notices, restriction notices, and partial restriction notices.
The Committee will be aware that not all foreign financial services markets are as open as ours. We need a defensive power of this kind to help our firms to get the same kind of access to those markets as their firms enjoy here. Most countries have such powers. Indeed, Belgium, Denmark, France, Germany and Austria are among those countries which have such powers. Frankly, we believe that it is only common sense.
The important point here—and I recognise the disquiet, if I can call it that, which lies at the back of the mind of the noble Lord, Lord Williams—is that the power is discretionary. I do not want to speculate on exactly what circumstances may provoke us to use it or against what country. I do not think that that would be helpful. Indeed, I am really saying that I hope that we shall never be forced to use the power, but I have to say that we would not hesitate to do so if it should become necessary. The provision demonstrates our determination that British financial houses should not suffer unreasonably in international competition.
This part of the Bill is not a major departure from the City's openness because it will only be used in the last resort to defend the national interest. Subsection (2), with its requirement that action must be considered to be in the national interest, is an earnest of the Government's intention that this power should never be used lightly. The City's openness is part of its

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strength, but the ability- of-British firms to compete worldwide is no less important.
Clause 152 also allows a notice to be served in relation to investment business, insurance business or banking business on the grounds of access being imperfectly reciprocated in any one of those three sectors. In other words, a notice could be served on a banking business in response to imperfect reciprocation in some part of investment business. The additional flexibility which this provision affords for furthering British interests is, we believe, an additional reason for legislating in this respect for all parts of the financial services sector. It is that thinking that underlies the provision that we have put into the Bill. I hope that it is helpful to the noble Lord and to the Committee.
Clause 152 agreed to.
Clause 153 [Investment and insurance business]:
5.15 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 354:
Page 123, line 40, after ("or") insert ("certification by a").
The noble Lord said: This amendment was spoken to with Amendment No. 79. I beg to move.
Clause 153, as amended, agreed to.
Clause 154 [Banking business]:
On Question, Whether Clause 154 shall stand part of the Bill?
Lord Williams of Elvel: I wish to raise essentially the same question that I raised in respect of the Question Whether Clause 152 shall stand part, only in this case we are concentrating on banking institutions rather than on general financial services institutions. I can see very good reasons why the practice should be there. I believe, for instance, that the Swiss, the Americans, the Italians, the Australians and others have exactly these provisions but without actually writing them into primary legislation. It is very difficult to form a banking operation in Switzerland—and I speak as one who knows—although there is nothing in Swiss law which says that reciprocal arrangements shall, by statute, apply.
In the case of a bank, of course, it is more serious because the disqualification notice shall have the effect of cancelling any recognition or licence granted to the person concerned under the Banking Act 1979. A bank will have made very considerable investments. If for some reason or another it is decided that, for example—and I shall name a country which is perhaps not in the noble Lords's mind—Afghanistan is not giving us proper reciprocal facilities and we suddenly cancel the licence or the recognition of Afghan banks in London, it seems that it would be a slightly more serious affair than simply not allowing people in. Therefore, although I appreciate and accept the thrust of what the Government are trying to do, my doubts still remain on this matter and I wonder whether the noble Lord would like to comment.
Lord Lucas of Chilworth: I thank the noble Lord, Lord Williams. I can understand his doubts. I do not know whether I shall be able to allay them, but he invited me to comment on the matter and I accept his invitation. We would like it known that, as with investment business, there is in some countries an imbalance of access against UK banking institutions. Clause 154 is primarily intended to signal to the authorities in those countries our deep concern that this imbalance exists and our determination that it should not continue indefinitely. To that end, it provides reserve powers which again we hope it will not prove necessary to use. But the powers will exist and by this means we hope further to encourage them to open their markets and to promote free and equitable trade in banking services. I should say to the Committee that we believe that our intentions in this matter have not gone unnoticed.
If we did not have Clause 154, I believe that it would demonstrate to the authorities concerned that we have lost our resolve, particularly since a number of other nations, as the noble Lord, Lord Williams, reminded us, have such powers in place. It would, I think, weaken the Government's position and the position of United Kingdom institutions in arguing for reciprocal access abroad.
The deletion of Clause 154, while retaining Clause 153, would make this acute. It would do this by heightening the apparent lack of resolve over banking, as against investment business, and, worse, it would be less than good sense to separate the treatment of banking and investment business, given the closely related problems of access that they face.
The noble Lord asked—perhaps it was not a rhetorical question—why it is necessary to have this in statute. It is because we believe that without it it would be an improper exercise of statutory power and would be judicially reviewable. I think we acknowledge throughout the Committee that there is a common problem which requires a common solution, and we believe that in Clauses 152 to 155—obviously including Clause 154—we have that common solution to hand.
Lord Silkin of Dulwich: Before the Minister sits down, I wonder whether he would be kind enough to say how it is intended to make the choice as to which institution or institutions from the particular country concerned will be the unfortunate recipient of a notice under any of these clauses.
Lord Lucas of Chilworth: No; I am going to refuse that invitation. I do not think it would be helpful to the Secretary of State if I were to pose a hypothetical situation and give it a hypothetical answer. I believe that the Secretary of State would have to judge each case upon its merits from whatever sector it comes.
Clause 154 agreed to.
Clause 155 [Variation and revocation of notices]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 355 and 356:
age 125, line 36. at end insert ("certification by a").
Page 126, line 8, after ("or") insert ("certification by a").
The noble Lord said: I spoke to Amendments Nos. 355 and 356 with Amendment No. 79. I beg to move.
Clause 155, as amended, agreed to.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 357:
After Clause 155. insert the following new clause:
("Publication of information and advice:

.—(1) The Secretary ofState may give or publish, or arrange for the giving or publication, in such form and in such manner as he may consider appropriate, of such information and advice as may appear to him to be desirable for the protection of investors.

(2) Without prejudice to the generality of subsection (1), such information and advice may relate to—

(a) the rights conferred on investors by or under this Act and the steps necessary to have them enforced;

(b) the duties imposed on authorised persons by or under this Act and the steps necessary to comply with them; and

(c) any matter relating to any function exercisable by the Secretary of State under this Act. or under any rules or regulations made under it.

(3) In arranging for the giving or publication of any such information or advice, the Secretary of State shall have regard to the need for excluding, so far as that is practicable:—

(a) any matter which relates to the private affairs of an individ-ual, where the publication of that matter would or might, in the opinion of the Secretary of State, seriously and prejudicially affect the interests of that individual; and

(b) any matter which relates specifically to the affairs of a particular body of persons, whether corporate or unincorporate, where publication of that matter might, in the opinion of the Secretary of State, seriously and prejudicially affect the interests of that body.").

The noble Lord said: As the note in the margin states, this amendment deals with the publication of information and advice. I am fairly sure that the Committee will welcome any specific duties that are laid upon the Secretary of State, and thereafter by transfer of his powers to the designated agency, which are designed to encourage that agency to be bold in carrying out its responsibilities to those whom it seeks to serve.
The words of the amendment state:
"may consider appropriate, of such information and advice as may appear to him to be desirable for the protection of investors".
The new clause would create an express statutory function for the Secretary of State to give or to publish information and advice. I have to say—as the Minister has no doubt been advised—that it is based on a power given to the Director General of Fair Trading to publish information and advice to consumers. I believe that that power has been useful to the Director General of Fair Trading and would certainly be equally useful to the designated agencies. We are talking in terms of advice and guidance, specific and general, of booklets, of guidance, of explanatory notes and of a great many other things.
It may be suggested—I sincerely hope that it is not—that an express statutory function is not needed in order to be able to give out or publish information and advice. But I hope that, if that is part of the notes of the Minister, we can at least pause and reflect, because the express statutory function which I am seeking to insert into the Bill has two important benefits where the owner is transferred to the designated agency. First, it puts beyond doubt that the agency is able to recover the necessary cost by way of
758
fees. Secondly, and most important, it brings it within the scope of its exemption from liability to damages under Clause 156(3).
It may be helpful if I briefly read into the record what Clause 156, dealing with exemption from liability for damages, states. Subsection (2) states:
"The functions to which subsection (1) above applies are the functions of the organisation so far as relating to. or to matters arising out of".
Then there is a list of matters that properly will give rise to the designated agency carrying on its work. But subsection (3) states:
"Neither a designated agency nor any member, officer or servant of a designated agency shall be liable in damages for anything done or omitted in the discharge or purported discharge of the functions exercisable by the agency by virtue of a delegation order unless the act or omission is shown to have been in bad faith".
Subsection (1) of this amendment creates a general power to give or publish information where it appears desirable for the protection of investors. This is wider than the equivalent power given to the Director General of Fair Trading, because it refers expressly to the giving of advice as well as to the publishing of it. It would accordingly be possible to use the powers to give advice to a single investor, rather than only for publication to investors generally. Subsection (2) gives some examples of the expected use of the general power and also broadens it out, so that information or advice can be given in the specific case mentioned even where it may be open to question whether that was desirable for the protection of investors. Subsection (3) is drawn from the power of the Director General of Fair Trading and is designed to avoid the use of the power infringing people's personal privacy.
If there is any question of not accepting the amendment or the spirit of it, I want the Minister to note that in subsection (3), particularly in paragraphs (a) and (b), we are mindful of matters that shall not be given the power of protection or exclusion. In terms of paragraph (a), we are talking of the private affairs of an individual, and in paragraph (b) of the affairs of a particular body or persons. I believe that this is sensible and desirable, and, if we are to get this new arrangement off to a good start, we want the SIB and MIBOC to feel uninhibited. I am not talking about recklessness. I am talking about sensible and prudent people who are appointed by the Secretary of State. But they still need to feel, in giving advice and guidance which they ought to be able to give in good faith, that if something goes thoroughly wrong they will be protected. That is the genesis of this amendment. I beg to move.
Lord Brabazon of Tara: I am grateful to the noble Lord, Lord Graham of Edmonton, for having moved this amendment. I agree with him that it is desirable that the Secretary of State or the agency should have the function of giving or publishing information and advice, and, if it were to be transferred to the agency, then the agency could fund it out of statutory fee income and would be covered by the immunity from damages in Clause 156. But I am bound to say that my advice is that the amendment as it stands would not enable the functions to be transferred from the Secretary of State to the agency. Indeed, there may be other points in the amendment that we should like to look at. However, if the noble Lord is prepared to

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withdraw the amendment at this stage, I will give an undertaking that the Government will bring forward a suitable amendment at the next stage of the Bill.
Lord Graham of Edmonton: I accept that undertaking with alacrity and appreciation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 156 [Exemption from liability for damages]:
5.30 p.m.
Lord Silkin of Dulwich Lord Silkin of Dulwich moved Amendment No. 357A:
Page 126, line 18, after ("damages") insert ("at the suit of any member of the self-regulating organisation or of any person, whether authorised or not. whom the organisation is authorised by this Act to investigate or supervise").
The noble and learned Lord said: I beg to move Amendment No. 357A, and it might be for the convenience of the Committee to take with it Amendment No. 362A. Clause 156 is the important clause that conveys immunity to SROs. There is no dispute about the principle of immunity. The question the Committee must address is how far that immunity should extend and within what limits it should operate.
The clause as it stands provides that in some ways immunity is limited and in other ways it is very wide. Subsection (1) provides that immunity extends to liability in damages,
"for anything done or omitted in the discharge or purported discharge of any functions to which this subsection applies unless the act or omission is shown to have been in bad faith".
Damages appears to be the area where the immunity operates.
Apart from damages it would appear that the clause does not affect the liability of a SRO. It would not, for example, affect the liability of a SRO if proceedings were taken for a declaration, or an injunction where it is suggested by the plaintiff that the SRO has gone beyond its powers, quite apart of course from the exception of "bad faith", incorporated in the Bill already which would apply even to a claim for damages. Therefore, in that respect the immunity is limited.
However, it is wide in the sense that it appears to be irrelevant who the plaintiff may be, or what complaint he may be making against the SRO. A person other than one who is a member of a SRO, or a person who is seeking to become a member of a SRO and is for some reason refused the necessary authority, is still within the provisions of the clause. It is difficult to follow why such an outside person should be disentitled to claim damages even if one accepts, as we do, that a member of a SRO, or a person who wishes to be a member and who is not permitted to become a member, should not be in a position to claim damages.
Amendment No. 357A therefore seeks to limit the immunity to those who are members of the SRO concerned, or,
"any person, whether authorised or not, whom the organisation is authorised by this Act to investigate or supervise".
In other words, if the amendment is accepted, the limitation would be such as to enable what one might call an ordinary member of the public who suffers some harm from the activities of a SRO to have a normal claim for damages, but would exclude the claim, and grants immunity, in the case of members or those who may aspire to be members. It is difficult to see why a wider immunity than that is required, and if it is not, then it is plainly undesirable that it should be granted.
I come to Amendment No. 362A. It divides into two subsections which might have been put under separate headings, but it is convenient to take them together. The first proposed new subsection seeks to extend the term "bad faith" so that its embraces anything which may be,
"done in breach of the rules of natural justice".
We had a debate on that before, and I do not intend to speak at length about it.
I am not clear whether the term "bad faith" is intended in the Bill to include,
"breach of the rules of natural justice",
but a point arises here which is quite different from the point which arose on my previous amendment. There I was seeking to incorporate in the Bill the specific provision, in relation to inspections under the insider trading provisions, that the rules of natural justice shall apply.
In the case of this amendment the position seems to be that if the expression "bad faith" as such does not include,
"breach of the rules of natural justice",
there is no provision which enables a claim for damages to be made where the rules of natural justice have not been complied with. Therefore, the position here is not that referred to by the noble Viscount in the earlier debate when he suggested that the provision was not necessary. Here such a provision would be necessary in order to ensure that in the circumstances of the breach of the rules of natural justice a claim for damages would lie. That is that part of Amendment No. 362A.
The next part covers a different point altogether. It is a point that arises out of the uncertainty that prevailed in many quarters as to the position where in some other country a claim for damages is made under the law of that country which, by virtue of this clause, could not be made in this country; in other words, where, in the United States of America, for example, a claim for damages is made. This is a considerable possibility where there are foreign institutions operating in this country, which, as we have heard on many occasions is likely.
On the best view that I can get on this at the moment it might be possible for such a claim to be made in a foreign country, in which case it would defeat the purpose of this clause. That view may be wrong. I am not putting it forward as authoritative. I am simply saying that it is the best view that I can establish at this moment. The Minister may be able to guarantee that it could not happen, but if it could happen, if there is any possibility of it happening, then clearly the immunity provisions would be defective to that extent. This amendment copies the language on reciprocity of

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the clauses we have just been discussing so as to incorporate the powers given by those clauses to enable the Secretary of State or the Treasury to take similar action if it should happen that in some other country a person were able to enforce a claim for damages in the courts of that other country. That is the simple purpose of that part of Amendment No. 362A. If the assumption is right that this could happen then the Committee may feel that some provision should be made to enable it to be prevented. I beg to move.
Lord Hacking: This is an interesting amendment which I believe is worthy of some further consideration by this Committee. I say that in relation not only to SROs, to which this amendment is directed, but also in relation to recognised professional bodies. RPBs. to which the amendment is not directed. The circumstancs in which either SROs or RPBs need to act fearlessly and decisively concern actions which relate to their own membership. They need to act fearlessly and decisively because of the need to protect investors. By acting fearlessly and decisively they protect investors.
This is really running a trailer towards my own amendment, because if this amendment were adopted I am wondering whether the noble Lord, Lord Benson, and I would not have the support of both the Opposition and the Government with the amendment that we are shortly to move.
Viscount Colville of Culross: My Lords, I wonder whether I may say a word about these two amendments moved by the noble and learned Lord, Lord Silkin. He may be right on the natural justice point under Amendment No. 362A. I am afraid that 1 too have not had enough time to look it up, but I think the situation is probably something like this: if he remembers what was said by Lord Greene, the Master of the Rolls, in Associated British Picture Houses v. Wednesbury Corporation (which is really the fountain of all this administrative law jurisdiction) he will remember clearly that bad faith is one of the grounds upon which you can get an administrative decision which affects the rights of the citizen overturned by what is now judicial review, although it was not in those days.
It was run at that time under a rather strict regime of what used to be the prerogative writs. But now I think he will find that in Order 53 (which is what now governs judical review) not only bad faith but the other breach of natural justice will give rise to an application to the court. What is more the remedies are now wider to enable the court to award not only an order that overturns the decision but also damages as well. Therefore it is not necesssary to say what he says in the first subsection in Amendment No. 362A because that is already inherent in the powers of the court if one makes the right sort of application and I think in any event, because the courts can use these powers in their discretion under Order 53 and judicial review.
I therefore suggest that this again is an occasion where one would draw attention unnecessarily in a statute to something which applies overall to a vast number of situations upon which one might then
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throw doubt. Although it may be a different point the end product is likely to be very much the same.
5.45 p.m.
Lord Silkin of Dulwich: I do not altogether follow that point. What we are dealing with here is the revision of a clause which excludes a claim for damages in any case other than a bad faith case. I do not see how in those circumstances that would include the wording that the noble Viscount has just referred to.
Viscount Colville of Culross: I think the noble and learned Lord has to give the courts credit for being able to deal with this sort of thing. There have been many cases. I suppose the acme of the whole thing was Anisminic, when the courts had been able to spell out even of the most restrictive jurisdiction in a statute, the ability to produce a remedy where it is needed. I should have thought there was no difficulty in going beyond bad faith as such, which is the test for the purposes of the transaction inside the self-regulating organisation and also to take in any complaint about any further defalcation or any other failure to observe the rules of natural justice which led up to a decision by that self regulating authority. I suggest to the Committee that I do not think there is any necessity to go further than to spell this out, because Order 53 includes it already.
What I fail to understand in relation to the noble Lord's original amendment, Amendment No. 357A, is that, if he is suggesting that an ordinary' member of the public should be able to sue the self regulating organisation itself for something that has gone wrong, one has to envisage the situation that would predicate that sort of action. It must be that an investor has suffered a loss as a result of taking the advice of or going to seek the services of some investment agency which has been improperly authorised by the self-regulating organisation or which should have been struck off if the self-regulating organisation had been doing his job properly.
I can quite see that there could be a loss at that stage, but what I do not understand the noble Lord to have addressed himself to is the way in which this inter-relates with the other remedy that that person has under Clause 57 of the Bill, which we discussed last week. That also applies in subsection (2) to members of a recognised self regulating organisation or a recognised professional body. The person who has come to grief in the course of this transaction has already under the Bill been given a remedy against the person who is primarily responsible.
Are we to go further and to say that in addition to that they are to have a remedy against the body itself which perhaps ought to have disciplined the investment organisation which was primarily responsible for the fault? I can see that that is an insurance policy, but then think of the implications of it in relation to the people who are supposed to be turned into a self regulating organisation, the members and the officers. Not only will the people under their care be liable for their own defects, but the members of the SRO and the officers themselves will also fall liable for this sort of thing. I cannot see how one can suppose that we shall be able to obtain the services of

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people to act in the fearless way that has been suggested and to look after all these investment agencies if they are liable at the suit of any member of the public for damages in large sums of money. I should have thought that the generality of the clause which was inserted in another place is exactly what is needed in order to secure that there really will be an effective watchdog system. I leave the noble Lord with this thought. If this were going to be done not by a self-regulating organisation or one of the RPBs, presumably it would have to be done by the department. If the department refused to license some particular investment organisation, or if it withdrew the licence, does the noble Lord suppose that the department would be liable in an action for civil damages at the suit of an individual member who had come to grief because of the activities of the investment adviser or somebody like that? I do not believe that that is so in the least. These SROs and RPBs are doing a job as delegates of the department and I believe that they should have the same immunity.
Lord Lucas of Chilworth: I found this three-cornered lawyers' discussion absolutely fascinating. I trust that the Committee will forgive me if I do not follow each and every noble Lord down his own particular path. I should like to put quite simply the Government's view about this series of amendments. I am grateful to the noble and learned Lord, Lord Silkin for addressing his remarks to Amendments Nos. 357A and 362A together. These matters are important and the whole purpose of recognised self-regulating organisations is to provide investors with the protection that they deserve. Obviously, against that background we had to think very hard before concluding that such organisations should be immune from actions for damages brought at the suit of investors. Nevertheless, we concluded on balance that such immunity should be provided. I have to say that I listened very carefully to what the noble and learned Lord, Lord Silkin, said, as I listened very carefully to what my noble friend Lord Colville of Culross said, and I am not convinced that the noble and learned Lord opposite has said anything that should cause me to change my mind.
We have to remember that not all investors are small, private investors, notwithstanding the fact that we seek to introduce by way of wider share-ownership programmes the small private investor. The largest companies and institutions are also investors and their financial resources will far outstrip those of even the most powerful self-regulating organisations. If these organisations were liable for damages to investors, they could still be at risk from a number of large claims. A regulator will face a number of difficulties in deciding when to remove a business or authorisation, particularly on solvency grounds. The situation is rarely clear-cut. There are always arguments that, given another week or so, more capital can be found or a valuable asset can be sold and the problem will be resolved. But the interests of existing clients and others already dealing with the business will often suffer if authorisation is removed.
Such action nevertheless may be necessary to prevent harm to future clients. Existing clients and
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those dealing with the business would suffer more seriously if the business collapsed. But they may claim that the supervisor's action was unnecessary and the business would not have collapsed if given more time. They might then bring an action for damages against the supervisor on the grounds that their loss was the direct result of the supervisor's action. For example, a United States securities firm might use a British self-regulating organisation member to manage it clients UK portfolio. If that SRO expels the British business or stops it undertaking particular activities because of concern about its solvency, the United States firm—and I just pick the United States; it could be any company, and I hope nobody will take exception to my using this as an example—might sue the self-regulating organisation for the loss it suffered as a result of missed opportunities, damage to reputation, and so on. This threat could be a very serious one. It could put the SRO's future at risk.
We do not believe—and I think that this is one of the points that my noble friend Lord Colville made—that SROs should have this kind of threat hanging over them when taking difficult decisions. If they do have it hanging over them, there is no doubt that the quality and effectiveness of regulation will suffer and, in turn, the interests of the investors will suffer. The investors will not be deprived of remedies. They still will be able to sue a member of a recognised self-regulating organisation if he breaches the rules. They would have access to the compensation arrangements where appropriate. It is particularly important to note that the compensation proposals which SIB—and one has to make certain assumptions here—have put forward are biased in favour of the smaller, private investor. I think that this will help to ensure that the interests of such investors will not be seriously affected by the immunity granted to recognised self-regulating organisations which is necessary for the reasons I have outlined. I do not propose at this time to repeat some of the points my noble friend Lord Colville has made with regard to the composition of the SROs and the degree of responsibility that we would wish them to take.
I turn to Amendment No. 362A of the noble and learned Lord, Lord Silkin. The first subsection of this amendment would have the effect that anything done or omitted in breach of the rules of natural justice would automatically be regarded as being in bad faith. The result would be that any such act or omission would fail to attract the immunity granted by the clause. We consider that, to the extent that any breach was not in bad faith, the amendment would result in the very uncertainties and risks that the immunity provisions are seeking to remove so that regulation can be effective. Our starting point for this provision is that so long as regulators act in good faith they should not have to worry about the threat of actions in damages. The principles of natural justice and the general duty to act fairly are constantly being developed by the courts. So long as this continues, there is likely to be some uncertainty at any time about their scope. It would be undesirable to tie the concept of bad faith to breach of such principles—when, in fact and in law, there had been no bad faith.
The second and third subsections in the amendment would seek to trigger the reciprocity provisions in the

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Bill in the event that a foreign court gave a judgment which, by virtue of the provisions of the clause, would not have been enforceable in the United Kingdom had it been given here. I am advised that there is great ingenuity in this proposal, but we are not convinced that it would have the effect that the noble and learned Lord has claimed for it. It would not, and could not, restrict any right of action against a regulator which a person might have under foreign law. So the risk of such an action would remain, and the prospect that action might subsequently be taken against businesses connected with the country concerned would be of little comfort to a regulator contemplating action against an investment business. Moreover, the amendment would be of little help if the aggrieved party were a large and powerful investor who had no intention of carrying on investment business in the United Kingdom.
In any event, we would be hesitant about extending the scope of the reciprocity provisions in this way. Clauses 152 to 155, which we have discussed, are designed for the special purposes of strengthening our hand in negotiating better access to overseas financial markets. The question at issue here is nothing to do really with negotiating better access, and I think it preferable that the two issues should be kept separate. There are other objections of principle to this aspect of the amendment. It would, for example, give the authorities in this country power to retaliate against a foreign business on the grounds that the courts in this country take some action—not necessarily involving that business—which is properly open to them under the laws of that country.
The procedure which is provided for in the amendment could be seen as an interference with the proper exercise of the jurisdiction of foreign courts. Where foreign courts infringe our territorial jurisdiction then we reserve the right, and have powers, to act. But where there is no question of extraterritorial exercise of jurisdiction by foreign courts it would, we believe, come close to interfering with the sovereignty and jurisdiction of other countries to seek to impose sanctions on those connected with them because their courts award damages in a case where we—for our part—think it undesirable. We should not like such a threat hanging over our courts or subjects and I do not think we should seek to do it to others.
In the light of these comments, which I recognise the noble and learned Lord may wish to study, I do not think that I can help the Committee any further, I have outlined as best as I am able why we object to the amendments. I hope he will agree with our objection and indeed that he will agree to withdraw his amendments.
Lord Silkin of Dulwich: We are of course grateful, and the Committee will be grateful, to the Minister for that extremely detailed explanation of the Government's position. On the first amendment and the first part of the second amendment, the noble Lord referred to the views expressed by the noble Viscount. It seemed to me (and I shall have to read carefully in Hansard the speeches of both the noble Lord and the noble Viscount) that they reached the same conclusion for quite opposite reasons. However, we shall see
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about that when we read Hansard and, as the Minister has suggested, if necessary come back to one or other of these points on another occasion.
I have qualms about the third point. The Minister has accepted the possibility that proceedings might be brought in a foreign country, as I understand it, and in effect, if I understood his reply, he said, "If that happens, it is just unfortunate that we cannot really do anything about it". That does not seem to me to be a very satisfactory way of leaving the matter, whether or not what he described as the ingenious method of dealing with the amendment put forward is followed. Again, it seems to me better, particularly in view of the highly detailed nature of the reply, that I should look at it with others who are concerned, and maybe come back to it at the next stage. In the light of that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hacking Lord Hacking moved Amendment No. 358:
Page 126. line 34, at end insert—
("(2A) Neither a recognised professional body nor am of its officers or servants or members of its governing body shall be liable in damages for anything done or omitted in the discharge or purported discharge of any functions to which this sub-section applies unless the act or omission is shown to have been in bad faith.
(2B) The functions to which subsection (2A) above applies are the functions of the body in respect of this Act so far as relating to. or to matters arising out of—

(a) the rules, practices, powers and arrangements of the body to which the requirements in section 18(2) apply;

(b) the obligations with which paragraph 6 of Schedule (Requirements for recognition of professional body) requires the body to comply:

(c) any guidance issued by the body.

(d) the powers of the body under section 49(2), 59(4) or 92(2)(a) above: or

(e) the obligations of a recognised professional body under this Act.").

The noble Lord said: This amendment which stands in the names of myself and the noble Lord. Lord Benson, seeks to obtain immunity for recognised professional bodies, RPBs, on the same basis as immunity is now granted—or is proposed to be granted under the Bill—to SROs.
It may be helpful if I ask the Committee to take a step back and review the position and how the Bill is now, in its present state, granting immunity to the designated agency, the SIB, which it does under Clause 156(3), and to SROs under Clause 156(1) and (2).
I asked the Committee to step back and look at the position, because when this Bill was originally introduced in another place there was no immunity proposed in it for SROs. But as a result of representations that were made to the Government, not very early in the passage of the Bill in another place but at the Report stage, the Government changed their position and agreed that immunity should be granted to SROs. At that stage in the debate in another place, the Minister, Mr. Michael Howard, who has the responsibility for this Bill in another place, stated this:
"If regulation is to be effective, a recognised self-regulating organisation needs to be able to act swiftly and decisively, sometimes on less than conclusive evidence, if it seems necessary to do so. in the interests of investors. However, its financial resources will often be smaller than those of its members or others affected by its actions. There is a real risk that the prospect of a number of large claims for damages would deter a recognised self-regulating

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organisation from taking the actions that it believed to be necessary. That would not be in the interests of investors".
Incidentally, that focuses upon its supervision of those over whom the SRO has the responsibility to supervise.
The Minister, Mr. Howard, in another place then went on to say this:
"There is a real danger that individuals might be reluctant to work for or serve on the governing bodies of SROs if there were a risk of personal liability in damages for actions undertaken in good faith. It is essential, if self-regulation is to work properly, that SROs should employ and be run by people of the highest calibre. Anything that would deter such people from joining SROs could seriously affect the effectiveness of the organisations in regulating investment business".
Thus it is my simple premise, in tabling this amendment, that exactly the same rules should apply to RPBs such as the Institute of Chartered Account-ants or my own parent organisation, the Law Society. Regrettably, despite a number of representations that have also been made by them to the Government, thus far the Government have not been moved to bring in the same provision—the same immunity—to RPBs.
In another place, during the course of the same debate on Report, the Minister gave these reasons. He said that RPBs would be regulating a much narrower range of business on a much smaller scale than would SROs. The prospect of a number of large claims against an RPB is therefore much smaller than in the case of an SRO. "In these circumstances", he said "I don't believe that it would be appropriate to extend immunity to RPBs".
The Minister then went on to make another point. "It would certainly be anomalous", he is recorded as stating, "for RPBs to have immunity when they are regulating incidental aspects of their members' business when they do not have it, or do not appear to have needed it, in relation to the regulation of their members' mainstream professional practice".
I do not believe that either of these arguments, which have been repeated in correspondence, bears proper examination. It is true that RPBs will not be authorising their members to act, for example, as dealers in investments like Stock Exchange firms, and equally RPBs will not be authorising people whose principal activity is investment business. But a relatively small amount of investment business undertaken by professional firms, perhaps advising on investment, may well incur, and be the cause of, very large claims for damages. An RPB therefore would still be vulnerable to large claims.
While it is also true that RPBs have not required immunity hitherto for their other regulatory functions, neither, for example, has such an SRO, as the Stock Exchange. However it is accepted that SROs will need immunity in the future because of the new statutory responsibilities they will have under this Bill and because of the new responsibilities which will be imposed upon them. Yet this applies equally to RPBs and that is why, if we are talking of anomalies, it is an anomaly that RPBs are being treated in a different manner.
I can cite, as I cited at Second Reading, the circumstances in which, for example, the Law Society would have responsibilities under the Bill and how
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those responsibilities could be adversely affected by not having immunity. The main part of those responsibilities—and this goes back to a comment I made during our discussion on the last amendment—will be directed towards the supervision and investigation of those over whom it will be responsible to see that they are properly carrying on their investment businesses under the Act.
It is for that reason that I suggested when discussing the amendment of the noble and learned Lord, Lord Silkin, that there may well be a joinder point between the position taken by the Opposition and that taken by the Government. Therefore, in my submission, if there is any real prospect—and that is how it has been presented by the president of the Institute of Chartered Accountants and by the president of the Law Society—that those bodies may be inhibited—or persons may be discouraged from serving on those bodies—because of a lack of immunity, particularly, I would emphasise, in relation to imposing disciplines on those who will be carrying on investment work under their authority. Therefore, I would urge the Committee to give favourable consideration to this amendment, and I beg to move.
Lord Benson: I support this amendment I should explain at the beginning that I have a minor conflict of interest in that this amendment affects professional bodies, including the accountancy bodies, and I am an accountant. However, I have no interest and take no part in investment business. The professions that I think are affected by the amendment are the account-ancy bodies, the Law Society, the chartered surveyors and actuaries. There may be others, but I imagine that their feelings are similar to those expressed by the noble Lord, Lord Hacking, and indeed to those which I hope to express myself.
I have no wish to repeat the arguments which the noble Lord, Lord Hacking, has just put forward, except to agree that all the arguments that were made by the Under-Secretary of State in another place for giving immunity to the SROs apply without reservation to the RPBs. I agree also that the only two arguments for making this discriminatory legislation which is now proposed do not hold any substance at all. I will not repeat all those, but I should like to make just one or two other comments. My own profession has made inquiries to see whether we can possibly get insurance to cover the claims that we are troubled about. Present indications are that insurance is not possible. What is very puzzling to us, as professionals, is that professions which have been in existence for over a hundred years are discriminated against and are not given immunity, whereas newly-formed SROs who have no track record of integrity at all are given immunity. That seems to me a monstrous anomaly.
The second point is that I think the Government may defeat their own purpose. They obviously want RPBs, because they make provision for them in the Bill. The present feeling in my profession is that our members will not apply for recognition, for the perfectly obvious reason that they do not want to saddle themselves with uninsurable risks. I make this point wth great strength. It should be remembered that we are professional people, and for that reason we have unlimited liability. These claims, if they were made,

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would absorb the whole of our assets, if they were substantial.
There is one other point which troubles my profession very particularly; that is, that the DTI is our sponsoring body, which is expected to support us. In the many years I have been in contact with the DTI we have gallantly responded to any request made to us. It is very saddening—and I speak in moderate terms—to find that the department which ought to be sponsoring us and supporting us is introducing discriminatory legislation against us.
I hope, like the noble Lord, Lord Hacking, that this amendment will find favour with the Government. I am greatly encouraged on that because during the Second Reading debate the noble Lord, Lord Lucas of Chilworth, said at col. 655 of Hansard on 11th July 1986, that on this particular topic the door,
"is nominally ajar. If the matter would like to creep through one afternoon. 1 shall be happy to help".
If the noble Lord, Lord Lucas, wishes us to creep, we will creep; but we would prefer to walk through as upright citizens. whatever method of locomotion is imposed upon us, we gladly welcome the help that the noble Lord, Lord Lucas, has offered to us, and we ask him to implement it.
6.15 p.m.
Lord Chorley: At this stage there is little one can usefully add to what has already been said in support of the amendment. Not for the first time, I find myself in agreement with the noble Lord, Lord Benson. I should like to emphasise one point; but I first ought to declare an interest in that I am a practising accountant. As has been said, the basis of the Bill is one of self-regulation. Yet it is difficult to see how an RPB can be effective and exercise its functions properly unless the legislation accords the RPB protection from damages.
As the noble Lord, Lord Williams, I think it was, reminded us on Second Reading, we live now for better or worse in an increasingly litigious world, and it seems certain to me that an RPB will one day be sued, probably for a large sum of money. The result is clear. Either the membership, as the noble Lord, Lord Benson, said, will say, "No, we do not want to be a recognised body; it is far too risky and anyway it only concerns the periphery of our professional concerns", or the RPB will be so cautious as to be ineffective. Either way, the purpose of the legislation will be defeated. Even if insurance were available—and we are told it is not—it does not seem to me to be the right way to deal with the matter. I would suggest that immunity is not just a matter of equity but that it is also necessary to achieve effectiveness in the Bill.
During the Second Reading debate the noble Lord advanced, so far as I could see, only one argument, and an inadequate one at that. He said that the limited range and scale of investment business that the RPBs would regulate meant that they were less likely than recognised SROs to face a claim for damages. That might be the case, but surely the relevant factor here is not one of relativity but whether there is a significant risk of an RPB being sued for a large sum. I would submit that there is a significant risk. This is a most important matter and I hope the Government will respond suitably.
The Earl of Buckinghamshire: Perhaps I may say a few quick words in support of this amendment. I have been in discussion with the Institute of Chartered Accountants for Scotland, who are very concerned at the lack of legal immunity for the recognised professional bodies, and I am able to confirm and support the noble Lord, Lord Benson, in his views about the other institutes and faculties of actuaries, the Law Society and so on, who are equally concerned.
I should like to pose two questions to the Committee. First, is the amendment reasonable; and, secondly, what will happen if my noble friends in the Government do not accept the amendment? In regard to the first question, I have a number of points. First, I believe that the RPBs are reasonable in their request for immunity. The reasons are exactly the same as for the SROs, which, with their overwhelming reasons, gained that immunity in the first place. I cannot see why the RPBs are not so treated in the same manner. Sir Kenneth Berrill has asked for a level playing field, but the present proposals in this area are not level at all. While the scale of business in these areas may be small compared with other regulatory bodies, nevertheless possible claims arising out of the second part of the schedule can be quite large. In my own organisation, which employs actuaries, for instance, we carry several million pounds worth of professional indemnity insurance. We do not carry that lightly because it is a very high cost to us.
Perhaps I may now move on to the position if legal immunity is not granted to RPBs. It is difficult to predict the effects. To some extent the results may be slightly philosophical and subjective. It would, however, be a retrograde step if for instance the institutes and faculties felt unable to act as RPBs. This may in turn have a regressive effect on the members of the institute, who may become unwilling to offer advice in the areas of investment. Indeed, an element of competition in this area may well disappear if this occurs.
If a professional body obtains recognition for its members and if they wish to continue to offer investment advice, they may have to gain authorisation from a separate body. Thus the members will be subject to two regulators—the SROs for investment and their own body for the other parts of their business. I would hope that there would be no conflict of regulations if this were to happen. As with the SROs in their submissions to the Government, we may find that the officers and the elected council members of the various institutes will be reluctant to take part in this regulation without the immunity. The noble Lord, Lord Benson, has already outlined the difficulties of getting professional indemnity cover, and I am certainly able to confirm that from our point of view in this area. As the concept of immunity has been accepted in general, I cannot really understand why the concept should not be applied evenly across the board for the RPBs. The reasons given to date in another place and in correspondence to the Scottish Institute do not strike me as being very conclusive.
In conclusion, I hope that the Government will listen very carefully to the amendments proposed and view them favourably. I hope, like the noble lord, Lord Benson, that we do not creep through the door, but walk upright.
Lord Ezra: Perhaps I may briefly intervene as someone who has no interest to declare in the matter, not being a member of any of the professional organisations concerned. But I should like to say in that objective capacity that I have found the arguments in favour of this amendment very convincing. I think that it would be to the detriment of the smooth operation of this legislation if that omission in the matter of immunity were made. In seeking the adequate protection of investors we need to have the full support of all the bodies which will have to apply this law. In order to get that support all must be treated alike.
What particularly convinced me in the remarks of the noble Lord, Lord Benson, was that they had made inquiries about the possibility of obtaining insurance but this was not forthcoming. It seems therefore as if the insurance industry feels that the risks are very considerable if immunity is not granted, even though, as I understand it, the Government have said in another place that they do not consider these risks to be very great. I very much hope, therefore, that the door, which I gather from the previous remarks of the noble Lord, Lord Lucas, might be slightly ajar, can be pushed a little wider as a result of this discussion.
Lord Tryon: I, too, am neither a lawyer nor an accountant. Indeed, when I first saw this amendment I started off somewhat suspicious of it and almost prejudiced against it—prejudiced because I so dislike the letter that company directors usually have to sign at the end of the financial year nowadays, whitewashing accountants from virtually any responsibility at all in order to get them to produce the accounts. I thought that this was a continuation of the same sort of theme. But having talked around various practitioners, I am convinced that it is a sensible amendment, and I shall support it.
Lord Lucas of Chilworth: With noble Lords from all sides of the Chamber speaking in favour of the amendment of the noble Lord, Lord Hacking, I may find it rather difficult, but I want to put to the Committee as a whole one or two points.
Certainly when this matter was discussed in another place my honourable friend said that we start from the presumption that regulators should be liable for their actions and that it is for those who seek immunity to make the case for it. On the balance of the arguments that have been put to us thus far we have come to the view that immunity would be appropriate for recognised self-regulating organisations, for reasons which I think will be familiar to the Committee and which have, broadly speaking, been outlined by the noble Lord, Lord Hacking. But in this area, as in others, we have to consider very carefully whether what is right for an SRO is also right for a recognised professional body, given the differences between them—and there are differences between them.
It has always been clear that recognised professional bodies are only intended to regulate business of a limited range and scale. That is how we started our conversations with them and that is exactly how those conversations have gone on. We concluded that, given the scale and nature of investment business likely to be regulated by recognised professional bodies, it was
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unlikely that the circumstances would arise in which the exercise of a direct rule-changing power by the Secretary of State or designated agency was necessary to protect investors, and we therefore decided not to include such a provision in the Bill. Similarly, in deciding whether to extend immunity to such bodies we have had regard both to the scale and nature of the investment business they are likely to regulate and to their existing position as regards liability.
In the case of an RSRO we were concerned that the possibility of a number of large claims against an organisation might well deter it from taking actions and might also, as we have heard, deter people from serving on its governing body or working for it. It seems to us that different considerations apply in the case of a recognised professional body. The prime purpose of such bodies will continue to be the regulation of their own profession. In some cases, as with the Law Society, this would be a statutory function. In others, such as the Institute of Chartered Accountants, the statutory link will be that membership of the body is required in order to be able to undertake particular functions.
But in either case it is possible to conceive of action being taken by someone aggrieved at a decision of the body. For instance, a person who had lost money as a result of a negligent audit might sue the Institute of Chartered Accountants on the grounds that the institute should have known of its member's negligence and expelled him; and that had he been expelled he would not have been able to carry out the audit. Similarly, a member who had been wrongly expelled might sue the institute for his lost income as an auditor. Yet that existing potential liability to damage apparently has not deterred the existing professional bodies from carrying out their existing functions; nor does it deter individuals from becoming involved.
It is against that background that we must consider whether the additional potential liability to which recognised professional bodies would be subject in their regulation of investment business under the Bill would justify exemption from liability in that aspect only of their activities. We have concluded that it would not, for two reasons. The first illustrates the fundamental difference. Noble Lords who have spoken in favour of the amendment have suggested that there is no difference between a SRO and a RPB. I am suggesting to the Committee that there are fundamental differences, and I should like to outline them.
First, the investment business regulated by such bodies will be only a relatively small part of the business of their members. It is surely more probable that a major claim against a recognised professional body will arise in connection with its regulation of its members' main activity rather than their incidental activities. Since no immunity has been found to be necessary in respect of the main activity, I suggest to the Committee that it is difficult to justify indemnity in respect of incidental activities.
Secondly, the nature and the scale of investment business regulated by the RPBs will be such that large claims against such bodies will of their nature be less likely. That is not to say that the sums involved when a person certified by a recognised professional body

773
engages in investment business will necessarily be small. For instance, where an accountant is giving investment advice, in certain circumstances many millions of pounds could hang on the quality of that advice. In those circumstances an aggrieved client could claim only against the recognised professional body if both his adviser and the body itself had been negligent. The likelihood of such a case succeeding seems to us to be remote.
The difference here between a recognised self-regulating organisation and a recognised professional body is that the nature of the investment business regulated by the latter—certainly in the example of investment advice that I have quoted—is of itself such that a large claim against the regulator would be less likely to be pursued and to succeed than, for instance, a claim in respect of the collapse of a market maker.
Lord Diamond: Will the noble Lord—
Lord Lucas of Chilworth: Perhaps I may just finish my argument. The fact that a recognised professional body will not have immunity will no doubt affect the kind of business in which it decides to engage. I have sought to suggest that most of the business is incidental. If a member of an organisation wishes to engage in a different area of business as a main activity or as a principle activity, it will be up to that company to seek the immunity that is open to it.
The noble Lord, Lord Hacking, suggested that the RPB's immunity might if granted be limited to immunity against a member. But are RPBs primarily concerned about suits brought against them by members? If they are, I suggest in all humility that there is a remedy in their own hands. There is nothing to prevent a recognised professional body from including in its own constitution a provision binding members not to sue their professional body. That would not of course protect the RPB against claims by investors. However, the comment of the noble Lord, Lord Hacking, suggested to me that RPBs are less concerned about claims by investors and more about claims brought by their own members. I suggest that the noble Lord carefully considers whether my proposal would not adequately meet that part of his argument.
I indicated that RPBs would be regulating a narrower range of investment business, and on a more restricted scale, than the SROs. It is for that reason that I have not found the arguments put to me this afternoon sufficiently persuasive to make me believe that we should alter our current view.
Lord Diamond: I, too, belong to the Institute of Chartered Accountants, but I have not practised since 1963 and I have had no financial interest in the profession since then. I was waiting to hear what the Minister had to say, to find out whether there was a single, solid argument against the amendment. I must say that I have not heard one.
The main argument that the Minister proposes is the argument of scale, which does not appeal to any Members of the Committee who are concerned with the principle of the matter. As to the argument of scale, I ask the Minister whether the Government
774
propose on Report to introduce an amendment on their own intitiative, saying that if, against the RPB's expectations, damages are awarded in excess of £X, the body in question will be indemnified in respect of that excess. Of course they are not saying that. When there is a question of principle, one decides it as a matter of principle and not on the basis of scale. The fact that the maidservant's baby is only a very little one is a point that has been made many times before.
I am bound to say that a number of important and substantial points have been made in favour of the amendment but that I have heard none against it. I can well understand the desire of the Government not to push forward the boundaries of indemnity unnecessarily. That is why they hesitated for a long time to introduce indemnity for the SROs. However, by introducing this legislation the Government are in effect asking members of the SROs to undertake special responsibilities, and they have now decided to grant them immunity. The Government are in the same way asking members of recognised professional bodies to undertake a similar task. It is an exactly parallel task. It is in order to give effect to the Government's own legislation, to make it work, and therefore the same argument applies that there should be equal immunity for performing the same task and for putting oneself in the same kind of difficulty.
The public are protected by the reference to not acting in bad faith, and so the Government are protected in that respect. I myself do not know what those who moved this amendment propose to do, but I hope very much that they will pursue it fully.
Baroness Seear: This is not a field in which I can claim any expertise, but I wish to put on the record a protest against the last argument that the Minister used, when he suggested that a professional body should make it a condition that members should not exercise the very proper right of suing if they are in a situation in which they need to sue. That seems a totally improper suggestion from a representative of Her Majesty's Government.
Lord Lucas of Chilworth: I should like to answer the noble Lord, Lord Diamond. However before so doing perhaps I may say to the noble Baroness, Lady Seear, that she might find my suggestion, phrased as it was, improper but, in fact, this amendment seeks to do precisely that which I have suggested, though by a different route. I pick up only one point made by the noble Lord, Lord Diamond, towards the end of his remarks. It is only right that the same protection should be afforded for the same task, but the tasks are totally and absolutely different.
Lord Benson: May I draw the attention of the noble Lord, Lord Lucas, to two points? As I understood his reply, the main point was that the RPBs will undertake a narrower range of business. That can be put into perspective perfectly simply in this way. If a motor driver goes on to the streets and has an unfortunate accident a claim against him would be just as great whether he drives the car once a day or five times a day. The cause of action is the same and the claims will be just as heavy.

775
The second point which the noble Lord has not answered is how he is to implement the help he undertook to give us to "creep through" this afternoon.
The Earl of Limerick: Before the movers of this amendment dispose of it, I should like to pose one question. I speak in a slightly schizophrenic frame of mind, in that I have, so to speak, half an interest. For a brief period I was a practising accountant, but I ceased doing that in 1958, even longer ago than the noble Lord, Lord Diamond.
If the amendment were accepted and the principle enshrined in statute that there should be immunity from prosecution for the professional bodies in this manner, on the next time round, where will the line be drawn? There are other statutory duties imposed on professional bodies. I have in mind audits under the Companies Act, duties of reporting accountants in relation to prospectuses, and so on.
I am not clear what are the views of the movers of this amendment on that question. If the principle were accepted that professional bodies should have immunity in relation to those statutory duties, why should one think that they should not be likewise relieved from responsibility in relation to any other statutory duties that may be imposed on them?
Lord Hacking: Perhaps I may reply immediately to the noble Earl, Lord Limerick. The line that the noble Lord, Lord Benson, and I are seeking in tabling this amendment is that contained in the provisions of this Bill. There are three administrators—to use my own terminology—for the enforcement of his Bill. Those three adminstrators are treated differently. All I am seeking is that in administering the many and diverse tasks that fall upon the SIB, the SROs and the RPBs—within the framework of this Bill and within their responsibilities—should be treated alike and should have the same level of immunity. With respect to the noble Earl I do not think we need to consider the wide range of statutory duties that fall on a conglomerate of organisations and bodies throughout the land. We can, I believe discipline ourselves to considering what is the position under this provision as presented to the Committee.
I regret to say' that I remain dissatisfied with the response of the noble Lord the Minister. I am extremely grateful to members on all sides of the Committee who have spoken in favour of this amendment. In referring to all sides of this Committee I see that the noble Lord, Lord Williams, is looking at me with a careful glaze. I must express a little disappointment, therefore, that no voice came from the Front Bench upon which the noble Lords, Lord Williams, and Lord Silkin sit. I am disappointed because this amendment was originally tabled by a worthy member of that Front Bench—the noble Lord, Lord Bruce of Donington. I was only, so to speak, the seconder of the amendment and somehow the name of the noble Lord, Lord Bruce of Donington, disappeared from the Marshalled List and I found myself heading the brigade on this amendment and not just the seconder of it. Is the noble Lord, Lord Williams, at long last, wishing to participate?
Lord Williams of Elvel: I hope the noble Lord is not trying to make mischief between my noble friend Lord Bruce of Donington and myself.
Lord Hacking: I would not dare. The second reason I am disappointed that there were no speeches from the Front Bench of the noble Lord, Lord Williams, is because when I was giving support to an amendment moved by the noble and learned Lord, Lord Silkin, which I felt should be given consideration I suggested that this limit on immunity might be considered in relation to RPBs. It would therefore have been helpful if we could have had some response on that point. Despite the absence of that support your Lordships have made it plain that there is support for this amendment from all quarters of the Committee.
The noble Lord the Minister made some points on how, for example, members of RPBs could be put under some obligation of not seeking immunity against their governing society. There are two difficulties about that. There is, first, the difficulty of impropriety, as remarked upon by the noble Baroness Lady Sear. Secondly, there is the practical difficulty. Certainly concerning the Law Society, there is no obligation to become a member of the Law Society. However, under the effective powers that would have to be regulated by the Law Society under this Bill all persons who practise as solicitors would fall under the ambit of its responsibilities. Therefore, that was not a satisfactory answer from the Minister.
The noble Lord the Minister also produced another argument that under the present administration of their duties the Law Society, the Institute of Chartered Accountants, and so on, do not have immunity, so why do they need it now? The answer simply lies under the responsibilities—and the exposure resulting from those responsibilities—which will be imposed on them if they seek to take the status of an RPB.
As was pointed out by the noble Lord, Lord Diamond, the Government argument rests on that of scale. In my submission, that is unsatisfactory. It is not an argument of principle but only that "these claims will not be big and they do not need immunity". That is wholly judgmental, and being judgmental it is an unsatisfactory answer.
I believe that our discussions were clearly and accurately focused upon by the comments made by the noble Lord, Lord Ezra. He said that there is need for support from all the principal bodies which will be participating to make this Bill and its provisions work. These are the three authorised bodies or administrators—the SIB, the SROs (principally the Stock Exchange), and the RPBs. Equal treatment should be given to those from whom equal co-operation is being sought. Otherwise the regrettable situation will arise in which certain bodies which would normally come forward to operate as RPBs and make this Bill work will desist from doing so. That will defeat the overall purpose of this Government, which is to make the Bill work and work in all quarters.
It is rare that I seek to divide the Committee, but it is my intention to do so now.
6.49 p.m.
On Question, Whether the said amendment (No. 358) shall be agreed to?
Their Lordships divided: Contents, 55; Not- Contents, 102.

DIVISION NO.3

CONTENTS

Addington, L.

McNair, L.

Ailesbury, M.

Masham of Ilton, B.

Airedale, L.

Milne. L.

Aldenham, L.

Munster, E.

Aylestone, L.

Northfield, L.

Beaumont of Whitley, L.

Pitt of Hampstead, L.

Benson. L. [Teller.]

Ritchie of Dundee, L.

Caccia, L.

Roberthall, L.

Carnock, L.

Robson of Kiddington, B.

Chorley, L.

Rochester. L.

Craigavon, V.

St. Davids, V.

Diamond, L.

Seear, B.

Ezra, L.

Seebohm, L.

Grey, E.

Shackleton, L.

Hacking. L,. [Teller.]

Shannon, E.

Hampton, L.

Stedman, B.

Hanworth, V.

Taylor of Gryfe, L.

Heycock, L.

Taylor of Mansfield, L.

Houghton of Sowerby, L.

Tordoff, L.

Hylton-Foster, B.

Tryon, L.

Kagan, L.

Walston, L.

Kearton, L.

Whaddon, L.

Kilbracken, L.

Wilberforce, L.

Kilmarnock, L.

Wilson of Rievaulx, L.

Kinloss, Ly.

Winterbottom, L.

Kirkhill, L.

Wrenbury, L.

Lloyd of Kilgerran, L.

Ypres, E.

Lockwood, B.

NOT-CONTENTS

Allerton, L.

Greenway, L.

Ampthill, L.

Halsbury, E.

Ashbourne, L.

Hanson, L.

Auckland, L.

Harmar-Nicholls, L.

Belhaven and Stenton, L.

Henderson of Brompton, L.

Beloff, L.

Henley, L.

Belstead, L.

Hives, L.

Blake, L.

Holderness, L.

Boyd-Carpenter, L.

Hooper, B.

Brabazon of Tara, L.

Killearn, L.

Brougham and Vaux, L.

Kimball, L.

Butterworth, L.

Kitchener, E.

Caithness, E.

Knollys, V.

Campbell of Alloway, L.

Lane-Fox, B.

Campbell of Croy, L.

Lauderdale, E.

Carnegy of Lour, B.

Layton, L.

Colwyn, L.

Long, V.

Constantine of Stanmore, L.

Lucas of Chilworth, L.

Cork and Orrery, E.

McFadzean, L.

Craigmyle, L.

Macleod of Borve, B.

Crathorne, L.

Malmesbury, E.

Cross, V.

Mancroft, L.

Cullen of Ashbourne, L.

Margadale, L.

Davidson, V.

Marshall of Leeds, L.

De La Warr, E.

Massereene and Ferrard, V.

Denham, L. [Teller.]

Maude of Stratford-upon-

Dilhorne, V.

Avon, L.

Drumalbyn, L.

Merrivale, L.

Eden of Winton, L.

Middleton, L.

Elliot of Harwood, B.

Milverton, L.

Elliott of Morpeth, L.

Mottistone, L.

Elton, L.

Mountevans, L.

Enniskillen, E.

Murton of Lindisfarne, L.

Faithfull, B.

Norfolk, D.

Ferrers, E.

Northesk, E.

Fraser of Kilmorack, L.

Orr-Ewing, L.

Gardner of Parkes, B.

Penrhyn, L.

Glanusk, L.

Peyton of Yeovil, L.

Gray of Contin, L.

Platt of Writtle, B.

778

Quinton, L.

Sudeley, L.

Radnor, E.

Swinton, E. [Teller.]

Rankeillour, L.

Teviot, L.

Reigate, L.

Thorneycroft, L.

Rochdale, V.

Trenchard, V.

Rodney, L.

Trumpington, B.

Romney, E.

Ullswater, V.

Saint Oswald, L.

Vivian, L.

Sharpies, B.

Westbury, L.

Skelmersdale, L.

Wynford, L.

Stanley of Alderley, L.

Young. B.

Stodart of Leaston, L.

Zouche of Haryngworth, L.

Strathcona and Mount Royal.

L.

6.57 p.m.
[Amendments Nos. 359 and 360 not moved. ]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 361:
Page 127, line 8, after ("Schedule 2") insert ("paragraph 4(5) of Schedule (Requirements for recognition of professional body)").
The noble Lord said: I beg to move. This amendment was spoken to with Amendment No. 79.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 362:
Page 127, line 8, leave out ("and") and insert ("or").
The noble Lord said: This is a purely drafting amendment. I beg to move.
[Amendment No. 362A not moved. ]
Clause 156, as amended, agreed to.
Clauses 157 and 158 agreed to.
Schedule 12 [Restriction of Rehabilitation of Offenders Act 1974]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 363 to 366:
Page 202, line 2, after ("organisation") insert ("or body").
Page 202. line 3, at end insert—
("(2A) Any proceedings with respect to a decision or proposed decision of a recognised professional body refusing, suspending or withdrawing a certificate issued for the purposes of Part I of this Act.")

Page 203. line 13, at end insert— ("(2A) A recognised professional body.

(a) A person certified by the body.

(b)An applicant for certification by the body.

(c) A person whose certification by the body is suspended.

(d) An individual who is an associate of a person (whether or not an individual) described in paragraph (a), (b) or (c) above.")

Page 203, line 16, column 1, leave out ("or paragraph 2(b) or (c) above") and insert (", paragraph 2(a), (b) or (c) or paragraph 2A(a), (b) or (c) above").
The noble Lord said: I beg to move Amendment No. 363 and, with the leave of the Committee Amendments Nos. 364, 365 and 366, all of which have been spoken to with Amendment No. 79.
7 p.m.
Lord Ezra Lord Ezra moved Amendment No. 366A:

Page 203, line 41, at end insert— ("8. An approved exchange

An individual who is or is seeking to become an associate of the issuer of securities on an approved exchange and from or in respect of whom information is sought which the issuer of the securities is required to furnish under the rules of the approved exchange.").

The noble Lord said: The amendment relates to the restriction of certain clauses in the Rehabilitation of Offenders Act 1974 to give better protection to investors under the present Bill. This matter is dealt with in Clause 158 and in greater detail in Schedule 12. The amendment relates to Schedule 12.
Under the Bill as at present drafted, the exclusions from the relevant provisions of the Rehabilitation of Offenders Act are allowed for authorising organisations when considering whether the principals of businesses that undertake investment activities seeking authorisation are fit and proper to do so. A similar exclusion allows the competent authority for listing—that is, the Stock Exchange Council—to ask questions of potential directors of listed companies about certain previous convictions and if appropriate to act on such information.
Clearly, the inquiries which the authorised organisations are empowered to make are in the interest of investor protection. However, in the case of the Stock Exchange, the wording of the Bill is such as to exclude it from being able to ask similar questions of potential or new directors of companies on the unlisted securities market. It is only in respect of the listed market that it can make those inquiries. That seems to be a gap. It is possibly unintentional. I should remind the Committee that the USM is a fast growing market. It is one in which smaller and less well-known companies happen to operate. Therefore, there seems to be all the more reason that careful inquiries of actual or potential investors should be made. The purpose of the amendment is simple. It is an attempt to close that gap. I beg to move.
Lord Lucas of Chilworth: I am most grateful to the noble Lord, Lord Ezra, for so carefully explaining the purpose of his amendment. I am afraid that I shall have to resist it. It is not difficult to set out why, although perhaps not as consistently as one would wish.
My honourable friend the Minister in another place, when he spoke about the amendments to be made to the Rehabilitation of Offenders Act in this Bill, said that there was a balance to strike between the need to protect investors by ensuring that responsible authorities were fully aware of the relevant previous convictions of applicants and could take them into account, and the need to maintain important rights granted by Parliament under other legislation.
This delicate balance is not an easy one to achieve but I believe, as did my honourable friend, that the provision as drafted achieves it. The clause restricts the workings of the Rehabilitation of Offenders Act in so far as it relates to crimes of fraud and dishonesty or under specified statutes, committed by those in senior
780
positions in authorised businesses and companies listed or applying for admission to the official list, which carries a special status, not least in the eyes of investors. Listed companies have long had a special status under our laws, and indeed under EC law, and it is therefore right to apply stricter safeguards to the vetting of their associates. The complexity of the provision indicates the care with which it has been focused. I recognise the concerns which the Stock Exchange has expressed to the noble Lord, Lord Ezra, but I would suggest to him that his proposed amendment goes too far in disturbing the balance. The proposed extension of the disapplication would not be confined just to applicants for admission to the unlisted securities market but would apply to applicants to all approved exchanges, so the effect of the amendment would be to deprive more individuals of their rights conferred by statute.
I think also that it would be difficult to distinguish between approved exchanges and other recognised investment exchanges. The main differences between approved exchanges and other RIEs is that an approved exchange may be allowed to substitute its own disclosure requirements for those to be laid down by the Government under Part V of the Bill. This is not a good reason for distinguishing between approved and other recognised exchanges for the purposes of this restriction.
The Rehabilitation of Offenders Act contains its own safeguards even without this amendment. Convictions do not become spent until substantial prescribed periods have elapsed. Where a conviction results in a custodial sentence in excess of 30 months, it never becomes spent nor will any other subsequent convictions. The Act also provides that, in any proceedings before a judicial authority, evidence relating to spent convictions may be admitted and required if the authority is satisfied that justice cannot otherwise be done. The Stock Exchange, for example, in deciding whether to admit a company to listing on the USM, would be covered in this way. So in appropriate circumstances convictions outside the specific disapplication can still be taken into account. I believe that this is sufficient for the proper operation of approved exchanges.
A further extension of the present provision in the Bill would run counter to the purposes of the Rehabilitation of Offenders Act 1974 by which Parliament gave rights to individuals which should, so far as possible, be left intact. Whenever one strikes a balance—in this case between the needs of regulators and the rights of the individual—one may be accused of drawing the line in the wrong place. I believe that the way in which this provision has been framed is correct and that the balance is right. I hope the noble Lord will agree and feel able to withdraw his amendment.
Lord Ezra: I am grateful to the noble Lord for the explanation that he gave of the Government's position. I sympathise with the Government's desire to ensure that there should not be too many limitations on the operation of the Rehabilitation of Offenders Act 1974. Nevertheless, I believe that they are drawing a false distinction between the listed and the unlisted securities market. They are close to each other these

781
days. They are listed in the financial press and their shares are freely traded, so that the risks to the investor are equal.
I should have hoped that even if the Government were not disposed to accept the wording of my amendment they would have been prepared to consider the point and introduce the USM in some other way. As it is, I do not wish to press the amendment, but I shall have a look at the matter again and possibly bring it back at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 367:
Page 204, line 4, column 1, leave out ("or paragraph 2(b) or (c)") and insert (", paragraph 2(a), (b) or (c) or paragraph 2A(a), (b) or (c) ").
The noble Lord said: This amendment was spoken to with Amendment No. 79. I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 368:
Page 204. line 23. leave out ("or membership") and insert (" . membership or certification").
Clause 159 [Occupational pension schemes]:
On Question, Whether Clause 159 shall stand part of the Bill?
Lord Lucas of Chilworth: I move that the clause does not stand part of the Bill, because I wish to introduce a new clause which is the subject of Amendment No. 369. It may be for the convenience of the Committee if I speak to it now.
The amendment reflects the result of consultations on the Bill's provisions in relation to occupational pension schemes. The reference in the existing Clause 159 to management through an authorised person has caused some uncertainty. Some have questioned the position of trustees of occupational pension schemes. The new clause clarifies the requirement to be authorised. A person such as a trustee who is responsible for the management of the assets of an occupational pension scheme will not be required to be authorised if he delegates day-to-day management of those assets to an authorised or exempted person. This does not mean that he would have to distance himself entirely from the management of the assets. He would still be able to take what might be called strategic decisions, for example, about the proportion of the assets that should constitute investments of particular kinds or the desired balance between growth and income, and indeed his responsibilities as a trustee might require him to do so.
Similarly, a trustee would not need to be authorised simply because the person managing the scheme's assets was required to consult him from time to time
782
in particular circumstances—where perhaps there was a take-over bid, where perhaps the manager had a conflict of interest, or where the transaction in question was particularly large. But a trustee would be required to be authorised if he regularly exercised discretion as to the sale or purchase of particular investments. The new clause also makes clear that the requirement to be authorised in subsection (1) overrides where necessary the exclusion for trustees in paragraph 20 of Schedule 1. If a trustee actively manages the assets of the pension scheme, he will have to be authorised even if he satisfies the conditions set out in paragraph 20. Subsection (3) allows the Secretary of State to exclude certain managers of certain types of occupational pension schemes from the scope of subsection (1) and hence from the requirement to be authorised.
It has been suggested to us, particularly in the context of small, self-administered, pension schemes, approved by the Inland Revenue, that the provisions of the clause are inappropriate to some types of small schemes because they are effectively under the control of beneficiaries. I am not able at this stage to say precisely which classes of scheme would be excluded under this provision. But, clearly, approved, small, self-administered schemes are strong contenders, although the Government will wish to consider carefully whether all such schemes or only classes of them should be excluded.
We should also want to consider whether the pensioner trustees of such schemes should continue to be required to be authorised. There may also be other classes of scheme in respect of which the power should be exercised. I should like to stress that my right honourable friend the Secretary of State for Social Services will need to consider carefully whether a scheme that is not managed by an authorised or exempted person should be able to contract out of the state earning-related pension scheme under the new arrangements to be introduced under the Social Security Bill. That is the purpose of the new clause. I beg to move.
Lord Williams of Elvel: I am sure that the Committee is grateful to the noble Lord, Lord Lucas, for his exposition of the new clause. It raises, as I am sure he realises, and as I think he mentioned, a number of extremely complex issues. Indeed, the noble Lord has himself identified a certain number of issues where the clause is, if I may say so, incomplete, or at least the explanation is incomplete, because there is still the question of which schemes will be excluded and whether pensioner trustees will be in or out of authorisation. So we have to wait and see what the Government finally intend before discussing this new clause as fully as we should like.
If, however, I may put down a marker, it is extremely difficult to determine—I speak as one who in the past has been a trustee and a manager of pension funds—exactly at what point the trustee ceases to have decision-making powers over individual investments or a series of investments and at what point the manager takes over discretion. This is an area where we shall have some interesting debates at a later stage of the Bill.
On Question, clause negatived.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 369:
After Clause 159, insert the following new clause:
("Occupational pension schemes.

.—(1) Subject to the provisions of this section, a person shall be treated for the purposes of this Act as carrying on investment business if, whether or not by way of business, he engages in the activity of management falling within paragraph 14 of Schedule 1 to this Act in a case where the assets referred to in that paragraph are held for the purposes of an occupational pension scheme.

(2) Subsection (1) above does not apply where all decisions, or all day to day decisions, in the carrying on of that activity are taken on behalf of the person concerned by—

(a) an authorised person; or

(b) an exempted person who in doing so is acting in the course of the business in respect of which he is exempt.

(3) The Secretary of State may by order direct that a person of such description as is specified in the order shall not by virtue of carrying on the activity mentioned in subsection (1) above otherwise than by way of business be regarded for the purposes of this Act as carrying on investment business where the assets are held for the purposes of an occupational pension scheme of such description as is so specified, being a scheme in the case of which it appears to the Secretary of State that management by an authorised or exempted person is unnecessary having regard to the size of the scheme and the control exercisable over its affairs by the beneficiaries.

(4) An order under subsection (3) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(5) For the purposes of subsection (1) above in its application to a person carrying on the activity there mentioned otherwise than by way of business paragraph 14 of Schedule 1 to this Act shall be construed without reference to paragraph 20 of that Schedule.").

7.15 p.m.
Clause 160 [International obligations]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 370:
Page 129, line 23, at end insert—
("() Subsection (1) above applies also to an approved exchange within the meaning of Part V of this Act in respect of any action which it proposes to take or has power to take in respect of rules applying to a prospectus by virtue of a direction under section 134(3) above.").
The noble Lord said: This amendment was spoken to with Amendment No. 310. I beg to move.
Clause 160, as amended, agreed to.
Clause 161 [Exemption from Banking Act 1979]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 371:
Page 129, line 39, leave out from ("authorised") to end of line 40 and insert ("or exempted person in the course or for the purpose of engaging in any activity falling within paragraph 12 of Schedule 1 to this Act with or on behalf of the person by whom or on whose behalf the deposit is made or any activity falling within paragraph 13, 14 or 16 of that Schedule on behalf of that person.
(2) Subsection (1) above applies to an exempted person only if the activity is one in respect of which he is exempt; and for the purposes of that subsection the paragraphs of Schedule 1 there mentioned shall be construed without reference to Parts HI and IV of that Schedule.
(3) This section is without prejudice to any exemption from the said Act of 1979 which applies to an authorised or exempted person apart from this section.").
The noble Lord said: This is a very technical amendment. But it is clearly essential that where the carrying on of investment business necessarily involves what, given a very broad definition in the Banking Act, must also be regarded as the acceptance of a deposit, then it must be the regime to be introduced under the Bill and not the inappropriate regime of the Banking Act that applies. The clause, as originally drafted, arguably went too wide. It could have permitted authorised persons to finance their businesses by means of an otherwise unconnected deposit-taking business without seeking a proper authority under the Banking Act. While it would have been possible to deal with the matter in the rules governing authorised persons, we think that it would be preferable to limit the exemption from the Banking Act on the face of the Bill. That is the first object of the amendment.
The second object is to ensure that exempted persons, who will need to accept deposits for the same reasons as authorised persons, will also have the benefit of similar exemption from the Banking Act. I beg to move.
Lord Williams of Elvel: As the noble Lord says, this is an extremely complex and technical question. I spent most of the weekend trying to understand previous clauses and I have not got around, I am afraid, to understanding what this amendment means. I am afraid that I shall need some time. While we do not oppose the amendment, we may wish to raise the matter on Report.
Clause 161, as amended, agreed to.
Clauses 162 and 163 agreed to.
Clause 164 [Financial assistance for employees' share schemes]:
Lord Hacking Lord Hacking moved Amendment No. 372:
Page 133, line 8, leave out ("ordinary") and insert ("the").
The noble Lord said: Unlike the last amendment moved by the Minister, this is a very simple amendment and one, I believe, wholly within the comprehension of the noble Lord, Lord Williams, even if he has not done his homework. I do not say that unkindly. It would be almost impossible for any of your Lordships in Committee wholly to have done his homework on such a long and complicated Bill. It was not a point of criticism; it was a point of sympathy with the noble Lord, Lord Williams.
I now turn to my amendment. As the Committee can see, I am seeking, in reference to voting rights attributable to share capital, to have the word "ordinary" removed and replaced by the word "the". Clause 164 inserts a new provision in the Companies Act 1985 which will enable a company to give financial assistance,
"for the purpose of enabling or facilitating transactions in shares … between or for the benefit of
bona fide employees and their dependants. It also enables employees connected with the company whose shares are involved to take steps to enable or facilitate the same transactions. In subsection (3), at the top of page 133 of the Bill, the definition of the expression "connected" refers to the right to,

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"control the exercise of a majority of the voting rights attributable to ordinary share capital which are exercisable in all circumstances at any general meeting of the other company or of its holding company".
The difficulty is that there is no definition in the Companies Act of "ordinary share capital". There is a definition of equity share capital, but that does not help us.
However, in addition to equity share capital there can also be preference shares which carry voting rights in all circumstances. By changing the wording in the Bill from "ordinary" to "the", one covers all share capital where there are voting rights. I hope that I have been able to explain this amendment, and I hope that it is within the comprehension of all noble Lords in this Committee. I also hope that it will be accepted by the Government.
Lord Williams of Elvel: I am most grateful to the noble Lord, Lord Hacking, for explaining to my extremely stupid mind his very simple amendment with such great brilliance and intellectual distinction. However, it seems to me that "ordinary share capital" meets the bill because, as I understand it, employee share schemes are those concerned with ordinary share capital. It is perfectly possible that the noble Lord, Lord Hacking, may be right and that future share schemes may involve preference capital, convertible voting preferred, ordinary redeemable voting convertible preferred, or anything else. It may therefore be that the noble Lord, Lord Hacking, has a point, but it does not seem that under present legislation he has. It may be that, again, I have misunderstood, in which case I shall leave the Minister to reply.
Lord Lucas of Chilworth: One always has a feeling on Tuesday evening about twenty-two or twenty-three minutes past seven that noble Lords' minds are perhaps thinking of looking after the inner man after several hours of deliberation. I think that the noble Lord, Lord Hacking, explained this very well. However, I fear we are not satisfied that as it stands subsection (2) achieves the desired effect. We think that it contains a potential loophole which could allow companies to provide financial assistance for purposes other than the acquisition of beneficial ownership of shares in the company. We intend to close that loophole because we believe that this is an important provision. It is sufficiently important that we should make efforts to get it right. We intend to close that loophole but it has not been possible to produce a suitable amendment for consideration by the Committee. We shall wish to bring forward something ourselves on Report.
Against that background, may I make a suggestion to the noble Lord, Lord Hacking? I am not totally persuaded that we should adopt his proposed amendment. However, if he will agree to withdraw it we shall certainly undertake to consider the underlying point, in consultation with the Law Society, and, if appropriate, we can bring forward a suitable amendment on Report at the same time as we do with subsection (2). I hope that that course of action will commend itself to the noble Lord and to the Committee.
Lord Hacking: I am very grateful for the bouquet that the noble Lord, Lord Williams, has extended to me even if it had one or two thorns in it. I am also most grateful to the Minister for the response he has made to my amendment. On the basis that he has put the position of the Government, I am only too happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 164 agreed to.
Clause 165 [Disclosure of interests in shares: interests held by market maker]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 373:
Page 133, line 25, after ("exchange") insert ("other than an overseas investment exchange").
The noble Lord said: This amendment was spoken to with Amendment No. 111. I beg to move.
Lord Hacking Lord Hacking moved Amendment No. 374:
Page 133, line 27, leave out ("a price") and insert ("prices").
The noble Lord said: I spoke to this amendment when I spoke to Amendment No. 344AA at a much earlier stage this afternoon in Committee. I am hopeful that the Government will accept this amendment because they were kind enough to accept Amendment No. 344AA. In that case I do not desire to say anything further to the Committee. 1 beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved amendment No. 375:
Page 134, line 6, after ("exchange") insert ("other than an overseas investment exchange").
The noble Lord said: This amendment was spoken to with Amendment No. 111. I beg to move.
Lord Hacking Lord Hacking moved Amendment No. 375A:
Page 134, line 8, leave out ("a price") and insert ("prices").
The noble Lord said: As I understand it, the Government are also prepared to accept this amendment. I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 376:
Page 134, line 11, at end insert—
("and an interest of such a person in shares is an exempt interest if he carries on business as a market maker in the United Kingdom, is subject to such rules in the carrying on of that business and holds the interest for the purposes of that business.".").
The noble Lord said: I beg to move Amendment No. 376. This is a technical amendment an amendment was introduced in another place to provide a definition of the exempt interests of recognised market-makers which will not be notifiable under Sections 198-210 of the 1985 Companies Act, but the corresponding provision for Northern Ireland was unfortunately omitted. This amendment makes good that omission. I beg to move.
Lord Williams of Elvel: Why was the Northern Ireland provision omitted? I do not quite understand how this could happen.
Lord Brabazon of Tara: Everybody makes mistakes.
Clause 165, as amended, agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 377:
After Clause 165, insert the following new clause:
("Power to petition for winding up or administration order on information obtained under Act 1985 c.6.

.—(1) In section 440 of the Companies Act 1985—

(a) after the words "section 437" there shall be inserted the words "above or section 81 of the Financial Services Act 1986"; and

(b) after the words "448 below" there shall be inserted the words "or section 92 of that Act".

(2) In section 8 of the Company Directors Disqualification Act 1986—

(a) after the words "the Companies Act" there shall be inserted the words "or section 81 or 147 of the Financial Services Act 1986"; and

(b)for the words "that Act" there shall be substituted the words "the Companies Act or section 92 of the Financial Services Act 1986".").

The noble Lord said: I beg to move Amendment No. 377. This is another technical amendment. At present the powers given to the Secretary of State under Section 440 of the Companies Act to petition the court for the winding up of a body corporate are only exercisable if it appears to him from a report of inspectors appointed, or information obtained, under Companies Act powers that this is in the public interest. This Bill enables investigations to be carried out into the affairs of persons carrying on investment business. Such an investigation may well uncover evidence about a company, not necessarily an authorised business, which is of such a nature that the Secretary of State may wish to bring a petition to wind that company up.
At present, his Companies Act powers could not be used because they may be invoked only if the Companies Act investigation powers have been used. Such a further inspection would have to be set in train. This really would be a nonsense, so it is proposed that information obtained using powers given in this Bill should be able to be used by the Secretary of State to invoke his Companies Act powers.
The amendment to the Companies Directors Disqualification Act is made for the same purpose in relation to applications by the Secretary of State for disqualification orders against a director. I beg to move.
Lord Williams of Elvel: As the noble Lord, Lord Brabazon, has said, this is a rather technical point. However, it raises certain matters that we may have to study carefully. Therefore, as with all the Government's new clauses, I must reserve our position until we have had a closer look at it.
Lord Brabazon of Tara: I think that we have reached a suitable moment at which to adjourn this
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Committee stage. I suggest that we do not return to further consideration of this Bill until 8.30. I beg to move that the House do now resume.
House resumed

Drivers' Hours (Goods Vehicles) (Modifications) Order 1986 Drivers' Hours (Harmonisation with Community Rules) Regulations 1986 Community Drivers' Hours and Recording Equipment Regulations 1986 Community Drivers' Hours and Recording Equipment (Exemptions and Supplementary Provisions) Regulations 1986
7.30 p.m.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): My Lords, I beg to move that the three draft regulations and the draft order standing in my name on the Order Paper be approved.
These regulations and the order form part of a comprehensive revision of the rules governing the driving time and rest periods of goods and passenger vehicle drivers, and the use of tachographs. They relate in the main to goods drivers. Most goods vehicles of 3.5 tonnes and most coaches are subject to the EC regulations on drivers' hours and tachographs. They are also subject to the provisions of the Transport Act 1968 on duty periods; that is, the total time a driver may work.
Drivers not subject to the EC rules have their driving, rest and duty periods controlled by the Transport Act 1968. New EC Regulations 3820/85 and 3821/85 were agreed by the Council of Ministers on 14th November 1985 and will come into effect on 29th September 1986. They apply directly in the United Kingdom and are not the subject of today's Motion, apart from provisions for permissible derogations. However, they underlie our debate and are the reason for the four instruments before us. The House will recall that proposed changes to the existing regulations were the subject of the Select Committee on the European Committee's 19th report in the 1983–84 Session, and were debated on 15th November 1984.
The new EC regulations result from many months of negotiation on the original Commision proposals and reflect the views of all the member states. They are not perfect but we believe that they are an important step in the right direction. They will bring significant benefits to drivers in the form of less driving, longer weekly rest and longer breaks for most of them. Drivers and operators together will benefit from the ability marginally to increase daily driving and to postpone daily and weekly rest subject to later compensation.

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The four instruments before us will allow our industry to take full advantage of the new EC regime. I apologise to your Lordships for having to go into some detail, but your Lordships will understand the necessity and importance of so doing. May 1 start with a comment on the Community Drivers' Hours and Recording Equipment Regulations 1986. This draft instrument makes consequential changes to existing legislation to take account of the new EC Regulations 3820/85 and 3821/85, which I have already mentioned.
I turn to the Drivers' Hours (Goods Vehicles) (Modifications) Order 1986. This draft instrument modifies the domestic drivers' hours code for goods vehicle which are outside the scope of the EC regulations. The existing code is disapplied except for the daily driving limit and the daily duty limit. The vast majority of drivers under this code are light goods vehicle drivers who do not go long distances or drive long hours. We have simplified the rules for them but retained two effective controls.
The second regulation is the Drivers' Hours (Harmonisation with Community Rules) Regulations. This draft instrument gives requirements for those who drive under both EC and domestic rules. Those under the EC rules will no longer be required to observe duty requirements. The definition of the working week has been amended to concur with the EC definition.
There has been genuine concern from the trade unions and others that the removal of duty limits will lengthen the working day, lead to exploitation and increase driver fatigue. We do not belittle that concern, but we consider that the new EC rules in themselves provide adequate safeguards. Weekly rest goes up from 40 to 45 hours and breaks for most drivers go up to three-quarters of an hour from half an hour. The ability to drive an extra hour and postpone some rest—but it must be compensated for—is directly in line with one of the Select Committee's conclusions that journeys should be arranged so that drivers can return home to spend their leisure hours and sleep. If we retained duty limits, this ability would vanish. It is true that this flexibility could in theory lead to a driver being on duty for up to 15 hours in a day, including 10 hours driving. But such a long day must be compensated by corresponding shorter days and could not be worked on a regular basis. To ensure that the new provisions are not abused, we will continue to strengthen our existing enforcement effort.
Last but not least, I turn to the Community Drivers' Hours and Recording Equipment (Exemptions and Supplementary Provisions) Regulations. This draft instrument provides for permissible derogations from the EC regulations. It also provides for a shorter break for some coaches in London, some coach tours to postpone weekly rest for six days, and requires some postal services carrying parcels to fit tachographs.
We intend to take full advantage of the permissible derogations. The local business or industry that is not competing with the professional haulier should not be saddled with the cost of fitting and maintaining a tachograph. Among those who will benefit are: The farming, forestry, horticultural and fishing industries; the local small businessman not engaged in haulage;
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those who do not leave any of our offshore islands, including the Isle of Wight; electric and gas powered vehicles under 7.5 tonnes; drivers of minibuses with up to 17 seats. The proposed exemptions for the Royal Naval Lifeboat Institution, vintage vehicles and sea coal vehicles require approval from the European Commission and the regulation will not be made until it is granted.
Your Lordships may like to know that, although we were unsuccessful in Brussels in getting all private driving of passenger vehicles exempted from the new EC rules, we have asked the Commission to re-examine this question.
These four instruments further our policy of reducing unnecessary burdens on industry while having proper regard to road safety. They will allow the industry to increase its efficiency and drivers to improve their working conditions. I commend these instruments to the House, and I beg to move.
Moved, That the Drivers' Hours (Goods Vehicles) (Modifications) Order 1986 laid before the House on 1lth June [27th Report from the Joint Committee]; the Drivers' Hours (Harmonisation with Community Rules) Regulations 1986 laid before the House on 1lth June [27th Report from the Joint Commit we]; the Community Drivers' Hours and Recording Equipment Regulations 1986 laid before the House on 27th June [28th Report from the Joint Committee]; and the Community Drivers' Hours and Recording Equipment (Exemptions and Supplementary Provisions) Regulations 1986 laid before the House on 1lth June [27th Report from the Joint Committee] be approved.—(The Earl of Caithness.)
Lord Underhill: My Lords, I thank the noble Earl for his explanation of these regulations and the order. Although I have the greatest respect for the noble Earl, I wonder whether he has really covered all the points that arise. I say that, first, because, having attempted to read the four measures and then the four memoranda, I feel that it must be agreed that the four memoranda tell us very little about these complex documents. It might have been useful if somewhere there had been set out all the existing provisions regarding drivers' hours, rest periods, duty hours, breaks and so on; what the changes are, and what is left.
I have found it extremely helpful to read the debate on this order and the regulations in the other place on 15th July. It has also been extremely helpful to read carefully a very long letter sent by the Transport and General Workers' Union to the Under-Secretary of State on 3rd June and also to take into consideration the report of your Lordships' own Select Committee on social conditions for drivers, to which the noble Earl has referred, and the debate on that report which took place on 15th November 1984.
It will be recalled that the Select Committee were concerned not only about road safety but also about the social conditions for drivers. I understand the complications which your Lordships' Select Committee appreciated; namely, the difficulties of working two sets of rules—the United Kingdom regulations and those of the EC. However, it may be recalled that the Transport and General Workers' Union made absolutely clear to the Select Committee

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that it did not want to see a universal standard that was less effective than that which we have already. It wished to have a minimum EC standard supple-mented by the more advanced United Kingdom standards. I think that that was the general type of view which seemed to permeate through your Lordships' Select Committee. Will we have that if these regulations are approved?
In May this year, the Transport and General Workers' Union commented:
"Contrary to what the Government has said previously, the new regulations change fundamentally the hours of work and rest periods by providing for an extension of both driving hours and the working day and allowing shorter periods of rest".
Those words were actually used by the Opposition spokesman in the other place, and examples were set out of what may happen in certain cases, but I regret to say that they were not dealt with in the reply of the Under-Secretary of State in the other place.
I think it will be generally agreed that the 1968 Act rules have served the United Kingdom extremely well and that, generally, our road safety standards, particularly for goods vehicles, are very high indeed. But I see that the Under-Secretary of State said, at col. 954 of the Official Report of that debate on the regulations:
"To retain our existing weekly duty limit of 60 hours would prevent the use of a new EC provision which allows weekly rest to be reduced in one week provided it is compensated within the following three weeks. So we are proposing to abolish all 1968 Act limits on duty hours in so far as they apply to driving subject to EC rules."—[Official Report, Commons. 15/7/86.]
The first order, which is entitled Drivers' Hours (Goods Vehicles) (Modifications) Order, refers to the fact that certain aspects of the 1968 Act rules are no longer to apply. It refers, in particular, to subsection (3)(a), which I find refers to the working day not exceeding 11 hours and which I gather is still to be retained. But it makes no reference at all to paragraph (b) of the same subsection, which deals with the spread-over of duty to 12½ hours maximum. I presume that that is being abolished and that no longer will the maximum duty of 12½ hours in any day still apply.
The noble Earl said that the normal weekly rest will be increased from 40 to 45 hours, but, as I have already mentioned, this must be compensated within a three-week period. The Transport and General Workers' Union argue that this is no betterment at all and, in the letter to the Under-Secretary of State, they said that the statements made are misleading and that,
"Employers will be able to use a combination of the sixth day working and permutations in the weekly rest period with no benefit to the driver".
They set out the arguments in support of that case.
The case was put in the other place that with the introduction of the sixth day working, a driver could work four nine-hour spells and two 10-hour spells, resulting in 56 hours driving and working during one week. That statement was made in the debate in the other place and it was not replied to in any way in the closing speech of the Under-Secretary of State.
As I said, the order makes clear that there is no change in the daily rest period of 11 hours between working days. But the union also claim that under the new regulations it will be 11 hours, but reducing to three times nine hours per week, or 12 hours in two or
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more periods, one of which must be at least eight hours. I want to hear the argument against this point made by the union—it has not been advanced—which could be greatly exploited by some employers.
We are told that the minimum break period will be increased from half an hour to three-quarters of an hour. I understand—and I am always open to correction, because this is a very complex matter—that at present the half-hour break is after 54 hours duty. Under the new regulations it will be after 44 hours actual driving. When your Lordships' Select Committee considered the general and social conditions of drivers, they suggested that a break should be after four hours driving. It could well be that in the course of a working day many drivers will not accumulate 44 hours actual driving, and this point was made by the union. What, then, are the provisions for their rest break if the new regulations are to change from 54 hours duty to 44 hours actual driving? The union have also argued that the waiting time to load or to unload will not be deemed to be on-duty time.
At this point, I should like to deal with the question of flexibility, to which reference has been made, particularly by the Under-Secretary of State in the other place. In col. 956 of the Official Report he said:
"The proposals contained in these instruments pay proper regard to road safety and they are consistent with our policy of reducing unnecessary burdens on industry. Trade unions and employers will be able to negotiate together new patterns of work which will allow both drivers and operators to benefit fully from the increased flexibility".
There are obviously grave dangers in this.
Despite what the Minister has said about enforcement, are we satisfied that it will be possible within this alleged flexibility to have effective enforcement? What I am saying is in line with the evidence given by those who attended the Select Committee—and I ask your Lordships to remember that I attended most meetings of the Select Committee—from the Department of Transport, that the Government are concerned with road safety but that conditions of work are matters to be settled between employers and employees. I recall that in our debate I protested and asked if that is the case, why do we have United Kingdom standard regulations dealing with conditions, hours and so on? Bearing in mind that the majority of haulage employers have five or fewer vehicles, and many are non-unionised, the problem of carrying out enforcement with any degree of flexibility will be extremely difficult.
The Minister has said that it will be made easier for drivers to vary driving hours to enable them to reach home and relax there, instead of being forced to sleep in the cab. This is an aspect which was considered very carefully by your Lordships' Select Committee. They held the view, which I endorse, that where distance permits journeys to be so arranged as to allow drivers to get to their homes and have proper relaxation, that ought to be done. But they said that there should not be too sharp an increase in hours to enable that to be done.
The problem which the union have posed is that the new regulations will provide for nine hours driving, but twice weekly for a period of 10 hours driving. I must ask: how will this be rigidly enforced and how can abuse of this flexibility be avoided? I think all of us

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should like to see journeys so arranged that drivers can get home by some extension of hours, rather than have to sleep in their cabs, which is a procedure which your Lordships' Select Committee said should be avoided wherever possible. But we must ensure that, somehow, the flexibility to enable this to be done is not abused.
The debate in the other place concentrated a fair amount of time on the effect of driver fatigue, but I must remind your Lordships of what our own Select Committee said in its report. It said that there is insufficient research into the effect of fatigue on driving safety and that further research is necessary into the causes of driver fatigue. That was some two or two-and-a-half-years ago, and I do not know whether further research is taking place. The Select Committee said that there should be a substantial break after four hours at the wheel. It has been suggested in the regulations that the period should now be four-and-a-half hours. The Select Committee also said that there should be freedom to take other breaks according to the individual needs of drivers, and that the regulations must provide safeguards against driving for long periods when already tired and fatigued by other work. Where is there a reference in these new regulations to that important aspect of driver fatigue and road safety? Your committee also said that irregular shifts can lead to dangerous driver fatigue. I would ask that the new EC regulations should be checked with the utmost care to ensure that they provide stable and humane shift arrangements.
It was not my intention to refer at all to the passenger and coach aspect because the new regulations seem to be all right in that respect. Having read today's reports of the tragic coach accident on the continent, where no other vehicle was involved and where the driver went off the motorway into a ditch, one must ask whether we are satisfied that the position on driver fatigue of coach drivers on long journeys may not have to be looked at. There is nothing in the regulations to deal with that.
The new regulations make no reference at all to a maximum spreadover of duty hours. The 1968 Act provides for a 12½-hour maximum.
Lord Teviot: My Lords, I apologise to the noble Lord for interrupting, but I think I can tell the noble Lord about the accident to which he has referred. Accidents have always to be looked into, and I only refer to it because the noble Lord has done so. I gather that the driver concerned had been in his place only for about 35 minutes when the accident occurred.
Lord Underhill: My Lords, I am grateful to the noble Lord, but I was not drawing any conclusions whatsoever about it. All I say is that some people have suffered injury, if not fatality; but, generally speaking, our coach journeys are thoroughly safe. All I say is that one ought to look carefully at the report of that accident to see whether or not driver fatigue comes into it. Most of us have driven on motorways, and I confess that it would not be the first time that I have suddenly woken up after being asleep for a second. But that second is enough to send one in the wrong direction. I think most noble Lords will have suffered that experience.
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Could the noble Earl tell us what is being rescinded in the 1968 Act, and what is left? The union claim that what remains will be just the 11 hours maximum duty, and the 10 hours maximum daily driving spread over a day. There is no provision in these regulations for meal breaks other than the one fixed rest referred to. I should have liked to have seen all these set out so that we could see clearly what these regulations provide. The Minister said in the other place—and the noble Earl referred to enforcement policy—that there will be consultation with both sides of industry on how to make this effective. Of course I welcome that.
I would remind the House that our own Select Committee expressed concern that there should be enforcement by all countries—they were concerned that Britain carried out a fair enforcement policy, but other countries did not—not only in the interests of road safety but also to control unscrupulous operators. One must admit that even in the United Kingdom there are unscrupulous operators, many of them operating just two or three vehicles. We want to ensure that the new regulations, and what is left of our 1968 provisions, will be adequately enforced.
May I ask the Minister whether the Under-Secretary of State, or another Minister, has replied to the many points in the letter of 3rd June of the Transport and General Workers' Union? Many points were covered. and I have not seen them answered in the debate in the other place. I do not suggest that the noble Earl should reply to them all tonight because they cover about six or seven pages, but I wonder, if a reply has been sent to the union, whether a copy could be placed in the Library. Could there also be placed in the Library a list comparing all the limitations which existed prior to these regulations before us, and the position on all these points after these regulations have been approved? I say "after" because it is not the policy of the Opposition to oppose regulations and instruments approved by the other House, but there are a number of important points that we should like to have answered.
I have in front of me a chart of the sort that was presented to the Select Committee contrasting what was then the EC regulations, the 1968 regulations, what were going to be abolished and what might be retained. We should like to see a list of that kind placed in the Library which would tell us exactly which points of the 1968 Act no longer exist and all the new regulations, and not just the minimum number to which reference has been made.
Lord Tordoff: My Lords, it is common ground that we thank the Minister for presenting these regulations as clearly as anybody could. It is also common ground that all in this House would oppose anything which led to an increase in road accidents. That is something which crosses all parts of the House. It is difficult to disentangle the facts in this debate, and it is not helped by having read the debate in the other place, where the facts seemed to get even more entangled rather than the other way round.
We have some facts. The Transport Road Research Laboratory has made it clear that something like 11 per cent. of motorway accidents to heavy goods and public service vehicles involve driver fatigue. But there is not any evidence that there is a direct link between driving time and fatigue—and I emphasise "between

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driving time and fatigue". However, a recent report of the Medical Commission for Accident Prevention entitled Medical Aspects of Fitness to Drive says:
"Scientific evidence supports the view that limits are needed to duty hours if fatigue effects incurred from non-driving tasks and from disruption of sleep quality and quantity are to be minimised.".
This touches on the point that the noble Lord, Lord Teviot, made in response to what the noble Lord, Lord Underhill, said about yesterday's tragic accident. None of us knows the cause of that accident. It may be that driver fatigue could be a factor: we simply do not know. There may be mechanical reasons, or whatever.
Were it to be driver fatigue it would not necessarily depend on the number of hours the driver had been driving. As the noble Lord, Lord Teviot, has apparently found out, the number of hours in that spell were quite short, but that does not mean that there could not be other fatiguing factors because of other duties. Duty hours are much more important than driving hours. As I read the new regulations they tend to regulate the hours of driving rather than the hours of work. Under the 1968 Act, as the noble Lord, Lord Underhill, has said, an 11 -hour working day was the maximum, whereas under the new regulations a driver can have 13 hours work within a 24-hour period, as I calculate the regulations as they stand.
The question of short breaks is something which slightly baffles me as well. The EC rules, as I understand them, provide for breaks after a period of continuous driving; normally 45 minutes after 4½ hours. The law is clear enough after 4½ hours' driving. A driver must have a break, and other work does not count as a break. That is perfectly clear. But the EC rules are unclear about the entitlement of a driver who drives for, say, two hours, unloads for one hour, drives for three hours and unloads again for one hour. There have been conflicting judgments in United Kingdom courts already about when, if at all, such a driver is entitled to a break under the EC rules. The Transport Act 1968 provides for a break of half an hour after 5½ hours' continuous work, not just continuous driving. The draft regulation would remove this entitlement. I find that extremely worrying.
The noble Lord, Lord Underhill, mentioned also the worries about spreadover. As I understand it, the drivers' driving hours may now be spread over up to 15 hours; that is, 24 hours less a minimum of nine for rest. In other words, he could clock in at 7 a.m., drive for 44 hours, wait around at his destination for five hours, and then drive back arriving at his base at 10 p.m.
The Transport Act 1968 limits the spreadover of goods drivers to 12½ hours, so it seems that there is a much greater spread here. One accepts that flexibility may be a good thing and that drivers would be far better getting back to their homes and their own beds rather than sleeping in the cab, however comfortable some of those cabs are these days. It is far better that a man should be able to get home, or I should say a woman: one must not be sexist these days, even on heavy goods vehicles.
There is a very serious worry here that the EC regulations are allowing far too much in the spreadover period. The regulations specifically allow member states to lay down higher minima for both
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breaks and rest periods although a maximum for daily and weekly driving. It seems to me that nothing in the EC regulations would therefore prevent the United Kingdom from retaining the 11 -hour duty limit or the entitlement to a break after five hours' work.
Your Lordships' Select Committee has already been referred to in this debate. When it reported in May 1984 it broadly came out in favour of what at that time was the European Commission's suggestion in wanting a limit on continuous duty, but the lack of agreement in Europe between employers and unions led to an imposed solution which went for the system that we now have; the control of the duty period instead of the driving period. It is my belief, though I am certainly open to correction, that Her Majesty's Government have discretion and that they should use that discretion to the absolute maximum. Obviously the operators are happy with the increased flexibility and one should not sneer at that. We need to have an efficient road haulage system. To be competitive in world markets, we need to make the maximum use of equipment that we possibly can, safely. This must not be at the expense of safety, however.
May I ask the noble Earl what comments the police have had to make on these variations? It seems to me that the increased flexibility must make it very difficult for the ordinary policeman to come to an on the spot interpretation of what the rules are. I know they are not simple at the moment, but it seems to me that the interpretation under the new regulations may be more difficult for the average police constable to enforce.
When it comes to a technical enforcement of the items contained in these regulations, I understand that this is mainly done by the Department of Transport traffic examiners, of whom there are only 235 for the whole of Great Britain. While there may be 29 in Kent and Sussex (that may be a good place to put them to challenge drivers coming through the Channel ports) there are only three in the whole of Mid and South Wales. That seems inadequate, particularly when these people for reasonable reasons are reluctant to work outside normal hours or to work overtime because Government spending limits have cut down the amount of overtime that can be worked. I understand that if a policeman stops a vehicle and there is no examiner available because it is out of hours or because it is in an overtime period, the policeman may have to let that vehicle go even if he considers it to be in an unsafe state.
May I ask the Government what monitoring and research has been done so far and what monitoring they intend to carry out when these regulations come into effect, as they doubtless will? I accept that the maximum fortnightly driving has been reduced from 92 to 90 hours and I accept that the minimum weekly rest has been increased from 40 to 45 hours, although this can, as the noble Lord, Lord Underhill, pointed out, be reducible with compensation. But it seems to me that the overall position is gravely weakened by removing the limits on the daily duty and the maximum spreadover. We are very unhappy, as my honourable friend Mr. Cartwright expressed in another place, that the safety provisions are being eroded.
If these regulations are not carefully monitored, I believe that the cowboys will profit at the expense of

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the reasonable haulage companies and at the expense of the health of the drivers and will endanger the ultimate safety of the public. Like the noble Lord, Lord Underhill, we do not intend to oppose these regulations in this Chamber, they having passed through another place. But I ask the Government to take serious consideration of the points that have been raised both here and in another place, to try to set minds at rest and above all to make sure that these regulations are properly monitored. If they are deficient, if there is any suggestion that safety is in decline, we hope the Government will do everything they can to use the maximum flexibility within the regulations to ensure that safety standards are improved and not reduced.
Lord Stanley of Alderley: My Lords, I have recently criticised my noble friend for being mean over motorway competition. On this occasion I should like to correct the balance by thanking him on behalf of the agricultural, forestry and horticultural industries for the exemptions provided and also, in the absence of my chairman, my noble friend the Duke of Atholl, I should particularly like to thank my noble friend for the representations that he is making to the Commission on behalf of the RNLI. We are most grateful for that exemption. I support the regulations.
Lord Teviot: My Lords, by and large I welcome these regulations although I shall be making one or two points or even criticisms on behalf of passengers. I should like to say before I am a minute older how much the Bus and Coach Council, the Freight Transport Association and the Road Haulage Association appreciate the way the officials in the Department of Transport have helped. I gather that much hard work has gone into making these orders more flexible. They are complicated, the subject is complex, some might even refer to it as being dull, but all these orders affect an awful lot of people's lives. I am sure people are very grateful for what the department has done.
On the goods side, I have very little to say because it was well covered in the other place. The Freight Transport Association has sent a very good brief, but it welcomes the tidying-up operation which these orders cover. These orders ensued from the 1968 Act. The FTA felt that the existing laws were unsatisfactory. The only doubt I have to pass on from the Road Haulage Association (which the noble Lord, Lord Tordoff, has already mentioned from what he has heard) is whether the new laws will be properly enforced.
With passengers it is a slightly different situation. This was not covered in the other place at all. My noble friend has already mentioned that the instructions to the Commission in 1984–85 were to simplify the regulations, make them more flexible and improve conditions for drivers. There is considerable doubt whether any of these three have been achieved. The new regulations, about which the passenger side feels rather strongly, are mainly designed for goods transport. The regulations to do with goods transport do not sit easily with passenger transport, which is a different matter. Particular difficulties can arise with the weekly rest, which is increased from 39 to 45
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hours, and the awkwardness of compensation for any permitted reduction of it. Its effect will be to reduce a six-day availability to five and a half or even five day working, which could be a serious loss to a seasonal industry. 1 gather again that in this seasonal industry we have a North-South situation as the regulations concern passenger transport and the tours people. People from the North have further to go and there is even more of a problem.
The employer in arranging the driver's hours of work will have much less room to manoeuvre. The maximum duty hours available to employers and drivers will drop by 15½ per cent.—that is, from 76 to 64i hours. In practical terms one of the six days presently available is lost.
This is felt only by the passenger side. The Freight Transport Association and the Road Haulage Association dissociate themselves from these remarks. They do not apply to them. But the opportunities for drivers to earn well in the season will be reduced both for themselves and for their employers. It is likely therefore, that more part-time employment and less full-time employment of drivers would ensue in some types of coach operation. In the present economic climate, many coach firms will be unable to retain as high a proportion of drivers through the winter as hitherto—not only for those reasons but for other reasons which perhaps it would not be proper for me to go into.
I think that one must explain that in this country, in the United Kingdom, there is an almost unique express network which the Government's deregulation of coach services has helped to develop. Personally, I think it is a very good thing. However, the longer break—and the noble Lord, Lord Underhill, touched on this—has now been reduced from five-and-a-half hours to four-and-a-half hours; whereas four hours was recommended by the committee. I am not quite sure but I believe that whereas in the five-and-a-half hours there was a 30-minute break, in the four-and-a-half hours there will be a 45-minute break. I gather that that poses certain operational problems. These concern mainly interchange facilities and congestion at certain of them. A derogation is under discussion at present to ease this problem. However, this regulation is likely to result, in a significant number of cases, in increased overall journey time.
I really have very little more to say, and I have not gone on for very long. The noble Lord. Lord Underhill, mentioned the tragic coach accident in the early hours of this morning. It could have been due to fatigue, but accidents do happen and I think that one can say absolutely that this is a human problem. From what I gather, the driver drove over a pothole on a motorway. Also I can say that the French opposite number of our transport association (which I believe is called the Fédération Nationale de Transport Routiére) say that there was no contravention of regulations and that the police are not taking up the matter at all. It comes back to a point that was raised in the other place by no less a person than the right honourable Mr. Michael Foot, who mentioned a passage in the Official Report of the other place of 25th June 1986 which (although I have not been able to find the reference) said that there was no clearly established connection between driving hours and fatigue. Mr. Foot referred to that as "drivel".
Lord Tordoff: My Lords, I am not sure that it is quite proper for the noble Lord to be quoting from the Official Report of another place, save only when a Minister is speaking.
Lord Teviot: My Lords, I thank the noble Lord, but I thought that it was quite all right to quote chapter and verse. However, be that as it may. I must apologise, but I can continue on my own on this subject.
I am glad that it has been established at last and is understood that accidents do not happen only at the end of a shift. Accidents can happen in the very early hours, as we see in this incident; and the noble Lord himself mentioned it. A great deal of research has gone into this but more research may be needed. I have long suspected that the whole thing has to with human error, which can happen at any time. I will conclude by saying that the passenger industry has had a very good year so far. This is the first major accident with any fatalities of any coach, not only in this country but elsewhere. Their record is extremely good. Also extremely good, I believe, is the record of the goods operators.
8.15 p.m.
The Earl of Caithness: My Lords, the noble Lord, Lord Underhill, chided me for not covering all the points which arose from these three draft regulations and the draft order, but I am sure that if I had tried to cover all the points the noble Lord would have said, "I beg to move that the noble Earl be no longer heard". And the noble Lord would have been quite right so to do. The noble Lord, Lord Underhill, said that this is going to cause tremendous problems for the drivers. My noble friend Lord Teviot said, "No, my Lords. It is going to pose tremendous problems for the operators". So I think the Government and the other member states have got it about right. It is not perfect for either side, but it is somewhere in the middle and I think we have a better working solution now than we had before.
Lord Tordoff: My Lords, will the noble Earl not agree that the important point is whether it has been got right for the travelling public and for the safety of the public at large?
The Earl of Caithness: My Lords, that is always uppermost in our minds. The noble Lord, Lord Underhill, quoted from a TGWU letter, I think, and said that these regulations were a fundamental change. They are not a fundamental change. It is solely because the proposals are so much in line with what was the situation in our 1968 Act that we have been able to get rid of the duplication and come under one set of regulations—which must be a preferable situation to operating under two distinct legislations, the EC regulation and that of our own Transport Act.
It is the removal of the hours of duty, the total duty hours, that has provided the very necessary flexibility which we all wanted to see for drivers to allow them to get home after work, where that was feasible, rather than spending the night in their cabs. Although the noble Lord, Lord Tordoff, said that we must have this back again, the moment we have it back it reduces the
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flexibility that we have now built into the system. I know that the noble Lord, Lord Underhill, supports me on the need for flexibility, because he said so at col. 473 of Hansard on 15th November 1984; but I shall not quote chapter and verse.
Lord Underhill: My Lords, the important point on flexibility was not to allow the drivers to get home and was not the question of the tour of duty, which is 12½ hours. It was the driving hours involved. That is to be considered as well. That is why we are prepared now to allow a certain amount of flexibility so long as there is proper enforcement and no abuse.
The Earl of Caithness: My Lords, I am coming on to enforcement in a minute. The noble Lord said that there had been no reply to a couple of examples given in another place. During the debate in the other place on 15th July, the honourable Member for Wigan, Mr. Stott, gave two examples of work patterns that he said might occur under the proposals. One of those involved a driver working from 9 a.m. one morning to 2.15 a.m. the following day, a 17¼ hour working day—16½ hours allowing for a break of 45 minutes. That would not be legal. It surprises me that the honourable Member made such a fundamental mistake as that.
The regulations will require a rest of 11 hours to be taken in every 24 hours. That may be reduced to nine hours three times a week provided that later rest periods are extended in compensation. The absolute maximum working day will be 15 hours, of which not more than 10 hours can be spent at the wheel, and three-quarters of an hour will be a break. This can happen three times a week at most, to be followed by an extended rest period. The right honourable member for Barnsley, Central, Mr. Mason, gave an example of a long week which, he said, could total 68½ hours driving over six days. In fact, that is wrong, too, in that not more than 56 hours may be spent driving in any one week, and not more than 90 hours in a fortnight. Also 68½ hours' duty is possible in six days, but it must be followed by over two days' rest—51 hours—so it could not happen every week. I hope tht that has cleared up those two misleading examples.
The noble Lords, Lord Underhill and Lord Tordoff, and my noble friend Lord Teviot mentioned enforcement. The department has 235 traffic examiners who checked half a million tachograph charts in 1985, and on top of this the police checked many more. This admirable effort on the ground is being further enhanced by a new high technology system for checking large numbers of charts automatically. This system is already in operation. So we are making progress on that front, and I hope that the noble Lord, Lord Tordoff, will be pleased with that.
The noble Lords, Lord Underhill and Lord Tordoff, also talked about fatigue. Fatigue is common to us all. I wonder how one would classify the duty hours in this House; I remember long hours when we were in Opposition, when the Labour Government were trying to take legislation through at the end of July. It happens to all governments. I think that the new system of a break after 4½ hours' driving is a satisfactory situation. In fact, it is a longer break than we had before. So it is an improvement. But of course

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during that period of break one has no control over what the driver is doing. He might be taking a sensible rest, he might be having a game of football, or seeing his girlfriend, which will probably be more fatiguing. But that is one of the things over which we have no control. The noble Lord, Lord Underhill, asked about a driver who was not driving 4½ hours a day. There is, of course, no provision for a break in such an instance because he is primarily not a driver, and that would be covered under his normal conditions affecting working hours which are a matter for the usual negotiations between employer and employee.
With regard to the TGWU letter of 3rd June, I can tell the House that Ministers have had several exchanges, letters and meetings with the unions. The Secretary of State met MPs and union officers on 3rd July. I shall see whether a copy of the letter can be placed in the Library. I shall also see whether a proper summary of the proposed changes for goods vehicles can be placed in the Library, if that is helpful to noble Lords.
Lord Carmichael of Kelvingrove: My Lords, I apologise for interrupting the noble Lord, and I have been sitting listening with great interest. Instead of putting up a list of changes, is it possible to state what the actual situation is? Drivers used to be able to know the old regulations fairly well, and it must be very confusing for drivers now. particularly when there are so many exemptions—quite legitimate ones—for farm vehicles, lifeboat vehicles and airport vehicles. Is it possible to have a small booklet which gives an indication, without it being binding in law, of the rules of the road for drivers? I believe that would help me as well.
The Earl of Caithness: My Lords, I shall see what we can do on that. I have a huge list of derogations with me, but I think it would perhaps test the patience of the House if I went through it word for word.
I turn to the question of what is left of the 1968 Act—a point raised by the noble Lord, Lord Underhill. All that is left are the provisions for drivers not covered by the EC rules. These are 10 hours' driving a day and 11 hours' duty. I am grateful to my noble friend Lord Stanley of Alderley for his thanks in regard to the agricultural vehicles and the RNLI; I think those are two important derogations of which we can be proud.
I think in summary, as I said in the beginning, it is perhaps not the perfect solution to have these four draft instruments before us, but it is a satisfactory step forward without endangering road safety, and I would recommend the House to accept them.
The Earl of Swinton: My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.
[The Sitting was suspended from 8.26 to 8.30 p.m.]

Financial Services Bill
House again in Committee.
Lord Terrington Lord Terrington moved Amendment No. 377A:
After Clause 165, insert the following new clause:
("Data Protection Act 1984.
.—(1) An order made under section 30 of the Data Protection Act 1984 (regulation of financial services etc.) shall include provision for restricting the rights of subject access to such records held by recognised self-regulation organisations as are specified in the order.").
The noble Lord said: This amendment is designed to ensure that SROs will be able to perform their investigatory duties without fear of falling foul of the Data Protection Act's provisions regarding a person's right to access any data held on an electronic database. The point is that the Data Protection Act allows certain exemptions to the normal rights of a data subject to access personal information held about them on an electronic database. Access to personal data held for the purpose of discharging statutory functions need not be granted if it would be likely to prejudice the proper discharge of those functions.
This exemption is necessary to permit authorities the right to gather information in the course of an investigation without fearing that the subject of their inquiries will demand access. The Data Protection Act specifically exempts data held for protection against or the detection of crime and uses Section 30 to extend this to cover other statutory duties. The problem is that investigations by the Stock Exchange's surveil-lance division into breaches of its membership rules could be compromised if a data subject demanded access to all personal information held on a Stock Exchange database. Such access could lead to the person being investigated to destroy or alter evidence prior to a disciplinary hearing.
At present the Stock Exchange could apply for an exemption on the basis that it was performing statutory duties. This will not be possible, however, when the Financial Services Bill comes into force. Under its terms SROs will not be performing statutory duties per se when they exercise supervision of their members and will not be technically eligible to claim an exemption under the Data Protection Act.
I understand that discussions have been taking place about this matter with the Department of Trade and Industry and the Home Office and, as this is in the nature of a probing amendment, I would ask the Government to give an undertaking to consider the matter further and perhaps to come up with their own amendment at a later stage in the Bill. I beg to move.
Viscount Bridgeman: I must declare an interest: I am a member of a stockbroking partnership. The surveillance division of the Stock Exchange has recently been expanded and is absolutely central to the self-regulatory role. It will totally negate its functions if, for example, a data subject under surveillance is able in effect to have access to his or her own files, and I would very much hope that the Minister will remove this anomaly between the Data Protection Act and this Bill.
Lord Seebohm: I should like to make a very brief intervention on this amendment because I have been in the City for a very long time and I believe that the

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SROs are bound to collect an enormous amount of very confidential information. They cannot help it; they have got to do it, and I think that every protection that is possible must in fact be implemented.
Lord Brabazon of Tara: The noble Lord, Lord Terrington, has raised a very important point in this amendment. The Data Protection Act contains provisions in Section 30 for an order to be made which excludes from the subject access provisions of that Act to personal data kept in connection with the protection of the public from financial loss due to the malpractice of those concerned in the provision, inter alia, of financial services.
The noble Lord, Lord Terrington, has suggested that without such an exclusion a person who suspected that he was under surveillance by a regulatory authority could use his right of access under the Data Protection Act to find out what information was known about him. As the noble Lord said, he could then cover his tracks and possibly avoid conclusive proof of his malpractice being uncovered.
It has been represented that the wording of Section 30 should explicitly refer to records kept by self-regulating organisations about their members, as some of them feel that the present text of Section 30 may not achieve this. These SRO records may contain information of the sort just mentioned, which ought not to be disclosed to individuals in case it helps them to cover their tracks.
In the light of this evening's exchanges and the contributions by my noble friend Lord Bridgeman and the noble Lord, Lord Seebohm, I shall certainly consider whether there is a case for an amendment. I shall return to the point on Report and, with that undertaking, I hope that the noble Lord, Lord Terrington, will feel able to withdraw his amendment at this stage.
Lord Terrington: I very much appreciate the support that I have received from various quarters of the Committee and I am grateful for the assurance that the noble Lord, Lord Brabazon, has given to me. I shall most certainly beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Clause 166 agreed to.
Clause 167 [False and misleading statements]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 377B:
Page 136, line 13, leave out subsection (1).
The noble Lord said: I beg to move Amendment No. 377B standing in my name and that of my noble friend Lord Morton of Shuna. This is in the nature of a probing amendment into Clause 167(1). We are here dealing with false and misleading statements. I understand fully that if somebody furnishes information which he or she knows to be false or misleading in a material particular, he or she commits an offence. Perhaps I may just ask the Committee to note that the word "commits" has two "m"s rather than one "m" as it is printed at this point in the Bill.
What I am a little worried about is the expression,
"recklessly furnishes information which is false or misleading in a material particular".
I wonder whether the noble Lord can very kindly give us some sort of definition of what on earth this means. I beg to move.
Viscount Colville of Culross: I think the noble Lord, Lord Williams, has got a point. There is a Bill running parallel to this one called the Public Order Bill, and in that there has been an abandonment of the expression "reckless", because the Law Commission has investigated this matter and has come to the conclusion that the case law on it at the moment is a little obfuscated. The Law Commission has gone over to the expression "is aware that". It would be an amazing thing, would it not, supposing that we are talking about the same sort of recklessness—though we may not be—that we have in the same Session at the same time two Bills containing two entirely inconsistent phrases?
Lord Lucas of Chilworth: I am grateful to the noble Lord, Lord Williams, for telling us that he was in fact probing. I read his amendment rather differently so I shall have to abandon the notes that I have in front of me. In the light of the reminder to the Committee of my noble friend Lord Colville that we have another extremely important Bill passing through Parliament which abandons these words, the Committee may find it agreeable if I say that I should like to look at this.
The word "knowingly" is I am sure quite understood. By "reckless", we mean not caring whether true or false; so carelessly as to be culpable of a falsity. I do not know whether that helps the noble Lord. I suspect that it probably does in the light of what I have just said, but we really ought to have a look at it. On the other hand, if one uses the phrase "is aware that" in a way that means "knowingly", on its own and quite separate for from anything else that may be written alongside, it is very much weaker.
I am advised that in the context of the Public Order Bill, to which noble friend referred, it is quite different. However, having made the offer, I would not want to withdraw it. In the light of what my noble friend has said, we might have a look at it, but that is essentially what we mean by the term "reckless".
Lord Williams of Elvel: I am most grateful to the noble Lord for his response, which I thought was perhaps more encouraging before he received a message from a carrier pigeon than afterwards. My noble friend Lord Morton of Shuna, who is associated with me in this amendment, points out that the word "reckless" is differently interpreted in Scotland from England and Wales. Therefore I willingly accept the noble Lord's assurance that he will have another look at the wording, and, in the light of that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 167 agreed to.
Clause 168 [Prosecutions]:
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 379:
Page 137, line 19, after ("(b)") insert ("in Scotland except by or with the consent of the Secretary of State or the Lord Advocate; or (c)")
The noble Lord said: This amendment is aimed at correcting the omission from Clause 168 of any mention of Scotland. There may be an answer, so it is in the nature of a probing amendment, but Clauses 114 and 154. unlike other clauses, do not stage where the action is to start. Other clauses say that in relation to Scotland it has to start in the High Court, where it runs in the name of the Lord Advocate but, as the noble Lord opposite will be well aware, is started by a petition in the name of the procurator fiscal. If it is a sheriffs court action, which would be necessary if it was a summary action, it would again be in the name of the procurator fiscal.
Having had the honour of serving four different Lord Advocates in the Crown Office, I am quite aware that the Lord Advocate can issue instructions but I am also aware that in certain cases such as prosecutions by the Customs and Excise these are done by the Customs and Excise and not by the Lord Advocate. Is it the intention that the permission of the Lord Advocate or the Secretary of State will be necessary, or in Scotland can offences be prosecuted by anybody who has authority to prosecute for offences?
8.45 p.m.
Lord Lucas of Chilworth: Would that my noble and learned friend the Lord Advocate were here! However, he advises me—and the noble Lord, Lord Morton of Shuna. will accept that I repeat the advice which has been given to me and offer no further answer—that as a matter of Scottish constitutional law all prosecutions in Scotland are initiated by or with the consent of the Lord Advocate.
Lord Morton of Shuna: The Lord Advocate, who is the premier law officer in Scotland, controls the procurators fiscal but I am not sure that constitutionally that is right. The procurator fiscal in his own area is entitled to raise his own prosecution unless there is an instruction of a certain type given by the Lord Advocate that he may not do so. Does the noble Lord mean that the Lord Advocate will give an instruction? If so, would it not be better just to advertise the existence of Scotland at least in Clause 168 and to say specifically that prosecutions in Scotland are not to take place without the consent of the Lord Advocate? If that is not objectionable to the Government I should be perfectly prepared to withdraw the amendment and produce another at Report stage.
Lord Lucas of Chilworth: I rather like the last remark of the noble Lord, Lord Morton of Shuna. Perhaps he would like to do that and then I can consult with my noble and learned friend the Lord Advocate. That might produce a far more satisfactory reply than my guessing at it.
Lord Morton of Shuna: I am much obliged, and, subject to that proviso, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 379 and 380 not moved.]
Clause 168 agreed to.
On Question, Whether Clause 169 shall stand part of the Bill?
Lord Morton of Shuna: I rise to speak in order to get more information, which I am sure we shall get from the Government, on the legal question of where the onus of proof is to lie under subsection (3). Is a partner to have the onus of proving that he is ignorant or that he attempted to prevent the commission of the offence; or is the prosecution to prove that he was not ignorant and did not attempt to prevent the offence? It is a rather serious matter. It is very important and it is far from clear.
"A partner who is proved"—
proved by whom?
Lord Lucas of Chilworth: I hope that I shall be able to help the noble Lord, because I was a little surprised when I saw that he and his noble friend had given notice that they wished to oppose the Question, That Clause 169 shall stand part of the Bill. It is a technical clause—in this the noble Lord is absolutely right. It contains the general provisions to enable proceedings in respect of offences to be brought against individual directors, officers or partners, as well as against their respective organisations. I think the noble Lord will accept that as being correct.
The onus of proof will lie on those who bring the charge—I think the term is the prosecution. It is not the other way round. This is probably the defence for which the noble Lord is looking.
Lord Morton of Shuna: That is all very well but it does not say so in the Bill. As the noble Lord will be fully aware, it is quite incompetent to refer in court to anything that is said in any debate in either Chamber, and therefore this remains a matter for a court's interpretation unless it is made clear in the Bill which way the onus lies. It could be interpreted that it is for the partner to prove a defence. If that is not intended, then it should be made clear.
Lord Lucas of Chilworth: I do not know whether I can help the noble Lord. The onus of proof of the offence is on the prosecution. The partner, or whoever it is, has to prove that he should have known. He will have to prove that, and I understand that such is a common form of provision. However, I am not sure that I am right. I am not of the legal profession. I would prefer to take further advice. It would be sensible if I were to write to the noble Lord with the interpretation that we place on that provision. If he wishes to pursue the matter further in your Lordships' House, then he will have the opportunity to do so.
Lord Morton of Shuna: I am much obliged. I look forward to receiving that letter, a copy of which will no doubt be made available in the Library for anybody else who may be interested. The primary point is that to prove ignorance is very difficult for a prosecution. It could well be interpreted that that was a defence rather than a prosecution onus.
Clause 169 agreed to.
Clause 170 agreed to.
Clause 171 [Service of notices):
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 381:
Page 139, line 39, at end insert—
("(d) in the case of an appointed representative, be given to or served on his principal.")
The noble Lord said: This is a further amendment in the group beginning with Amendment No. 114 which makes technical improvements to the regime for appointed representatives. This simple amendment makes it clear that to serve a document on an appointed representative, it is sufficient to serve it upon his principal. I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 382:
Page 140, line 4, after ("or") insert ("a person certified by a").
The noble Lord said: This amendment was spoken to with Amendment No. 79. I beg to move.
On Question, amendment agreed to,
Clause 171, as amended, agreed to,
Clause 172 [Regulations, rules and orders]:
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 383:
Page 140, line 26, after ("State") insert ("or a self-regulating organisation").
The noble Viscount said: This is a common form, technical provision as well, in subsection (3), and of course it is absolutely right as it stands that the regulations, rules and orders made by the Secretary of State may indeed make different provisions for different cases, because there will be an enormous number of different cases for which provision will have to be made.
The problem is that Clause 172 deals with rules made under the Act. It is not only the Secretary of State who will make rules under the Act. The SROs will be making rules, and there are references to those in Clause 8(1) and in Clause 10(3). The RPBs will be making rules. That is in Clause 115(1)(b), and there is another reference in Clause 18(2)(b). Indeed, there are other references with which I shall not bore the Committee at the moment.
There is no delegation that provides, for instance, under Clause 96 of the Bill, that those rules are effectively part of the functions of the Secretary of State. They are separate exercises provided for in the Bill by separate bodies called SROs and RPBs—and they are rules. I would have thought—and I invite the Committee to consider this possibility—that SROs, of which there will not be all that number, will be covering a substantial different number of investment activities. Therefore, they also will want a statutory power to make rules that differ for different cases. If Clause 172(3) stands as drafted, there will be a possible doubt whether they can do that, because that provision applies only to rules made by the Secretary of State under the delegation powers by the SIB. Would it not be better if we were to provide for the rules to be made by those other people also to provide for different rules for different cases? I beg to move.
Lord Lucas of Chilworth: I am grateful to my noble friend for his explanation of the purposes of his amendment. As he explained it, and as I understand his amendment, it seeks to extend the provisions of subsection (3) so that rules and regulations made by an SRO may make different provisions for different cases. However, Schedule 2, paragraph 1(2), requires an SRO covering investment businesses of different kinds to have appropriate rules and practices. Under the Bill, SRO rules will have to be compared with rules made by the Secretary of State or by the designated agency.
It will be up to the SROs seeking recognition to make such changes to their constitutions as are necessary to empower them to make rules meeting the recognition requirements. There is therefore no need for the express provision suggested in the amendment.
I agree with my noble friend that SROs will need to have an ability. However, they will not be making rules under the Bill, and it is up to them to make sure that they have the necessary rule-making powers. They can then be expected to need such a power. In the circumstances that I have outlined—and I listened carefully to what my noble friend had to say—I can assure my noble friend that his amendment is unnecessary. I ask him whether he would care to withdraw it.
Viscount Colville of Culross: Nothing would give me greater pleasure than to withdraw my amendment if it is unnecessary. I believe that rather than being a matter of interpretation for the courts, this is a matter for the interpretation, first of the department and then of the SIB. If my noble friend is assuring me—and perhaps it would be kind if he would confirm this—that there will be no problem for the SROs to make rules that differentiate between different circumstances and different classes, and to find that they are accepted, then there is absolutely no reason to put anything more in the Bill. However, it is an administrative matter. If my noble friend will confirm exactly what he means, then we can certainly leave the matter there.
Lord Lucas of Chilworth: Let me make it clear what I do mean. SROs will be making rules under their own constitutions. They must have rules as a condition for recognition. The difference is that they will not be making rules under the Bill, but they will certainly have to make rules under their own constitutions. So long as those rules are at least equivalent to the rules which the SIB, or the Secretary of State or the designated agency, make, then they can do anything they like. They can therefore provide for the various differences that the noble Viscount seeks an assurance will be covered.
Viscount Colville of Culross: I am grateful to my noble friend. That is entirely clear and I am sure that the department and the SIB will be held to that. In those circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 384 not moved.]
Clause 172 agreed to.
9 p.m.
Clause 173 [Interpretation]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 385 to 389:
Page 141, line 5, at end insert—
(" "certified" and "certification" mean certified or certification by a recognised professional body for the purposes of Pan I of this Act;").
Page 141, line 29, leave out ("16") and insert ("Professional bodies").
Page 141, line 38, leave out ("16") and insert ("Professional bodies").
Page 142, line 8, at end insert—
(" "overseas investment exchange" and "overseas clearing house" mean a recognised investment exchange or recognised clearing house in the case of which the recognition order was made by virtue of section (Overseas investment exchanges and clearing houses) above;").
Page 143. line 12, leave out ("16") and insert ("Professional bodies").
The noble Lord said: Amendment No. 385 was spoken to with Amendment No. 79, as were Amendments Nos. 386, 387 and 389. Amendment No. 388 was spoken to with Amendment No. 111. With the leave of the Committee, I move these amendments en bloc.
Lord Hacking Lord Hacking moved Amendment No. 390:
Page 143, line 32, after ("ccn1.") insert ("or more").
The noble Lord said: The definition of "controller" is to be found in Clause 173(3). In paragraph (a) the definition of the controller is expressed in relation to bodies corporate. In paragraph (b) it is expressed in reference to unincorporated associations. However, the test in paragraph (a) is the power to control the exercise of 15 per cent. of the voting power, whereas in paragraph (b) the test is the power to control 15 per cent. or more of the voting power.
Clearly the tests in paragraphs (a) and (b) are different and I suggest that the more appropriate test is that in paragraph (b); namely, 15 per cent. or more. For that reason, I ask the Committee to agree that the words "or more" should be included after 15 per cent. in paragraph (a). I beg to move.
Lord Brabazon of Tara: Once again I am grateful to the noble Lord, Lord Hacking, for having brought this matter to our attention. I understand that the Law Society has also been concerned with this.
The amendment corrects the defect in the definition of "controller" for the purposes of the Bill. As it stands, broadly speaking a person is a controller of a body corporate if he controls 15 per cent. of the votes in that body corporate but apparently not if he controls more than 15 per cent. That would be absurd and I, therefore, gladly accept the amendment, which corrects this defect.
Lord Hacking Lord Hacking moved Amendment No. 390A:
Page 144. line 31, at end insert—
("() In this Act references to currency of any country or territory other than the United Kingdom include ECUs, Special Drawing Rights and any other basket or combination of currencies or similar international monetary asset.").
The noble Lord said: I have a solemn announcement to make to the Committee. This is the last of my
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many amendments and I should like to thank the Committee for dealing so patiently with them I also record my personal indebtedness to the Company Law Committee of the Law Society for the tremendous care which it took over this Bill and in considering so many detailed matters in it, several of which have been accepted by the Government and to many of which the Government have kindly agreed to give further consideration.
This amendment seeks to amend Clause 713. The Bill refers in various places to investments which consist of currency. For example, in paragraph 7 of Schedule 1, on page 147, there is reference to,
"Options to acquire … currency of the United Kingdom or of any other country or territory."
Similarly, in paragraph 25(1)(a) of Schedule 1 there is a reference to,
" 'property' includes currency of the United Kingdom or any other country or territory".
It is now becoming common for certain investment transactions to be in ecus, which is the European unit of account assessed by reference to a basket of currencies, or in Special Drawing Rights. Neither of these is a currency of any particular territory and it is for that reason that they do not, thus far, fall under the terms of the Bill. That is why I ask the Government to agree to this amendment. I beg to move.
Lord Williams of Elvel: This is an extremely interesting amendment from the noble Lord, Lord Hacking, and I understand that it is inspired by the Law Society. At the risk of resuming the exchange we had before dinner I remind the noble Lord. Lord Hacking, that a European unit of account is somewhat different from the ecu, which is the European Currency Unit. The European unit of account was a device used in the 1970s in which to denominate certain bonds which had, in certain respects, a similarity to the European Currency Unit but had no official standing within the Community. The European Currency Unit does have official standing within the Community, because it is the currency or the unit in which the Community budget and other expenditure is denominated.
Having said that, I confess that I am torn in two directions. There is merit in trying to specify in the Bill what is meant by a currency. On the other hand, if there is no definition of a currency it will be for the court to decide the currency. My own belief would be that I am drawn rather more to the latter solution than to the former solution. I say that because I believe that other units of account will be devised in the future about which we do not know and to put this into primary legislation, and then have an amendment to primary legislation, would be a complicated measure for any future Government to introduce.
I find I have difficulty in grasping the meaning of the expression "similar international monetary asset". I am not sure whether gold could be considered a similar international monetary asset because a number of countries keep their reserves partially in gold. I am worried about the word "basket" because that is a form of jargon that is used in the trade, but I do not think that it has any legal significance; I think it is a combination that the noble Lord is getting at, and that is probably better.

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Special Drawing Rights are, in my view, quite different. It may well be that the attempts that were made in the past to link certain issues to Special Drawing Rights could be revived. So far as I remember there were about three or four Euro issues linked to Special Drawing Rights in the late 1970s. They were not successful but nevertheless there could be a revival of that type of market.
I am really saying that if we try to define "a currency" in this Bill we shall be led into some rather arcane discussions about not only what is the current practice in the Euro-markets but what will be the future practice in the Euro-markets, because having defined "a currency" or what could be referred to as a currency in the Act, I think we shall find ourselves led into speculation about the future nature of the Euro-currency markets in which I myself would not be competent to engage. So while I have great sympathy for what the noble Lord, Lord Hacking, is trying to achieve, I think that it is probably better achieved by leaving the courts to decide at any particular time what is a currency.
Lord Hacking: Before the noble Lord replies, perhaps I may say that, as a lawyer listening to a noble Lord who has considerable experience of the operation of the City, I certainly shall not argue with him as to whether an ecu is not correctly described as a European unit of account. However, is there not a problem here! If the Act restricts,
"references to currency of any country or territory other than the United Kingdom"
and if it is a fact that there are other forms of "currencies" —I use that word in inverted commas because I am not seeking to define the word but other units of value that are used in transactions—would it not be sensible some way or other to deal with the difficulty? I fully accept that my amendment may not accurately deal with the problem, but I urge the Committee to recognise that there is a problem.
Lord Williams of Elvel: I am most grateful to the noble Lord, Lord Hacking, for that intervention because I think that he has a very serious point. I suspect that when faced with the wording,
"currency of any country or territory"
the courts might not accept some of the instruments that the noble Lord, Lord Hacking, has mentioned; and I suspect that it may be right for the wording to be adjusted in some way—perhaps not in the way that the noble Lord has put forward—to accommodate securities which are issued in units of account of one form or another which do not happen to be currencies of any particular country or territory. In that sense, I support the noble Lord.
Lord Brabazon of Tara: We have had a most interesting exchange of views on this amendment and I am grateful to the noble Lord, Lord Hacking, for having raised the point. I think that the noble Lord, Lord Williams, will be happy to know that I am not going to accept this amendment outright and I did not intend to do so even before the noble Lord made his most useful contribution. I accept that there is a
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problem. We think that matters of this kind may already be caught by the definition of "contracts for differences", but we are not sure that the matter is beyond doubt. In fact, the noble Lord, Lord Williams, shakes his head, in which case he increases my doubt. Therefore I am certainly willing to consider this point and to undertake if necessary to bring forward an appropriate amendment on Report. I hope that on that basis the noble Lord, Lord Hacking, will feel able to withdraw his amendment for the moment.
Lord Hacking: I am more than happy to withdraw it. Since this is the last time that I intend to intervene during this Committee stage, perhaps I may just ask one general question of the noble Lord. The Bill as it will be presented to the House has been radically changed through the many amendments that have been moved thus far, and there are further matters to be considered. I think that it would greatly assist not only Members of this Committee but those outside the Chamber who have been giving close scrutiny to this Bill in a helpful manner if the noble Lord could indicate when the Bill will be reprinted, so that the next stage of discussions can go forward. The position is that we are coming up to the long Recess—I hope that it will be a long Recess before our return—and there will be an appreciable gap between the completion of this Committee stage and Report.
In view of all the amendments, many of which came at a very late stage, one wants—I am using the term "one", which normally I do not like to use; but I want to make my expressions as neutral as possible—to see the Bill reprinted as soon as possible, so that we may consider it and so that there will be plenty of time for those who wish to table amendments at Report stage to consider its terms. The horror would be that it would not be reprinted until two weeks before the Report stage.
Lord Williams of Elvel: Before the noble Lord decides what to do with his amendment, perhaps I may echo his remarks about the reprinting of the Bill. Because I think it would be of use to the noble Lord, Lord Hacking, I should also like to say that it would help us enormously if we could have a consolidation, as it were, of Notes on Clauses and Notes on Amendments, so that in the new, reprinted Bill we have a clear idea of the Government's intention on each clause.
Lord Hacking: Perhaps I may echo those views. I have spoken rather far from my amendment. I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Clause 173, as amended, agreed to.
9.15 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 391:
After Clause 173, insert the following new clause:
("Gibraltar.

.— (1) Subject to the provisions of this section, section 30, 53(l)(c), 78 and 111(2)(c) and (d) above shall apply as if Gibraltar were a member State.

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(2) References in those provisions to a national of a member State shall, in relation to Gibraltar, be construed as references to a British Dependent Territories citizen or a body incorporated in Gibraltar.

(3) In the case of a collective investment scheme constituted in Gibraltar the reference in subsection (3)(a) of section 78 above to a relevant Community instrument shall be taken as a reference to any Community instrument the object of which is the co- ordination or approximation of the laws, regulations or administrative provisions of member States relating to collective investment schemes of a kind which satisfy the requirements prescribed for the purposes of that section.

(4) The Secretary of State may by regulations make such provision as appears to him to be necessary or expedient to secure—

(a) that he may give notice under subsection (2) of section 78 above on grounds relating to the law of Gibraltar; and

(b) that this Act applies as if a scheme which is constituted in a member State other than the United Kindom and recognised in Gbiraltar under provisions which appear to the Secretary of State to give effect to the provisions of a relevant Community instrument were a scheme recognised under that section.").

The noble Lord said: This new clause makes provision for investment businesses in Gibraltar. It treats Gibraltar as if it were a member state of the Community in its own right. We believe that such a course is the only one that is consistent both with Gibraltar's position under the Treaty of Accession —since for financial services Gibraltar is effectively part of the European Community—and with Gibraltar's constitution under which it enacts its own legislation. The practical effect of this new clause will be most important for life assurance and unit trusts.
The Gibraltar authorities have yet to implement the European Community establishment directives on insurance. They are currently in the process of preparing legislation, and they are discussing this with the Department of Trade and Industry. I should make it quite clear that we do not intend to implement this clause so far as insurance is concerned—and the most important clause for this purpose is Clause 111 which would otherwise prohibit the advertising of the investment contracts of a Gibraltar insurer in the United Kingdom—until we are satisfied that Gibraltar has a system of insurance supervision which complies with the Community directives.
Equally there is as yet no legislation in Gibraltar —and in this case there is none as yet in the UK—to implement the new unit trusts UCITS directive, for which implementation is due by 1989. Gibraltar unit trusts will therefore obtain the benefits of Clause 78 only when Gibraltar has implemented the UCITS directive.
I hope the Committee will accept therefore that this new clause provides in the long run a proper place for Gibraltar consistent with our Community obligations within the United Kingdom financial services scene, while preserving protection for United Kingdom investors particularly in the transitional period before Gibraltar has enacted the necessary legislation. I beg to move.
Lord Marshall of Leeds: Before commenting I should like to declare an interest as I am the chairman of an insurance company and of a unit trust company.
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Over the past few years it has been well known that a number of life assurance companies have been established in Gibraltar and have offered their products on the London market. Investors in those policies have had no protection whatsoever under United Kingdom insurance companies legislation. In the case of one company, Signal Life, many people in this country have suffered considerable financial loss.
The Association of British Insurers is anxious therefore that the new system of investor protection should provide adequate protection against offshore insurers. To a large extent, that is achieved by Clause 111,
"Restriction on promotion of contracts of insurance".
but Gibraltar is a special case.
For the purposes of financial services Gibraltar is treated under European Community law as if it were part of the United Kingdom. The amendment seeks to overcome that problem by treating Gibraltar as if it were a member state. Because of the constitutional position the Association of British Insurers accepts that that is perhaps the only way to deal with the problem and that there is no practical alternative.
I should welcome an assurance that it is not intended—I think this is my noble friend's intention—to apply Clause 30 until the DTI is satisfied that Gibraltar has a system of insurance supervision which complies with Community directives on insurance and that the standards and quality of insurance supervision in Gibraltar are also adequate. I think it was my noble friend's intention to say that was the situation. I should welcome the amendment if he can deal with that matter when he replies.
Lord Williams of Elvel: It was interesting to hear the noble Lord, Lord Marshall of Leeds, on the question of insurance, because Gibraltar in recent years has become what I would call a financial haven. It is not just a question of insurance companies; banks and other organisations have set up under what I take to be Gibraltar law.
For one moment when the noble Lord referred to the treaty I thought that he was going to refer us to the Treaty of Utrecht, but I understand that we are talking about the Treaty of Rome rather Utrecht.
Can the noble Lord tell us, in the light of all this, whether it is the policy of the British Government to encourage offshore financial centres, such as Gibraltar and indeed the Channel Islands have become, or whether it is the policy of the Government to discourage them? If so, are there any special regulations that this Bill will, or may, introduce in respect of the Isle of Man?
Lord Lucas of Chilworth: To respond quickly to my noble friend Lord Marshall of Leeds, I am sorry if I did not explain the matter sufficiently clearly. The implementation of the directives is a matter for the Gibraltar authorities. As with anywhere in the Community, there is a Community obligation to ensure that the insurance supervision regime is carried out effectively. The Gibraltar authorities are, of

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course, consulting my department about the practical arrangements for so implementing the directives.
As to the position of other offshore United Kingdom dependencies such as the Isle of Man and the Channel Islands, the noble Lord asked specifically whether it was the Government's policy to encourage offshore centres. This Bill does not seek to encourage or to discourage offshore controls or centres. It seeks only to protect the United Kingdom investor. It is perhaps a little difficult to answer his question specifically. The only way in which I can reply sensibly is by using a phrase that I used earlier this afternoon. We believe in open and free trading, provided that it is fair, in regard to manufactured goods and also in regard to financial services. We have sought always to promote wider trade in financial services wherever it may be. The Isle of Man and the Channel Islands are treated under the Bill as though they were foreign countries; that is, businesses from there must satisfy exactly the same criteria as businesses from anywhere else or anyone else, seeking to become authorised. There are no special privileges so far as the Isle of Man and the Channel Islands are concerned.
Lord Williams of Elvel: I am grateful to the noble Lord for his explanation. We shall obviously have to look at what he said to see whether we want to come back to it. I am slightly surprised that the Isle of Man is treated as a foreign country for the purposes of the Bill. If, however, the noble Lord says it is, so be it.
Lord Lucas of Chilworth: I should perhaps make the position even more clear. The Isle of Man and the Channel Islands, unlike Gibraltar, are not covered by the Treaty of Rome for these purposes. Accordingly, they have to be treated like any other non-Community territory. This perhaps makes the position a little more clear.
Lord Marshall of Leeds: I am rather unclear as to how the position will lie. My concern is that people in this country who are investing their hard earned savings in life assurance companies which are located and domiciled offshore in places like Gibraltar should have, so far as possible, the fullest investor protection rights—rights, so far as possible, equivalent to rights that they could achieve in this country either under this Bill (or this Act when it becomes an Act) or under any other insurance protection legislation on the statute book. One of the great difficulties is that in the past this has not happened and has led to the losses to which I have referred with the Signal Life Assurance Company because they were not answerable under UK legisaltion. I am trying to ensure that investors in this country will be accorded a similar protection.
Before I sit down, perhaps I can answer the point made by the noble Lord, Lord Williams of Elvel. The offshore insurance industry is not generally confined to life insurance companies in places such as Gibraltar. The majority of offshore insurance business is carried on for tax purposes in offshore locations and domiciles generally by reinsurance companies to whom reinsurance from the British market is assigned. That
816
is purely a question of fiscal convenience. However, that is another question.
Lord Lucas of Chilworth: It is not for me to answer questions addressed to the noble Lord, Lord Williams. Perhaps he would like to answer now.
Lord Williams of Elvel: I am very well aware of the reinsurance arrangements that are made in tax havens, both by companies in captive reinsurance and by insurance companies who form their own reinsurance arrangements.
My difficulty was that I also believe there are non-qualifying policies issued by insurance companies who are domiciled in places such as the Cayman Islands, Bermuda and Gibraltar. Our concern was that such policies should be given the same protection—as I think the noble Lord, Lord Marshall of Leeds, was arguing—if they are sold to United Kingdom residents as is provided under the Bill. If this clause achieves that, then that is fine. If it does not, then it is not fine.
Lord Lucas of Chilworth: In an attempt to give my noble friend the reassurance for which he is looking, I wonder whether—I say this in the nicest possible way—he will carefully study in Hansard what I have already said. We seek to protect United Kingdom investors. The new clause will not be brought into operation until we are satisfied about the Gibraltarians having a satisfactory system of supervision in operation. That is the point that my noble friend wants to take home with him. I hope that helps the Committee.
On Question, amendment agreed to,
Clauses 174 to 176 agreed to.
Schedule 13 [Transitional provisions]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 392 to 400:
Page 206, line 23, leave out from ("that") to end of line 43 and insert—
("any of the requirements of section 18(2A) of this Act or paragraphs 2 to 6 of Schedule (Requirements for recognition of professional body) to this Act are not satisfied he may in accordance with this paragraph make a recognition order under section 18 of this Act ("an interim recognition order") notwithstanding that all or any of those requirements are not satisfied.
(2) The Secretary of State may, subject to sub-paragraphs (2A) and (2B) below, make an interim recognition order if he is satisfied—

(a) that the applicant proposes to adopt rules and practices and to make arrangements which will satisfy such of the requirements mentioned in sub-paragraph (1) above as are not satisfied;

(b) that it is not practicable for those rules, practices and arrangements to be brought into effect before the date on which section 3 of this Act comes into force but that they will be brought into effect within a reasonable time thereafter, and

(c) that in the meantime the applicant will enforce its existing rules in such a way, and issue such guidance, as will in respect of investment business of any kind carried on by persons certified by it (or by virtue of paragraph 4A below treated as certified by it) afford to investors protection as nearly as may be equivalent to that provided as respects investment business of that kind by the rules and regulations under Chapter V of Part I of this Act.

(2A) Where the requirements which are not satisfied consist of or include those mentioned in paragraph 2 of Schedule (Requirements for recognition of professional body) to this Act as application for an interim recognition order shall be accompanied by—

(a) a list of the persons to whom the applicant proposes to issue certificates for the purposes of Part 1 of this Act; and

(b) particulars of the criteria adopted for determining the persons included in the list: and the Secretary of State shall not make the order unless it appears to him that those criteria conform as nearly as may be to the conditions mentioned in that paragraph and that the applicant will, until the requirements of that paragraph are satisfied, have arrangements for securing that no person is certified by it (or by virtue of paragraph 4A below treated as certified by it) except in accordance with those criteria and for the effective monitoring of continued compliance by those persons with those criteria.

(2B) Where the requirements which are not satisfied consist of or include that mentioned in paragraph 6 of Schedule (Requirements for recognition of professional body) to this Act, the Secretary of State shall not make an interim recognition order unless it appears to him that the applicant will, until that requirement is satisfied, take such steps for complying with it as are reasonably practicable.").
Page 206, line 45, after second ("the") insert ("practices and").
Page 207, line 4, after ("rules") insert (", practices").
Page 207, line 10, after ("rules") insert (", practices").
Page 207, line 13, leave out ("and arrangements, or other rules") and insert (". practices and arrangements, or other rules, practices").
Page 207, line 22, after ("rules") insert (", practices").
Page 207, line 25, after ("rules") insert (", practices").
Page 207, line 27, leave out ("of subsection (2)(b) and (c) of that section") and insert ("mentioned in sub-paragraph (1) above.").
Page 207, line 30, at end insert—
("Interim authorisation by recognised professional bodies
4A.—(1) If at the time when an interim recognition order is made in respect of a professional body that body is unable to issue certificates for the purposes of this Act, any person who at that time is included in the list furnished by that body to the Secretary of State in accordance with pararaph 4(2A)(a) above shall be treated for the purposes of this Act as a person certified by that body.
(2) If at any time while an interim recognition order is in force in respect of a professional body and before the body is able to issue certificates as mentioned in sub-paragraph (1) above the body notifies the Secretary of State that a person not included in that list satisfies the criteria of which particulars were furnished by the body in accordance with paragraph 4(2A)(b) above, that person shall, on receipt of the notification by the Secretary of State, be treated for the purposes of this Act as a person certified by that body.
(3) If at any time while an interim recognition order is in force in respect of a professional body it appears to the body—

(a) that a person treated by virtue of sub-paragraph (1) or (2) above as certified by it has ceased (after the expiration of such transitional period, if any, as appears to the body to be appropriate) to satisfy the criteria mentioned in sub-paragraph (2) above; or

(b) that any such person should for any other reasons cease to be treated as certified by it; it shall forthwith give notice of that fact to the Secretary of State and the person in question shall, on receipt of that notification by the Secretary of State, cease to be treated as certified by that body.

(4) Where by virtue of this paragraph any persons are treated as certified by a recognised professional body the requirements of paragraph 2 of Schedule (Requirements for recognition of professional body) to this Act so far as relating to the retention by a person of a certificate issued by that body and the requirements of paragraph 4 of that Schedule shall apply to the body as if the references to persons certified by it included references to persons treated as certified.").
The noble Lord said: Amendments Nos. 392 to 400 have already been spoken to with Amendment No. 79. With the leave of the Committee, I should like to move them en bloc.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 401:
Page 208, line 36, at end insert—
(" .—(1) Subsection (7) of section 80 of this Act shall not apply to a scheme which is in existence on the date on which this Act is passed if—

(a) the units under the scheme are included in the Official List of The Stock Exchange and have been so included through- out the period of five years ending on the date on which this paragraph comes into force;

(b) the law of the country or territory in which the scheme is established precludes the participants being entitled or the operator being required as mentioned in that subsection; and

(c) throughout the period of five years ending on the date on which the application is made under that section, units under the scheme have in fact been regularly redeemed as mentioned in that subsection or the operator has in fact regularly ensured that participants were able to sell their units as there mentioned.

(2) The grounds for revoking an order made under section 80 of this Act by virtue of this paragraph shall include the ground that it appears to the Secretary of State that since the making of the order units under the scheme have ceased to be regularly redeemed or the operator has ceased regularly to ensure their sale as mentioned in sub-paragraph (1)(c) above.").
The noble Lord said: I beg to move Amendment No. 401, which I have to confess is very largely a technical amendment. It widens the scope of eligibility for applying for recognition under Clause 80 to include such open-ended investment companies as meet its requirements. Clause 80 is intended to enable foreign schemes which could not apply for Clause 78 or Clause 79 recognition to apply directly to the designated agency for recognition.
We have received representations to the effect that the laws of certain countries may prohibit companies formed in those countries from complying with the strict requirements of Clause 80(7), which requires a scheme to guarantee redemption of units. In cases where companies formed in such countries can demonstrate that they have in fact complied with these requirements for a substantial period, we can see no reason why they should not be able to apply for recognition.
This amendment enables an application to be made by a scheme which in fact redeems units but is prevented from guaranteeing redemption by the law under which it is established. This provision will not prejudice the ability of the designated agency to refuse recognition of such schemes on other grounds; and the amendment merely provides a limited alternative to the test that the terms of a scheme must provide for redemption of units.
The requirements are designed to restrict the availability of this alternative to those schemes which can demonstrate a satisfactory record of redemption. And this limited exception will not, in my view, reduce the protection afforded to investors. If such schemes cease to redeem in a satisfactory manner, recognition may, of course, be withdrawn.
Lord Williams of Elvel: I am grateful to the noble Lord for his explanation of the amendment. Again, we shall have to look at it, because it is rather technical. As I am wholly unclear at the moment about what an open-ended investment company is, I find it rather difficult to comment other than to put down the marker: What is a satisfactory level of redemption, to which the noble Lord referred? No doubt that will

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come in the course of time. I do not want to press it now.
9.30 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 402:
Page 208. line 37, leave out from beginning to end of line 12 on page 209.
The noble Lord said: This amendment was spoken to with Amendment No. 262. I beg to move.
Schedule 13, as amended, agreed to.
Clause 177 agreed to.
Schedule 14 [Consequential amendments]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 403:
Page 210, line 7, leave out ("has the same meaning as in") ("means a recognised investment exchange (other than an overseas investment exchange) within the meaning of").
The noble Lord said: This amendment was spoken to with Amendment No. 111. I beg to move.
Schedule 14, as amended, agreed to.
Schedule 15 [Repeals and revocations]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 404 to 408:
Page 211, line 35, column 3, at beginning insert ("In section 20, subsection (1), in subsection (3)(a) the words "section 449 of the Companies Act 1985 or as the case may require" and in subsection (3)(b) the words "section 449 or as the case may require".").

Page 211, line 51, column 3, at end insert—

("In section 693, paragraph (a) and in paragraph (d) the words "in every such prospectus as above mentioned and".").

Page 212, line 14, leave out ("and").
Page 212, line 16, at end insert ("and section 20 of the Banking Act 1979").
Page 212, line 16, at end insert—

("1986 c. 31

The Airports Act 1986.

Section 10.

1986 c. 00.

The Gas Act 1986.

Section 58.").

The noble Lord said: Amendment No. 404 was spoken to with Amendment No. 350. Amendment No. 405 was spoken to with Amendment No. 310. Amendments Nos. 406 and 407 were spoken to with Amendment No. 350. Amendment No. 408 was spoken to with Amendment No. 279. With the leave of the Committee, I beg to move Amendments Nos. 404 to 408 together.
In the Title:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 409.
Line 8, after ("trading") insert ("banking").
The noble Lord said: This amendment was spoken to with Amendment No. 350. I beg to move.
On Question, amendment agreed to,
On Question, Whether the Title, as amended, shall be the Title to the Bill?
Lord Taylor of Gryfe: Before this Bill passes the last rites of the Committee stage I should like as one of the spectators of these proceedings to pay a compliment first to the Minister for his dedication and understanding in handling this Bill; secondly, to the Labour Benches for mounting such a formidable team who have exercised the rightful duties of this House as a revising Chamber with a great deal of expertise and knowledge; and, thirdly, to the noble Lord, Lord Hacking, who was well briefed by the Law Society and who has also contributed to our knowledge and experience in this field.
From these Benches I should like to say thank you to all concerned, and also to echo the plea that was made earlier by the noble Lord, Lord Hacking, and the noble Lord, Lord Williams of Elvel, that we get the revised Bill as amended in Committee printed at an early date, so that some of us may be able to play a more active part in these proceedings in a helpful way. I hope that that will be taken on board. I am sure that the Committee is indebted to all concerned for the way in which this complex Bill has been handled.
Lord Hacking: I thank the noble Lord, Lord Taylor, for his kind remarks about myself. I played a very small role compared with the role that has been played by the noble Lord, Lord Williams, and his colleagues on the Labour Bench, and an even smaller role compared with that played by the noble and learned Lord, the Lord Advocate—who, regretfully, is not here today—by the noble Lord, Lord Brabazon, and, most significantly of all, by the Minister, the noble Lord, Lord Lucas. I join in all those compliments and I should be very grateful, before this Bill leaves Committee, if the noble Lord the Minister, without rolling up his sleeves and going down to Wapping to make personal undertakings about the printing presses, will do what he can to see that we get an early reprinting of this Bill.
Lord Tryon: I, too, should like to pay tribute to the noble Lord, Lord Lucas, and to the noble and learned Lord the Lord Advocate for the way in which they have dealt with this Bill, which has been a very difficult one pushed through at great speed and late in the Session. I have not said as much as I thought I was going to say during this Committee stage, because there have been so many amendments, 22 new clauses and so on, and for the humble Cross-Bencher with very little support it has been very hard to keep up.
Therefore, I should merely like to add my voice to those who wish to see the Bill reprinted as soon as possible, because there are still a number of points in which the noble Lord knows that I and a number of other people who have spoken in Committee are interested, with which we still have to deal at the Report stage. So a little guidance on that would be of help to us all, if we could get it.

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I am sure that it has been very difficult for the Minister and for everybody else to get through this Bill in these four days, over two weeks, but we have a long pause now and I hope that a lot of thought will be given to what has been said. There are still a number of points to be worked out. The noble Lord, in response to my Second Reading speech, said that I was tending to over-exaggerate some of the problems. I think we now see that there are some fairly serious problems. Some of them have been redressed, but some of them still have to be dealt with. I look forward to the next stage of the Bill.
Baroness Seear: I should like, very briefly, to say on behalf of my noble friend Lord Ezra, who unfortunately is not able to be present, that I know he would wish to join in the thanks which have been given to the noble Lord the Minister and to all who have taken part in this Committee stage. I am sure he would also welcome most wholeheartedly the wish that we could have the reprint of the Bill as quickly as possible.
Lord Williams of Elvel: May I echo the sentiments of a number of noble Lords who have spoken in thanking the noble Lord, Lord Lucas, and the noble Lord, Lord Brabazon of Tara, for their help and co-operation in the Committee stage of this Bill? It has been an extremely difficult exercise, for both the Government Front Bench and certain anonymous people who sit in certain corners of the Chamber and whom we are not allowed to see. But I think we have managed to get through the Committee in as reasonable a state as we possibly could. I am most grateful to my noble friends Lord Morton of Shuna and Lord Silkin of Dulwich and others who have helped us on this Bill. I am also grateful to the noble Lord, Lord Hacking, who has made some very valuable and extensive contributions.
May I again echo the requirement from many noble Lords in this Committee that the Bill be reprinted as soon as possible? By "as soon as possible", I should have thought that about a week was right, because we have a lot of serious work to do in order to get to Report stage in the overspill with a sensible and
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coherent series of views about what we wish to see. I am sure that the noble Lord, Lord Lucas, will recognise that we on our side have made an effort, and I hope he will ensure on his side that the printing of the Bill is expedited with great dispatch.
Lord Lucas of Chilworth: I am most grateful to the noble Lord, Lord Williams. I am grateful to him for a number of factors, notably that we came to this Committee stage at the end of a long and difficult summer, and without the co-operation of the Opposition, and without a certain element of good humour within the Committee and outside, we should not at 25 minutes to ten on the last day have got through as much work as was put before us. I am most grateful to the noble Lord.
I am grateful to the noble Lord, Lord Taylor of Gryfe, but there is a long way to go. Although the noble Lord, Lord Tryon, spoke about problems, I have a simple philosophy. Those matters which appear to any noble Lord as a problem, I see as an opportunity. I look forward to the opportunity of finishing our business in October. So far as it is within my power, I shall ensure that the Bill is reprinted and is available in the Printed Paper Office as soon as the authorities can manage it. I shall ensure that my office acquaints every noble Lord who has an interest in this, or has taken part in our debates, with the fact that the Bill in its reprinted form is available, but I cannot actually guarantee to hand deliver them.
I also undertake to ensure that the Notes on Clauses and the amendments, which are the responsibility of my department, are available in ample time—and I mean very ample time—so that noble Lords who have time to go away into the country and look at these things instead of staying at their offices and desks like some junior Ministers have to, can get on and do the work.
Title, as amended, agreed to.
House resumed: Bill reported, with amendments.
House adjourned at sixteen minutes before ten o'clock.

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