Before I call the hon. Member for Harrow, Central (Mr. Grant) to move the motion, I must inform the House that Mr. Speaker has not selected the amendment. Also, he has asked me to remind hon. Members of the advice that he gave to them earlier this year about voting on the Bill if they have a direct pecuniary interest in it. He said:
On the question of a pecuniary interest, I am of the opinion that if any right hon. or hon. Member has the slighest doubt about the matter he should not vote. If he votes, he takes the risk that the House itself could disallow the vote afterwards.
Mr. Speaker also said:
However, it is the right of every hon. Member, whether or not he is a member of Lloyd's, to cast his vote if a closure motion is proposed and is accepted by the Chair. No financial interest can be involved in that procedure. That would be a matter of public business"—[Official Report], 24 March 1981; Vol. 1, c. 812–59.]
On a point of order, Mr. Deputy Speaker. The esteemed institution that is Lloyd's, when it wakes up tomorrow morning, will be rather surprised to find that discussion on its Bill is sandwiched between a debate that started on sex shops and is not yet concluded but will carry on at 10 o'clock.
Could you give any guidance, Mr. Deputy Speaker? As we have to stop at 10 o'clock to make way for the sex shop debate again, can you tell us whether we are likely to have another period of debate for this important Private Bill, or perhaps another two occasions, as we have a number of amendments to be discussed and there is little time in three hours? How many more periods are we likely to have on the Bill? It is important that we know that.
May I perhaps raise the tone of debate from the level of sex shops? I beg to move, That the Bill, as amended, be now considered.
It is with sadness that I find myself standing today in the place of the late Sir Graham Page, who was the original sponsor of the Bill. He was held in high esteem in all parts of the House for his industry and his meticulous care, and he was held in affection for his good humour and honesty of purpose. He will be greatly missed as a colleague and a friend.
I know that the House will wish to proceed as rapidly as possible to move on to amendments and it is both unnecessary and out of order for me to repeat the debate of March last year when the Second Reading was passed by a majority of 164.
However, I think that it would help the House in its consideration if I described the subsequent progress of the Bill. Following the Second Reading being opposed by petitioners, the Bill was considered over five days by a Committee consisting of two hon. Members from each side of the House. Three basic issues were involved. In the first the petitioner sought a single election for the proposed council of Lloyd's, but evidence was not offered on the subject and the Committee rejected the proposed amendment. Therefore, I need not dwell on it.
The second issue was raised by the petitioners who contended that Lloyd's proposals on the divestment issue did not go far enough. The Lloyd's proposals were that the whole subject of the measure of separation between brokers and managing underwriting agents should be left to the future council to decide. The petitioners contended that divestment should be made mandatory by Parliament. That was also the view of some hon. Members. The Committee expressed the opinion that the Bill should be amended to provide for complete divestment between brokers and underwriters.
Therefore, Lloyd's referred this to a specially convened meeting of its members. By a large majority, some 13,000 to 1,000, it was agreed to amend so that there would be divestment by brokers of their interest in managing agents and vice versa. This was reported to the parliamentary Committee, which was chaired by the hon. Member for Oldham, West (Mr. Meacher) on 20 July, and the Committee accepted the Lloyd's amendment.
On 14 December 1981 Lloyd's returned to the Committee with the proposed amendments on divestment, which the Committee approved, and which are now clauses 10 to 12. One firm of Lloyd's brokers—Alexander Howden—petitioned against the new proposals and for six days the Committee heard arguments for and against before finally deciding in favour of the provisions put forward by Lloyd's.
I add here, because it is relevant, that on the last day the leading counsel for Alexander Howden said:
With the exception of the additional provisions on divestment the petitioners wholeheartedly share the general desire that the Bill ought to proceed. They recognise there is a serious need for it, and that it should make a very healthy and valuable contribution to the future health of Lloyd's.
That is the view I hold, too, and I find it a little difficult to reconcile those words with the statement of objection put out by Alexander Howden today.
This matter of divestment has been argued over for 11 days in Committee. I believe that the public expect an institution such as Lloyd's to be scrupulous over potential conflicts of interest and that is the purpose of the clauses.
I turn to the third basic issue, the difficult question of restraint upon suit, or immunity as it is rather less accurately called. On this question there was much debate on Second Reading. Sir Graham Page gave an undertaking to the House—
On a point of order, Mr. Deputy Speaker. Understandably, my hon. Friend is making a fair introduction. However, he is referring to a number of matters which are the subject of new clauses or amendments, to which we shall be coming later. May I take it that any reference that he is now making w ill not preclude the debate or his dealing with these matters in similar terms when we come to the later stages?
I am merely seeking to explain the position.
The undertaking given by Sir Graham Page was to the effect that the restraint upon suit would be removed from the Bill and dealt with by a byelaw. However, during the course of the debate, it became clear that the House wished the matter to be dealt with by primary legislation. Lloyd's, being in something of a quandary, put both alternative courses to the Committee which suggested that we should have primary legislation.
Like Sir Graham Page, I am not a member of Lloyd's. I have no interest to declare. I came to this problem with a completely open mind—some would say a blank mind. I am instinctively suspicious of immunities. I understood the anxieties expressed on Second Reading. I shared some of them myself. I have also taken note of views subsequently expressed. It is natural that Parliament should look carefully into issues of this kind. We are concerned and responsible for the public at large.
I should like to clarify one matter over which there has been misunderstanding. The public, that is to say, policyholders, are not affected by this provision. They can sue underwriters in the courts as they have always been able to do and as they will continue to be able to do. Their position will be strengthened by the powers given in the Bill to the council to maintain discipline and proper standards of conduct among brokers and underwriters for the protection of the public. If, however, the council is to exercise its powers speedily and effectively to prevent scandals, it must not be inhibited by the threat of lengthy litigation.
At first glance, one inquires, as I did, why the position should be different from the Law Society, the General Medical Council or similar bodies. The answer is that they do not trade in the same way. Lloyd's trades throughout the world to the great benefit to our invisible earnings. Unlike other bodies, it is involved in what might be called the risk business. The widely publicised paralysis resulting from protracted litigation is avidly seized upon by competitors overseas and damages the reputation of Lloyd's.
Is not another risk that Lloyd's is much more exposed to blackmailing actions simply because such actions would almost inevitably invite headlines and might initiate from organisations abroad which are attached to Lloyd's? Is this not an infinitely greater danger than the one to which the hon. Gentleman has rightly referred?
I agree. I am grateful to the hon. Gentleman for drawing attention to the matter. Overseas competition in this market is ruthless. I am glad that the hon. Gentleman has alerted the House to the problem. I hear laughter from one of my hon. Friends. I do not think that anyone will disagree that Lloyd's is engaged in an international business that is highly competitive. Clause 14 was approved by the Committee following two days of argument.
I apologise to my hon. Friend. Hon. Members find themselves in some predicament because we shall come to this specific debate later. My hon. Friend should advance stronger arguments than the fact that Lloyd's is a trading organisation. Anyone coming fresh to the debate would say that this was prima facie an argument for not giving it any specific immunity, but the very reverse.
I shall advance many other arguments in favour of the clause. There is, however, a distinction that I seek to make. Bodies such as the Law Society, the Stock Exchange and the General Medical Council do not have the immunity or restraint on trade. They do not indulge in risk-taking business throughout the world. Lloyd's is unique in this respect. Clause 14 was approved by the Committee after two days of argument. Its effect is that a limited circle of people, that is to say—
I can assure my hon. Friend that any litigation in Lloyd's is widely publicised. It is used overseas as a criticism of Lloyd's and as a reason for foreign competitors taking away the business. That is the plain fact. It is an experience that has been known over a number of years. —[An hon. Member: "Why not the Stock Exchange?") Because the Stock Exchange does not do that sort of trade. It is a different body.
The effect of the clause is that a limited circle of people—the community of Lloyd's—are restrained from recovering damages from the society the members of Lloyd's—provided that the society acts within the confines of the Act and does not act in bad faith. I shall be moving an amendment to exempt from restraint damages arising as a result of a clerical or similar error. Lloyd's business is, after all, risk taking. It would change the whole character of unlimited personal liability if a member through litigation could pass on his losses to members as a whole.
It is wrong to suppose that Lloyd's is being placed above the law. The review of the courts and the remedies of injunctions, declarations and the prerogative writs will still bite on Lloyd's. It is right that they should do so to ensure that the society is properly run within the law. I would welcome any advice that the Minister can offer on the question of judicial review and to what extent it will be available to people in these circumstances.
It would be wrong to suggest—I know that my hon. Friends feels seriously about this point—that an individual member of Lloyd's will never suffer as a result of an act by the council. I believe that this is a remote contingency if the council is armed with the new powers of the Bill and excercises them responsibly. This remote possibility has to be balanced against the positive benefits that the clause will bring to the society and community of Lloyd's as a whole and to the public generally. On balance therefore, and after starting from a position of complete neutrality, I come to the firm conclusion that Lloyd's, the Fisher working party, which investigated the matter in great depth, and the parliamentary Committee, consisting of Members of both sides of the House, are right on the matter.
It is my understanding that the Fisher working party specifically did not go so far as the immunities outlined in the Bill but merely stated that the immunities should go so far as those outlined in the Companies Act.
I shall check exactly what the Fisher report stated. It is clear that the provisions of the Companies Act are not adequate for the purposes that are necessary if the council is to do its work properly.
Lloyd's is at all time ready to discuss that problem and the Bill has to pass through another place. What would be tragic—
Does my hon. Friend not agree that the only recommendation by Fisher for immunity for the society proceeds on the premise that Lloyd's might be inhibited in the task of self-regulation by fear of legal proceedings? Is he aware that this is the only reference made to the matter in the Fisher report? The report does not encompass the proposals contained in the Bill.
That may be so. Lloyd's has been advised by learned counsel. The proposals have been wrangled over for a long time. They are far more limited than is sometimes suggested. I am satisfied that they are necessary if Lloyd's is to be able to pursue the task that it is given by the Bill properly and effectively in the interests of Lloyd's as a whole and the public.
What would be a tragedy is that if all the work that has gone into the Bill were to be set at naught. A constitution of more than 100 years ago when there were fewer than 1,000 members of Lloyd's is wholly inappropriate when there are now 19,000. 1 must warn the House, in all seriousness, that if this measure does not reach the statute book there is virtually no chance of any other such Bill being passed in the lifetime of this Parliament. Lloyd's will continue to be hamstrung—to both its own and the nation's detriment.
I genuinely apologise to my hon. Friend for intervening again, but it seems to me that he is coming to a peroration. During the forthcoming debate I suspect that a number of hon. Members will wish to ask specific questions not on the later new clause but on matters in the statement issued by the promoters. Will my hon. Friend seek the permission of the House, if he is successful in catching your eye, Mr. Deputy Speaker, to respond to those points later? That would save us interrupting now.
I am grateful to my hon. Friend for giving way as usual. Is he absolutely consvinced that the community of Lloyd's is assured that this is the right Bill? In responding to that point, will he comment on the resignation letter of Mr. Bob Kiln in Lloyd's List in which extremely serious reservations are expressed about the nature of the Bill, bearing in mind that Mr. Kiln was a member of the Committee of Lloyd's during almost the whole time that the Bill was going through Parliament?
Mr. Kiln must speak for himself, but my advice is that he represents very much a minority point of view. That has been made clear in the votes and in all the information given to me by Lloyd's. I put it no higher than that, although, like all minority points of view, it has received disproportionate publicity, but that is the world in which we live.
Lloyd's is a great institution of which we should properly be proud. It is seeking to put its house in order and then to get on more effectively with the business of writing international insurance and governing its affairs in a manner more fitting to the 1980s and beyond. The House should help Lloyd's in that worthy and honourable task.
We have come a long way since we first discussed the Bill. It is a pity that of the three main issues raised by my colleagues at the outset—fraud, divestment and immunity—only one, fraud, had been tackled by the Committee of Lloyd's in the spirit of compromise. Divestment was wrung out of Lloyd's by the Opposed Bill Committee, which I must congratulate on the part that it has played, because a situation in which brokers can run syndicates is clearly in complete conflict with commercial interests and should never have been allowed to go ahead. Unlike my hon. Friend the Member for Harrow, Central (Mr. Grant), 1 do not propose to be dragged into the issues of divestment and immunity, as they can be discussed at length when we consider the amendments.
It is right now to look at the broad scope of the Bill and some of the other issues that have arisen. Lloyd's has argued that the Bill was approved by an overwhelming majority of the Wharncliffe meeting at the Albert Hall. I understand that the voting was 13,219 for and 57 against. That result was taken by Lloyd's as meaning that the whole Bill had been carefully read by all the members of Lloyd's and thus came to the conclusion that every item in the Bill was entirely satisfactory. It is not unknown for Members of Parliament not to read Bills carefully. Indeed, the majority of Bills that go through the House are not read carefully by all hon. Members. I do not wish to insult my hon. Friend the Member for Harrow, Central, but it is just conceivable—
I can well believe that. However, I shall not continue on that point. Let us face it. Hon. Members are paid to read Bills, but I venture to suggest that we often do not get round to that task It is a requirement that a member of Lloyd's should put up his capital, but not that he should read Bills, so it is conceivable that the Bill was not read very accurately by the members of Lloyd's. It might therefore have been better if Lloyd's had had people other than the Committee of Lloyd's to advise it on what exactly the Bill contained. The voting might then have been somewhat different.
Members of Lloyd's were assured that the Bill would give far greater powers of regulation to the committee, and who would disagree with that? In anyone's Ianguage, it must be a good thing for such a great institution as Lloyd's to have greater powers of self-regulation. I think that most hon. Members, certainly on the Conservative side, agree that self-regulation is the answer and that the last thing we want is Governments and Parliament interfering in what happens in these institutions.
I do not believe that the members of Lloyd's looked at the small print. Tragically, it was only later that the External Names Association emerged and people with a somewhat contrary view to that of the Committee of Lloyd's appeared on the scene suggesting that members should hold on a bit and asking whether they really knew what they were voting for and whether they had looked at the detail of the Bill which was so important.
That demonstrates how important it is that Members should be kept informed of what is happening. I believe that many Members of Parliament have benefited tremendously from the comments of outside bodies that lobby Parliament. They examine the detail of much of the legislation that goes through the House and are in a position to point out to us exactly what its consequences will be.
This brings me to amendments Nos. 15 and 16, in the name of my hon. Friend the Member for Faversham (Mr. Moate), which have not been selected. They seek to add to schedule 1 as addresses or, to quote the words of the amendments, the "usual places of abode" so that not only the names but the addresses of members of Lloyd's would be on the register. Paragraph 1 reads:
The Council shall keep and maintain a Register to be revised as at the first day of July in each year (or such other day or days as the Council may by byelaw provide) which shall be divided into two parts and shall show in Part I thereof the names"—
and here the words
and usual places of abode
would be added. Paragraph 1 continues:
of all those members of the Society who were classified as working members of the Society as at that date and in Part II thereof the names"—
here the words
and usual places of abode
would again be added. The paragraph then continues:
of all those members of the Society who were classified as external members of the Society as at that date.
There is another aspect to the business of printing people's addresses. I am not a member of Lloyd's and have no financial interest whatever in the organisation.
As my hon. Friend points out, I have no money either, which may be one reason why I am not a member of Lloyd's. I admit to having received the generous contribution of two very lavish lunches through the hospitality of the Committee of Lloyd's, but that is as far as my interest goes. It has been suggested to me, however, that if the addresses of members of Lloyd's appear on the register and the register is readily available, this could lead to abuse.
Two arguments arise in relation to the inclusion of addresses. Obviously, members of Lloyd's do not want their names to go on to mailing lists, as a result of which they receive a mass of undesirable advertising material through the post offering things that they do not want. At the same time, one must accept that if the External Names Association or any other organisation of that sort is to work effectively, it must have the names and addresses of the members, otherwise it will not be possible to contact them.
What about the listing of addresses? Clearly, membership of Lloyd's indicates a certain level of wealth. To publish a list of such names and addresses is an open invitation in this day and age when, unfortunately, we suffer from things such as terrorism. Terrorists and others could thereby identify these people and hold them to ransom. Perhaps that is not such a desirable objective.
Thank you, Mr. Deputy Speaker. I remind my hon. Friend the Member for Chippenham (Mr. Needham) that I was referring to paragraph 1 of schedule 1. It is pertinent to consider whether people's addresses are included in the schedule. It is an important point.
I agree with my hon. Friend the Member for AldridgeBrownhills (Mr. Shepherd) that a number of Lloyd's members are people of significant wealth. Therefore, there could be great problems if the names on the register became available, particularly in this day and age when kidnapping, and so on, is so popular.
If possible, responsible recognised organisations operating within the Lloyd's society should have access to these names and addresses, otherwise it will not be possible for the External Names Association to be the sort of organisation that I should like. It should be able to make available information about what is happening in Lloyd's and should ensure that external names are well informed about what is happening generally in the Lloyd's community.
The listing of the addresses is a real problem and poses a genuine dilemma. Am I not right in thinking that there have been instances—I think particularly of the Performing Right Society—where a member who felt distinctly under-privileged had great difficulty in securing the names and addresses of members whom he wished to canvass for legitimate reasons? I think I am correct in saying that one person went to court and after great difficulty secured the names and addresses. If I am right, there seem to be precedents for such information being made available, without its necessarily being presented to every aspiring burglar. Is there any strong argument why the names and addresses of Lloyd's external members should not also be available?
I take my hon. Friend's point, but we would need some kind of regulation to ensure that access to the register was sought by a bona fide organisation working within the Lloyd's community.
The question of information disturbed me on Second Reading. On the one hand, we have the working names—people on the inside track who have a good idea of what is going on—and on the other we have the exernal names. Very often those people are not in day-to-day contact or even year-to-year contact with what is going on in Lloyd's. It may be argued that they should keep in contact, but they are often the last to hear about problems when they arise. They probably do not pick up the gossip in the market place about someone going bust or some syndicate becoming extremely unreliable. They may not even be aware of the fact that their syndicate performance is declining compared with others.
It is therefore important that this access to information is given to members of Lloyd's, be they working names or external names. That was one of the excellent concessions wrung out by the Opposed Bill Committee. I again congratulate that Committee on this important step forward.
The Fisher report recommended that information should be made available. Paragraph 9.15 of the report said:
We recommend that the Council should keep under constant review the requirements for disclosure to prospective Names, and should make the necessary Bye-laws and keep them up to date. We recommend in particular:—
The report went on to say
Paragraph 23.22 of the Fisher report continued:
We recommend that the Council should:— (a) either through the Audit Committee or a new Accounting Committee and, in any event, with the close involvement of outside expert advisers, lay down rules (in an Accounting and Audit Manual which could replace part of the information currently set out in the Underwriting Agents' Manual) as to the minimum information to be disclosed in Syndicate Accounts and the accounting standards and principals which shall be applied. These would need to be specifically designed to meet the circumstances of Lloyds and, although they would draw on the experience derived by the accountancy profession from application of the Second Schedule to the Companies Act 1967 and the various accounting and auditing standards which have been issued for the Accounts of companies, they would recognise the special features of the Lloyd's system—for example, the three year account period, the lapse of time between accepting a risk and the processing of the policy and premium through the L.P.S.O., the volume of reinsurance and the central importance of the Reinsurance to Close.
The Manual would also contain a list of matters to which the auditors' attention should be specifically drawn and the form of audit certificate which should be required from the Syndicate auditors. While we see no difficulties in establishing the level of disclosure to be required in respect of such items as underwriting policy, the use of Binding Authorities, debtors, investments and expenses, including payments to Agents, we recognise that many auditors think that it is increasingly difficult to confirm that, in the auditors' opinion, the accounts give a 'true and fair view' because of the central importance of the adequacy of the Reinsurance to Close and the difficulty that an auditor has in confirming what is essentially an underwriting judgment. It is outside our brief to pursue this subject but we lay great importance on the need for the Council to take positive action to ensure that Syndicate Accounts are brought up to the standards required elsewhere for the accounts of agents and others who are handling, investing or dealing in other people's money.
That refers to the great problem of precise accounting in Lloyd's, bearing in mind that one never knows whether all the outstanding claims have been closed off.
I very much accept your point, Mr. Deputy Speaker. It is, however, quite new for Lloyd's to accept the requirement to give this information. At the Opposed Bill Committee, Lloyd's actually undertook to implement all those proposals. It is important that we get the proposals on the record because they were not included in the Bill.
The proposals are included in the record of the Opposed Bill Committee as paragraphs, but not as anything else. They were not read out at the Opposed Bill Committee because to do so would have taken too long. If that is sufficiently on the record of the House, the last thing that I want to do is to bore my hon. Friends.
Would it be in order, Mr. Deputy Speaker, to draw your attention to what "Erskine May" says on page 995? It says:
Debate on the question for consideration of a private bill,… has been confined by rulings from the chair within narrower limits than the debate on second reading.
On the Opposed Bill Committee the lawyers acting for the Lloyd's Committee said:
It seems to us, and indeed to the Petitioners, that those provisions for making available information in such detail and to such an extent are closely linked to the divorce issue because the divorce issue is basically concerned with the importance of enabling Names and prospective Names to have the fullest information necessary for reaching decisions about their activities as Members of Lloyd's. The Petitioners and we feel that it would be an effective way to attain many of the objectives which might have been attained by a total divorce without any of the disadvantages which are apparent to us and we believe also to the Petitioners.
Therefore, we can see that at the Opposed Bill Committee stage it was agreed that that would happen.
There was an undertaking that
The Committee of Lloyd's will take all (reasonable) (proper) steps to ensure that the recommendations in paragraphs 9.15" which I have read out—
it was at that point that I was brutally cut off in my prime—
of the Fisher report as to the availability of information are implemented by the Council, whether through the making of byelaws or otherwise, as soon as possible and in any event within"—
and we should like to see the words changed to
within two years of Royal Assent
So we would see the requirement—
The hon. Member for Epsom and Ewell (Mr. Hamilton) has not been out of order, although the House might deprecate the reading of such long extracts. I have asked the hon. Gentleman to bear in mind that it is already on the record and that his quotations have been inordinately long.
I apologise to hon. Members, but it is so rarely that when I speak in the House I have such an enormous and appreciative audience. When one speaks before an audience of three people, whether one bores them or not is of somewhat less pressing importance.
I am now coming to the end of my remarks, Mr. Deputy Speaker, and I should like to say how much I am looking forward—if I have the opportunity to catch your eye—to speak on the amendments. I hope that in time we shall have more compromises from the Committee of Lloyd's, so that we shall be able to give the Bill our wholehearted support and ensure that it gets on to the statute book.
As the hon. Member for Harrow, Central (Mr. Grant) has made clear, the Bill has already received what can only be described as exhaustive scrutiny by the Committee of which I was Chairman, involving no fewer than 40 hours of skilled and penetrating cross-examination by leading counsel, to whom I should like to pay a warm tribute for their precision of analysis and clarity of exposition. I hope that the results of that searching examination, as determined by the Committee, will be approved tonight by the House as a whole.
The Bill, as presented to the Committee, contained two contentious issues. The major one concerned immunity or restraint on suit. The lesser one, although not unimportant, concerned the adequacy of representation of the interests of non-working members in the affairs of Lloyd's.
There was also, in our view, one major omission—the provision for divestment between brokers and underwriters which, like the other two issues, was the subject of petition against the Bill.
The evidence presented to the Committee on the issue of divestment was both clear and forthright. The Cromer report in 1969 was unequivocal. It stated:
The broker is the agent of the insured and in any conflict with any underwriter should put first the interest of the insured … we find it difficult to accept that, in exercising judgment of what business to accept and what to refuse, an underwriter who is an employee of a broker-owned agency can at all times be wholly impartial.
The Committee, in paragraph 252, concluded:
There is a conflict of interest which cannot be ignored.
The Fisher report of May 1980 was even more explicit.
After discussing both potential and actual abuse, it concluded in paragraph 12.18:
the evidence of abuse is confirmed by the experience of the Lloyd's members of the Working Party who are sure that the conflict of interest involved is not only potential but actual.
In the light of that, the report, in the next paragraph,stated:
the majority of us have reached the conclusion that divestment should be enforced and the formation of such links prohibited for the future.
In support of that position, Mr. Posgate, the chairman of the subsidiary Lloyd's underwriting agency owned by the Alexander Howden Group, one of the largest British brokers, drew attention to several abuses which in his experience had occurred because of the broker ownership and control of underwriting syndicates. Those included large discounts for brokerages of up to 40 per cent. to 60 per cent., brokers placing business with their controlled syndicates on terms other than the best market terms, erratic ratings, the taking of a profit commission by the broker on the underwriting result, the misallocation of expenses between the names in the syndicate and the broking company and the payment of large commissions for the introduction of names.
Faced with that evidence, Lloyd's, as promoter of the Bill, said that in 12 to 18 months it could draft sufficient regulations and byelaws, to quote the words of the chairman,
to take care of the situation".
However, it did not believe that the problem had been analysed sufficiently in depth. The Committee did not find that at all convincing, not least because there had already been independent analyses in depth of the problem by two weighty committees, both of which recommended divestment.
Also, it seemed to us that the Lloyd's undertaking, with whatever good faith it had been delivered—I have no doubt about that—would be almost certainly overturned.
If the broking fraternity controlled 10 or 11 of the 16 votes of working members on the council, and if a majority of that section as well as of the non-working members section was required under the special regulation procedure, the resolution in favour of divestment would almost certainly not be carried. Mainly for those reasons, the Committee decided that divestment within a period of five years should be enforced as part of the Bill and not left to be dealt with by the byelaws and regulations of the Lloyd's Council.
On the second main contentious issue of the Bill—the restraint on suit—the Committee accepted the argument of the petitioners that the original drafting of the Bill on that point had gone extremely wide. Therefore, Lloyd's agreed to circumscribe more tightly the scope of the amenity sought and provided an alternative new clause. The effect of that has riot been as fully understood as it should be. It now limits the restraint on suit in several important ways. It confines it to members of the Lloyd's community, not to policyholders. It limits the benefit of restrictions to the Society of Lloyd's so that specific brokers and underwriters are not in any way protected. It applies only to actions for damages, so that even members of the Lloyd's community can apply for the remedy of judicial review. There is no restriction where there is liability for death or personal injury or where bad faith is involved, although I appreciate the problem of proving that. Above all, restraint on suit applies only in respect of the five activities listed in subsection (3) of the new clause.
I hope that hon. Members who are objective about the matter will accept that that significantly limits the legal immunity of Lloyd's compared with what was originally proposed. Alarmist talk in some quarters of giving Lloyd's unprecedented powers to become a law unto itself are widely exaggerated. It is true that, despite the limitation, it was still put to us that the appropriate means to protect the Corporation of Lloyd's against claims—it would not be protected by section 448 of the Companies Act 1948—should be not by a more comprehensive indemnity but by trying to cover any liability towards members and others within the Lloyd's community through an errors and omissions insurance policy.
We considered that proposal carefully in Committee. We noted I hat the cost would probably exceed £100 million—that was the information given to us which was not disputed—which would mean going outside the Lloyd's market and involving institutions abroad in questions of supervision and regulation of the Lloyd's market. It is fair to say that it could make the Lloyd's Council vulnerable to litigation in other countries not operating or permitted in the United Kingdom. However, our main consideration was that it could weaken the desired objective of a supervisory body capable of firm, rapid and fully effective intervention in the market, which experience during recent years has shown to be necessary.
Those considerations persuaded the Committee that it had secured from Lloyd's a tightening of the restraint on suit. The restraint was not specified in terms and not left to be specified later by Lloyd's Council, which procedurally it would be difficult, if not impossible, for Parliament to alter. The new clause was a reasonable balance—I put it no higher than that—between ensuring the capability for effective and active supervision and prescribing the powers of the council so as not to go wider than is strictly necessary for the purpose.
When the hon. Gentleman was considering the immunity clause, did he think about the Sasse case? If so, to what conclusions did he come? As I read the clause as it now stands, it will make it impossible for the Sasse syndicate to sue in future. Sasse is one of the few cases of anyone having sued Lloyd's. It was paid off and there was almost an admission of negligence by the Lloyd's Committee. Does the hon. Gentleman feel that that should not happen in future and that it should not have happened in the past?
I agree that it should not have happened in the past. Both the Sasse and the Savonita affairs, and some other unfortunate incidents, were considered in detail. Our view was that if Lloyd's Council had had the power of effective intervention much earlier, the problem that led to a prima facie case of the right to sue the council for negligence would not have arisen. However, if the council had taken action immediately—which we would have expected it to take with the new powers and with limited immunity—the matter would not have arisen in that way.
I am listening carefully to the hon. Gentleman, because he is putting forward some pertinent arguments. Is he saying that the only reason why the Committee agreed to such limited immunity was because that was the only way in which it felt that the Lloyd's Committee could regulate its market effectively? If that is the Committee's view, is that not a severe criticism of the capability of Lloyd's Committee and the Lloyd's community for self-regulation?
The matter was discussed in paragraphs 606 and 607 of the Fisher report. Paragraph 606 refers to the incorporation of the provisions of section 448 of the Companies Act 1948. Paragraph 607 states:
That section, while providing protection for individuals, will not protect the Corporation of Lloyd's itself against claims. In the light of the outcome of the legal proceedings and legal advice received, it will be necessary for the Committee of Lloyd's to decide whether to seek to obtain appropriate protection for the Corporation against legal claims.
The report goes on to suggest three possible courses of action. It is reasonable that Lloyd's should seek protection. The only real issue was which of the three possible routes should be adopted.
The first was an errors and omissions policy, which was favoured by the petitioners. The second was to require the 19,000 members to agree not to sue the Corporation of Lloyd's or to agree to indemnify the corporation against civil liability. Both sides agreed that it was almost impossible to obtain such consent from 19,000 members and therefore that course was not practicable. The third—I quote from the Fisher committee—was to seek
the inclusion in an amended Lloyd's Act of a section giving more comprehensive indemnity (possibly along the following lines)".
The committee then sets out a draft provision. Therefore, the choice was between the first possibility and the third. We considered the first, but accepted that it was reasonable—for both the reasons that I have given—that Lloyd's should go for the third possibility. We were concerned not to leave immunity wide open for construction by the Council of Lloyd's after the Bill had gone through the House. We were determined to have it written into the Bill in a way that could be amended on Report or, if necessary by the Opposed Bill Committee.
I genuinely seek clarification because this point worries me a great deal. Did the committee really come to the conclusion that, without either an errors and omissions policy or the type of limited immunity given in the Bill, the community of Lloyd's, the Corporation of Lloyd's or the Committee of Lloyd"s could not function as they do at present?
That was the view put to us by the promoters. It is fair to say that it was accepted by the Committee. It would expose the Corporation of Lloyd's to liability in a manner which would severely restrict the effectiveness of its regulatory and supervisory powers. My own view—I believe that it was also the view of the Committee—is that it was right to seek some protection. The only question concerned the form of that protection. Even the petitioners against the Bill were not claiming that it was not necessary. They said that an alternative route should be used.
Did the Committee consider the damage that can be done to a working member of Lloyd's by negligent and harmful comments in the form of slander or libel? If so, why did it conclude that the council should have protection for such libel? Was that considered and, if so, why was no separate clause introduced, so that libel was not exempted and so that they could not get away with that type of behaviour?
The question before the Committee was how to ensure that there would be effective supervision of the market to a degree that has not existed before. Therefore, increased powers for early, rapid and effective intervention in the market were written into the Bill. They are not challenged. The only question is how they can be made operative so that the council will not feel that its wings have been unduly clipped and so that it will not be restrained from operating quickly to use those powers. That was the issue. A reasonable balance has been drawn.
The hon. Gentleman has not answered my question. I asked whether the question of libel and slander and the damage that they can do was specifically considered by the Committee. If so, on what grounds was that included in the general indemnity?
If the hon. Gentleman is suggesting, as he seems to be, that libellous or slanderous remarks might be made by members of the council which could be damaging to members of Lloyd's, and against which members would not have recourse in the courts, the answer is that that matter was not specifically raised in Committee. It would affect future elections to the council, but I concede that the hon. Gentleman may think that that is a rather distant date and that there needs to be a more immediate recourse. However, the matter was not raised.
I congratulate my hon. Friend the Member for Oldham, West (Mr. Meacher) and his colleagues on the Committee for a most painstaking, diligent and skilful piece of work and on the way they conducted this difficult matter.
On the matter raised by the hon. Member for Nantwich (Sir N. Bonsor) and others, is there not always a duty on the committee to act within the realms of natural justice? If there is any breach of that duty or any lack of good faith in its operations, the prerogative writs apply and there is a remedy available in the courts.
I am always grateful to be assisted by my hon. Friend. He is a lawyer, and I am sure that he is absolutely correct. I am not a lawyer, and I stand to learn from his wisdom. It may be that he is correct, but I cannot confirm it.
Will the hon. Gentleman confirm that the libel would have to be issued by the society rather than by the individual member? Therefore, the likelihood is remote. Will the hon. Gentleman also confirm that the reason the Committee preferred clause 3 rather than the errors and omissions insurance was that if there were a claim under an insurance policy the conduct of the business must be handed over to the insurers? Therefore, the whole self-regulation of Lloyd's would be defeated.
Part of the case against the first route was that it would involve organisations outside Lloyd's—in particular, overseas institutions—having unwelcome access to the affairs of Lloyd's. We certainly wish Lloyd's to be operated in an open—not a secretive—and properly effective manner. The Committee accepted that it would not be in the interests of the country or of the Lloyd's community in general if overseas institutions, with which there is immense competition, had such access.
The third issue is the rights of non-working members. Lloyd's made a small move by agreeing to increase the number of seats on the council for non-working members, but the Committee did not feel it unreasonable—I put it no stronger—that working and non-working members should continue to be elected in separate sections when only the working members could know working members standing for election. Otherwise names in tens of thousands might seek advice from their managing agents with, perhaps, erratic results. It was on that general basis that last summer Lloyd's withdrew its Bill to obtain the approval of its membership for inserting the divestment provision in the Bill. Having obtained such approval by an overwhelming majority, Lloyd's resubmitted the Bill including the divestment provision. On that specific point, it was petitioned against again by the brokers Alexander Howdens. The Committee sat for a further six days while additional evidence on divestment was exhaustively analysed and reanalysed.
On the second occasion, the central proposal of the petitioners was that a requirement should be imposed on Lloyd's Council to implement the measures outlined in detail by the Fisher Committee in paragraph 12.30(a) to (f) to deal with potential abuse, with the understanding—and this is the key point—that if they were not implemented in the required five-year period it would be for Parliament and the Secretary of State for Trade to implement them mandatorily.
The Committee took Fisher's view. It was our basic ground for rejecting the petitioners' view. Fisher stated:
The majority of us believe that no proposal short of complete divorce is sufficiently watertight to reassure the public and the Names, and give active Underwriters the greater independence and standing which the health of the market requires.
I emphasise that we considered the proposal extremely carefully. We did not treat it cursorily. Our view was that in the last resort it was impracticable because there is not and cannot be, given the way in which we run Parliament, a guarantee that the Government of the day would take
such action at the end of the five-year period. For that reason we believed that it was right to retain our original decision on divestment.
I joined the Committee for the stage which the hon. Gentleman is now discussing. Will he confirm that our view was that we should have liked to examine the self-regulation aspect, but that the problem at the parliamentary end prevented us from reaching a decision in favour of the petitioners? Perhaps a lesson can be drawn from that which we can examine in other circles.
That is a fair comment. I pay tribute to the hon. Member for Arundel (Mr. Marshall) who joined the Committee for the second stage of our deliberations. I pay tribute also to my hon. Friend the Member for Hackney, Central (Mr. Davis) and to the hon. Member for Epping Forest (Sir J. Biggs-Davison) for their extremely valuable support in the detailed questioning to which on many occasions they subjected counsel and witnesses. I hope that the results merit their labours.
The Bill has been subjected to 11 days of exhaustive examination by skilled counsel and the Committee. I believe that it has been amended in a manner which preserves its original necessary and proper purpose. It inserts provisions on divestment and the limitation of immunity which are long overdue and widely acknowledged to be needed. On that basis, I hope that the House will approve the Bill.
I congratulate the hon. Member for Oldham, West (Mr. Meacher) on the care with which he conducted the Committee. I was not there, but I have heard about his conduct not only from members of the Committee but from in and around the Temple and elsewhere. People are full of admiration for the way in which he acted as Chairman in a difficult matter.
I shall confine my remarks to clause 14, which deals with immunity. I shall be brief. Hon. Members should realise that, in spite of the whittling down of the original form of the clause, it exempts the society from actions for negligence, however gross that negligence. That is a strong measure. It exempts the society at the suit of not only existing members of Lloyd's and other people on the fringes of Lloyd's but persons who might want to become members arid people who have tried to become members and failed. The matter is not merely internal for Lloyd's. The present form is better than the original form, which seemed to exempt at the suit of anybody and which seemed to exempt many other people as well. It is a strong immunity. I do not believe that it has been justified on the grounds mentioned.
The first ground is that the provision is necessary for the effective supervision of the market. That is an internal matter. I do not see why, if the Stock Exchange authority, which is in the commercial business, does not require it for the effective regulation of the market in stocks and shares, it should be necessary for insurance markets. The constitutions of the bodies are entirely different, but there is a parallel to be drawn.
The case which I wish to query is that expressed by my hon. Friend the Member for Harrow, Central (Mr. Grant), who said that the real reason why the immunity was necessary was that the society should be protected against blackmailing actions, particularly by overseas competitors. One might argue that the Law Society, or even the council of the Stock Exchange, were not so liable, but every great international trading organisation in the world is liable to blackmailing actions from overseas competitors. Any one of them, at any time, might have a writ bunged in against it containing material which was damaging once published but which was never supported by evidence. That is one of the risks that those who trade in the international or even the national market have to take.
A separate issue is involved. The most important commodity of Lloyd's is its reputation for integrity. A blackmailing action could be brought, time could be taken to deliberate it and enormous damage could be done to that reputation. The damage would be far more extensive than it would be in any other field that one can contemplate.
Our manufacturing industries still have a remarkable reputation for quality. There are not as many as there used to be, but there are still many. It is upon their reputation for quality that they depend for their markets. Nobody suggests that if an attack on the quality of its goods were made, perhaps destroying an overnight reputation for quality, that would mean that it could have the remarkable immunity against the negligent statements or actions made by itself, its shareholders or anybody else, however gross.
There might be a case for filtering claims against Lloyd's by the same sort of mechanism that obstructs vexatious litigants. Even without that, this argument tries to prove too much and, in conclusion, I shall say what I mean.
If the wicked foreigner postulated by those who defend clause 14 wishes to bring a blackmailing action, he will not be deterred by clause 14 as it is currently drafted. All he has to do is allege bad faith—he has to put It in the writ—and that is a far more damaging allegation than merely alleging gross negligence. He can do that even with the Bill as it is now drafted. Even if he does not want to go as far as that, he can find a non-member at whose suit gross negligence or other breach of statutory duty or tort can be alleged. That argument, the argument of the blackmailing foreigner, therefore proves too much. In my view, of course, it proves nothing, and nor does the claim that there should be an immunity of this size for the proper regulation and supervision of the market. That is a very fine phrase but I should have thought, as my hon. Friend the Member for Epsom and Ewell (Mr. Hamilton) suggested, that it was wrong to protect a regulatory body or society against claims for negligence when it had been negligent. The Sasse case may be an example of that.
Why should a body that has been negligent be protected from its own negligence? That has not yet been explained. Other bodies in the same position do not get such protection.
One always listens to the hon. and learned Member for Darwen (Sir C. Fletcher-Cooke) with care and on this occasion he expresses, as a distinguished lawyer, very real concern about immunities. When this matter was before the House on Second Reading, the approach envisaged was effectively to shelve the issue and to deal with it by way of subordinate legislation. That was wholly inappropriate and unacceptable to the House.
There is a case for dealing with the matter along the lines suggested by the hon. and learned Gentleman, although he took a somewhat academic view of the matter. There are real practical considerations which obtain here. They can easily damage that precious commodity—the integrity of Lloyd's—in the way that he, in what he said would be a short speech, glossed over.
The hon. and learned Member for Darwen is right in saying that if an unscrupulous person, wishing to disadvantage Lloyd's, alleges that there has been a breach of good faith, he can move to obtain a grant of a writ for judicial review. However, that is a much more limited remedy and, because the burden of proof that would rest on him would be profound and heavy, it would be difficult to establish that in most cases.
It is not only a writ for judicial review; he can start an action for damages because there is an exception to clause 14(3) where the normal immunity is removed from an action for damages and where
the act or omission complained of was done or omitted to be done in bad faith.
That applies to an action for damages as much as to a review.
The hon. and learned Gentleman is, of course, right but it is a much more limited scope of the action than if he were able to issue proceedings if the immunity did not exist. Given the balance of the argument, a reasonable but not by any means perfect compromise has been achieved. That is largely due to my hon. Friend the Member for Oldham, West (Mr. Meacher) and other Committee members.
Any lawyer will know that a legal action can be used for undesirable purposes. The undesirable purpose that we have in mind is the ability to try to extort compromises through adverse and often unjustified publicity. If limited immunity were not available, the damage would be infinitely greater than that caused by the type of action referred to. The Committee underlined something that Fisher was anxious to do. I refer to the wish to do one's best to ensure that Lloyd's disciplinary procedures are brought up to date so that Lloyd's can act expeditiously to preserve its reputation,. That was seen as a matter of prime importance. There was no doubt that the old and antiquated procedures were unduly cumbersome and complex. These changes—and those set out in clause 7—are overdue and welcome.
I do not question the justifiable anxiety expressed by many hon. Members about immunity. The burden of proof falls heavily on Lloyd's to assert that, in such circumstances, immunity is necessary. I have a limited amount of experience of the problems of Lloyd's both as a Minister at the Department of Trade dealing with company affairs for more than five years and as an Opposition spokesman in this area for more than two and a half years. Given the practical considerations, I believe that Lloyd's has made out its case, Initially, I was very much opposed to immunity. However, given the commercial justifications put forward, I felt impelled to the view that a persuasive case had been put forward. That case is much more compelling now that the immunites have been rightly and considerably scaled down. Therefore, I hope that the House will take the advice of my hon. Friend the Member for Oldham, West and act on the proposals that the Committee advanced after its most difficult and time-consuming deliberations.
On Second Reading I argued that divestment could not be left to the spun-out deliberations of the council. I felt that it was wrong simply to make byelaws. However, the Committee has carried out an independent survey and has reached almost precisely the same conclusion. I welcome that. The possibility of a conflict of interest could be damaging to Lloyd's reputation for integrity, which is essential to its future well-being. The issue is basic, because it touches on a conflict of interest. The move has been embraced by the Committee and the Bill's sponsors and should be supported by the House.
I hope that tonight the Minister will resist the temptation merely to talk, as he did on the last occasion, about the great advantages of Lloyd's to this country. Those advantages are self-evident and it is unnecessary for us to restate them.
I hope that the Minister is persuaded to divorce himself from the views that he expressed previously when he welcomed the proposition that secondary legislation would suffice for dealing with immunity. I hope that the Minister and his Department go along with the new thinking explained by the hon. Member for Harrow, Central (Mr. Grant).
I hope that the Government give these new proposals their support. If I am to be critical—I hope that the Minister will not take the criticism amiss—I do not think that the Minister helped the case last time by swiftly running into the position of saying "Yes, we support Lloyd's conclusions that there should be subordinate legislation. No one need fear it. It is perfectly all right." He did not give Lloyd's the comfort that he intended to give. Indeed, he helped to create a climate of great scepticism about those proposals. I hope, therefore, that he, too, has had second thoughts along the lines adumbrated by 'his hon. Friend the Member for Harrow Central.
On a point of order, Mr. Deputy Speaker. We have heard a great deal about the important subject of immunities and a certain amount about divestment. I understand that Mr. Speaker has selected a group of amendments dealing with both these matters. Could you please confirm that in due course we shall, be given an opportunity to discuss these matters more fully?
It might help the House if I now give the Government's views on the Bill and respond to the questions put by the hon. Member for Hackney, Central (Mr. Davis), although I hope that he will forgive me if I do not accept all his directions on the contents and nature of my speech.
It is now almost a year since we considered the Bill on Second Reading. The intervening period has been eventful, and it has certainly not been wasted. However, I must first note one very sad event already mentioned by my hon. Friend the Member for Harrow, Central (Mr. Grant)—the death of Sir Graham Page, who so ably presented the case for the Bill at our earlier discussion. I am sure that the whole House will recall the clear and cogent manner in which Sir Graham explained the motivation and purpose of the Bill and his complete mastery of the complex issues and technicalities involved. It is a great misfortune for the House and for the promoters of the Bill that Sir Graham was not able to assist us in our further deliberations. We are, however, fortunate indeed that my hon. Friend the Member for Harrow, Central has stepped into the breach and so quickly familiarised himself not only with the Bill as originally presented but with the important subsequent developments.
I also pay tribute to the members of the Committee on Opposed Bills, who have done so much to clarify the issues and to establish the facts upon which the House can reach its decisions. I congratulate the hon. Member for Oldham, West (Mr. Meacher) on his chairmanship of that Committee and on his thoughtful speech to the House today, and on the admirable way in which he replied to questions put to him in interventions. Those who have studied the proceedings of the Committee can only express their admiration for the patient, thorough, and scrupulously fair manner in which the Committee has carried out its functions. The House is in its debt, and we must attach great weight to the considered conclusions it reached after hearing all the evidence and the arguments presented.
It is also appropriate that I should commend the promoters—the Committee of Lloyd's—for the responsibility and determination with which they acted, not, I emphasise, in the pursuance of a narrow private interest but in recognition of the interest of the community at large in the health of Lloyd's as an important national institution and a contributor to the national economy.
Let us recall that on its own initiative the committee established an independent working party under the distinguished chairmanship of Sir Henry Fisher in February 1979. In May 1980 the working party produced a report containing proposals for a thorough-going revision of the constitution of Lloyd's and many of its procedures. At that stage it would have been easy for Lloyd's to say that it would need time to reflect on the issues and to prepare its own proposals in detail. It is greatly to the credit of Lloyd's that it did not take the easy way out. On the contrary, it showed great determination to maintain the momentum for reform provided by the Fisher report. With efficiency and industry it prepared and presented a Bill to Parliament within a year. That is a record of which it can be proud.
The efforts of Lloyd's did not stop with the presentation of the Bill. As one would expect, some aspects of the Bill have met with controversy. With patience and skill the promoters have argued their case where they believe it to be right. Most commendably, they have kept an open mind to constructive criticism and have shown great willingness to respond to well-founded criticism made in the House, despite the efforts needed to secure the agreement of members to any major amendments to the Bill. As a result, the Bill now before us is in several important respects an improvement on the Bill we considered last year.
In our debate on Second Reading I outlined the general attitude of the Government to the Bill. Lloyd's is a unique institution. It is also a successful institution. Lloyd's is noted not only for its unrivalled experience in such traditional areas as marine insurance but for its continuing ability to innovate and give the lead to the world insurance industry in such diverse areas as the insurance of oil rigs and communication satellites.
It is a measure of Lloyd's success overall that, despite fierce international competition and a downturn in the market, its latest published results show a record profit of £174 million. Lloyd's contribution to our annual invisible overseas earnings is well known. It runs into hundreds of millions of pounds.
There is a danger of allowing highly publicised incidents to obscure the continuing success of the Lloyd's market. However, those incidents and the apparent difficulty of dealing with them under Lloyd's existing constitution were bound to raise anxiety that Lloyd's record and reputation were at risk. Those considerations led to the setting up of the Fisher working party and to the Bill. It is of the utmost importance to recognise that the Bill represents the considered and collective opinion of Lloyd's—its members—on the best way to deal with the problems concerned.
In reaching that opinion, Lloyd's has also given due weight to the public interest as represented, first, through the independent membership of the Fisher working party and, more recently, by the impartial scrutiny of the House and its Committee. There must be a strong presumption that the judgment of the promoters overwhelmingly endorsed by the membership of Lloyd's and embodied m the Bill provides the best practical solution to the problems that Lloyd's recognises.
My hon. Friend raises a serious question. I admit that I have serious anxieties on that point. My hon. Friend is asking me what the Government will do if the Bill fails. If it fails, Lloyd's will consider the options, but valuable time will have been lost. On certain issues some progress may be possible in the light of further consideration, but the ground has already been fully explored. There can be no certainty that a second attempt would be more successful than the first, particularly where financial interests lie behind the opposition. If Lloyd' s found it impossible to resolve the issue without the assistance of the Government—
I thank my hon. Friend for intervening. If I have given the impression that I am in any way impugning the honour of any hon. Member, I withdraw whatever words gave that impression. That was certainly not my intention.
I want to emphasise a matter which would be important if the Bill were to fail. If Lloyd's found it impossible to resolve the issue without Government assistance, we should naturally have to consider whether we, the Government, could help. However, in view of the pressure of parliamentary time on the Government's own business, there could be no guarantee of success, particularly if it were a matter of finding parliamentary time for what I believe would be a Hybrid Bill.
I am inviting my hon. Friend the Member for Thanet, East (Mr. Aitken) to pay serious attention to the pressure of time on parliamentary business. Those demands would make it extremely difficult for the Government to respond and find such time.
I agree with the hon. Member for Hackney, Central. There are important implications for the international nature of the Lloyd's business. I am sure that all right hon. and hon. Gentlemen are aware of the importance of what I am saying. I ask them to bear in mind the importance of the matter that we are dealing with and the importance of coming to a decision on this Bill.
My hon. Friend, as the Minister at the Dispatch Box, has been asked about the prospects for a similar Bill if this Bill were to fail. I see no reason why it should fail. However, when we are discussing private legislation, my hon. Friend has no status other than his distinguished status as a Member of the House to venture an opinion about the prospects of success or failure of further private legislation introduced next year. No one has seriously suggested that that would be the subject of Government legislation.
I am emphasising the delay that would result from failure and the difficulty about the preparation of another Private Bill. In any event, there would be difficulty in producing a better Bill and difficulties concerned with its progress. Looking ahead, it would involve delay and difficulty for the Government, particularly with regard to parliamentary time. I hope that right hon. and hon. Members will take serious account of all those difficulties. It is therefore important that we should consider this Bill properly and that our deliberations thereon are properly conducted.
My hon. Friend said something that gave me the impression, and it may have been an impression that other hon. Members got, that, if the Government could find the time, since this was a very important Bill, they would be able to influence the authorities of the House to find more time for the Bill. Can I take it from what he said that the Government will use their influence to find more time, as they think that it is an important Bill, for this Bill, not for another?
First, may I say to my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) that I was making clear the very considerable difficulty the Government would have in finding parliamentary time should this Bill fail, that therefore hon. Members may not look to the Government to solve that problem. My hon. Friend is really talking about the time available for Private Bills. Hon. Members will know that there is considerable pressure on the time available to deal with Private Bills. It certainly does not lie within the power of a member of the Government to influence the allocation of time for such Bills, although no doubt my hon. Friend's remarks will be noted in the proper place.
My hon. Friend is making a very important point. He is emphasising that he is anxious that this Bill should not fail. Would he agree that that is a message that should be taken on board not only by those who might be seen today as delaying proceedings but also by the promoters, who in their turn should consider the proceedings of the House to ensure that it does not fail?
I think it would be desirable for me to continue with the main purpose of my speech, which I am sure my hon. Friend wishes me to do. I have said that we come to the best practical solution to the problems which Lloyd's itself recognises to exist. It is of course the duty of the House to ensure that objections to the Bill are properly considered and that legitimate private interests are not adversely affected without good reason. The Committee of the House has considered such objections in full and at length. Certain amendments have been made to the Bill in consequence. On the important issue of divestment, a general meeting of Lloyd's has endorsed the change which the Committee required.
The basic principle of the Bill is the preservation of effective self-regulation within the Lloyd's market. I made it clear on Second Reading that the Government support this objective. The choice is between self-regulation and regulation, directly or indirectly, by the Government themselves. We believe that, as long as the institution of Lloyd's shows the will and the ability to regulate its own affairs, it is greatly preferable that it should do do. There are several reasons for this.
First, it will be evident to all those who have studied the Fisher report and the evidence given before our own Committee that the institutions and procedures of Lloyd's are characterised both by great complexity and by a remarkable informality and flexibility. Lloyd's is a close-knit working community in which the transaction of business involves a maximum of personal trust and understanding and a minimum of paperwork and detailed regulation. It would be no light task for any outside agency to acquire the understanding, information and intuitive judgment about Lloyd's affairs that can be exercised by an effective supervisory system within Lloyd's itself.
Secondly, it is clear that, where abuses do occur, they are elusive of definition, difficult to prove, and as likely to infringe the spirit as they are the letter of the regulations. In those circumstances, internal disciplinary procedures are more likely to be effective, without destroying the essential flexibility, than Government supervision backed up by the normal apparatus of law.
Finally, it is important that Lloyd's should have the ability to adapt rapidly to changing circumstances and to make new rules to deal with new problems as they arise. The Bill gives the institutions of Lloyd's the power to make byelaws for these purposes. I am sure that this is more effective than attempting to lay down regulations from the outside, even with the aid of secondary legislation.
Will my hon. Friend comment on the resignation of Mr. Kiln from the Committee of Lloyd's and the reasons that he set out in Lloyd's List? In view of the shift of opinion in the Committee of Lloyd's that that may represent, will my hon. Friend tell us the Government's reasons why they do not find Mr. Kiln's arguments convincing?
1 am trying to explain in positive terms the Government's view of the Bill. I should not dream of commenting on internal matters relating to the conduct of members of the Committee of Lloyd's.
In passing, I would add that regulation is not merely a matter of statute and byelaws. It is also a matter of enforcement. I believe that Lloyd's should have the powers in the Bill and that they should be used. Lloyd's has proposed for itself—and we are endorsing—an extensive programme of byelaw making. By implication, we are also endorsing the need for the effective enforcement of the powers in the Bill and those to be incorporated in byelaws. I have emphasised the advantages that we see in self-regulation. But those advantages are lost if the regulation is not carried into effect properly, fairly and energetically. The promoters of the Bill have shown that they have these qualities, but it is right that it should be made explicit that the House, if it grants the powers, expects them to be used for the maintenance of the highest standards of integrity and professional competence.
I turn now to some of the more detailed and controversial aspects of the Bill. I consider first the issue of divestment. It is, I think, agreed by all concerned that there should be a separation of the control of brokers and managing agents of syndicates to avoid conflicts of interest. The only argument is about how this should be done.
Certain parties have argued that it is sufficient to separate the management of brokers and managing agencies without separating ownership. This is very much a minority 'view. The Fisher report, the Committee of Lloyd's, the membership of Lloyd's and the Committee of the House have all concluded that separation of ownership is the right way to achieve the objective.
Fisher thought that the necessary provisions would be complex and would have to be left to be spelt out in bye-laws. The original version of the Bill reflected this view. The Committee of the House, however, concluded that such a fundamental matter should be covered in the body of the Bill. The promoters have accepted this view and, with the overwhelming support of their members, obtained in a further general meeting, have proposed an additional clause. I believe that this significantly strengthens and improves the Bill.
As to the principle of divestment, I do not think that the objections are sufficiently weighty to override the considered view of most of those who have studied the issue. There is to be a five-year transitional period to allow divestment to take place. It has not seriously been argued that suitable buyers will be lacking for what are known to be valuable assets. Some, on the other hand, have argued that divestment will divide the market into factions and inhibit the growth of business. I do not find this very convincing. Lloyd's prospered before the underwriting agencies were owned by brokers and independent agencies prosper to this day. Lloyd's is a flexible and adaptable organisation, and I do not suppose that the membership would have endorsed the change if the prospect were generally as alarming as has been suggested.
My hon. Friend said earlier that we should trust the judgment of the promoters. When the Bill was first promoted in the House it did not contain compulsory, divestment. Had the promoters not throughly examined the matter then?
My hon. Friend is perhaps not giving due credit to the fact that the argument was advanced and that due account was taken of its strength. I believe that the position that has been adopted is a proper one.
I think that it will be better if I complete my speech.
A further point of detail that has been raised concerns the rules for the election of the new Lloyd's council. That seems to be very much a matter for those within Lloyd's to decide. I understand that the proposals on this point have been approved by more than 99 per cent. of the Lloyd's membership voting on the issue.
I have given way many times. I shall be interested to hear the coherent speech in which my hon. Friend will develop his own arguments.
Finally, I turn to the question of the so-called immunities for Lloyd's and its officers. I made it clear on Second Reading that I accepted the view of the Fisher report that a regulatory authority must be free of harassing litigation. In the particular circumstances of Lloyd's there are strong grounds for the view that Lloyd's and its officers should be given some measure of legal protection in the bona fide exercise of their functions. It is inherent in the nature of Lloyd's business that its members will, on occasion, suffer financial losses. Where this happens there will be a natural temptation to try to recover the losses by litigation, and Lloyd's, as a regulatory body with responsibility for ensuring good conduct in the market, will be a natural target for such litigation to obtain compensation from Lloyd's central resources.
It is a fundamental principle of Lloyd's operations that members have individual and limited liability for the risks that they accept. If they were encouraged to think that litigation against the regulatory authority would give them a chance of access to the central funds of Lloyd's as a society, that fundamental principle would be undermined and the character of Lloyd's would be radically changed.
I emphasise that the business of Lloyd's undertakers—I am sorry underwriters—is risk bearing. This was emphasised by the hon. Member for Hackney, Central. My hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke) — and I would always take careful account of his views—tried to say that the business of Lloyd's was directly comparable with that of the Stock Exchange. I do not think that is so because of the former's world-wide risk taking, which is not the same as that conducted by agents who deal in stocks and shares on behalf of their clients. The undertaking of these risks is a function which distinguishes Lloyd's from the Stock Exchange.
It is not unreasonable to want to prevent those risks from being laid off, through court actions, against the society itself. It is important that the properly constituted regulatory authority should be free to exercise its functions according to its own judgment. If we do not grant a degree of immunity, we shall be imposing a duty on the authority without the capacity to carry it our effectively. We shall not be giving self-regulation a fair chance to prove its effectiveness in the complexities of modern insurance business if every decision can become the subject of action for damages.
Is my hon. Friend aware that his Freudian slip about undertakers is a reference to the fact that in this speech he is in the process of burying the Bill's chances? By his not giving way an inch on the immunitities issue, so clearly illuminated by my hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke), it is clear that there is such opposition from Conservative and other Benches that the chance of the Bill getting a fair passage are being reduced to zero. As it has already been said that the Committee of Lloyd's will give further consideration to the Bill if it is delayed or impeded at this stage, would it not be wiser to go back to the drawing board with the Council of Lloyd's to see whether further consideration can be given to this important point?
I know that my hon. Friend has strong views on this matter and I respect them. However, I differ strongly and when I made that unfortunate slip I was trying to show the profound difference of judgment which I have with regard to the nature of the business. That is a very important element. My remarks about the progress of the Bill and the time available are of great seriousness. It would be a great responsibility on the part of any hon. Member to seek to talk out the Bill or to prevent its making progress because of the enormous consequences affecting the great institution of Lloyd's if the Bill does not receive proper attention and the question is not brought to proper resolution.
It is also right to recognise that the scope of immunity is strictly limited. It protects Lloyd's only against actions from those within the community itself. Moreover, as a result of consideration in the Committee, the categories of persons affected by the immunity have been restricted to the members and the more senior executives of firms within the market. The rights of the majority of the employees within Lloyd's are now unaffected.
A further most important limitation of the immunity is that in its revised form it protects Lloyd's only against suit for damages. It by no means rules out the process of judicial review of Lloyd's discharge of its regulatory duties. Where it is thought, for instance, that the authorities have exceeded their powers, failed to carry out their duties, or exercised them in an unfair or unreasonable manner, it would be open to aggrieved parties to seek judicial review by the High Court. A successful action could lead to an injunction or a declaration of the correct interpretation of the law.
Together with the hon. Member for Hackney, Central, I believe that this is a most important safeguard. The authorities at Lloyd's will be accountable in court for the fairness and reasonableness of what they do or omit to do. Subject to this safeguard, I believe that the Bill strikes the right balance. Regulatory decisions may well cause financial losses to members of the Lloyd's community from time to time. It is probably right that they should. But, so long as those decisions are taken within the framework of an effective regulatory system by or under the authority of the duly elected authorities and are subject to the rules of natural justice, I do not believe that there can be much ground for complaint from those who decide to work or invest in this community where the principle of utmost good faith is paramount.
If my hon. Friend will forgive me, I should like to complete my speech.
This is, of course, not Government legislation. It is a Private Bill. Nevertheless, I invite hon. Members on both sides of the House to give it their support in its present form. The fundamental reason is that it is a necessary piece of legislation for the proper running in our generation of the Lloyd's market. Nor is it a Bill that should be further postponed. The need for it is urgent. This has been demonstrated in the report of the Fisher working party.
The Committee of Lloyd's promoted the Bill with admirable promptitude and the membership backed it with an overwhelming majority. If we do not now back this confident and robust proposal for a system of self-regulation and self-supervision, we may undermine that confidence and weaken the vigour. Further consideration would not yield a better Bill. The risk is that it would yield no Bill. I do not believe that the House should take the responsibility of causing that or the confusion and uncertainty for the whole institution that would follow.
I shall be brief as I believe that there are only two issues and the sooner we get on to the detailed consideration of the amendments the better. The short point is that the present system of Lloyd's self-government is unwieldly and impractical. It must be modernised, because Lloyd's is vulnerable. In a sense, its integrity is its vulnerability. It can be got at and almost blackmailed because of its integrity and reputation, but it does not have the modern machinery to enforce integrity upon its members. That is the weakness shown up by the Sasse case and it demonstrates the overwhelming need to get the Bill through now.
There can be no question of leaving this to another occasion. The alternative of having no Bill is not only unacceptable to me and to Lloyd's, but it should be unacceptable to the country and to the House. The Bill has the overwhelming support of the Lloyd's community and it would be a parliamentary perversion—I do not think that that is too strong a description—to hold it up any further when an overwhelming case has been made out for it.
The first issue of the two issues is divestment. When the Bill was promoted, it was never in doubt that there ought to be divestment. Only the manner in which it should take place was at issue. The Committee carefully considered the matter and, quite rightly in my view, came to the conclusion that this matter was so fundamental that it should be the subject of primary legislation. The Bill has been altered accordingly. I have no dispute with that conclusion. I am sure that it is right.
The second issue is immunity. When I was first consulted by Lloyd's on these matters, I reacted against any kind of general immunities, as I am sure that the rest of the House would. However, I believe that it has now been pared down in such a way as to be tightly drawn and that only the necessary immunities are included.
There are two issues. First, Lloyd's should not be inhibited in the investigation, in good faith, of an allegation of neglect. That is right. There must be an immunity against, say, actions for negligence, libel or slander to enable proper investigations to take place.
Secondly, Lloyd's should not be made liable for a failure to exercise its powers of supervision. That would not only open the door to another Sasse case, but make the position worse. If one imposes duties and powers to investigate but leaves out the immunity from suit for failure to exercise those powers, the chances of further actions of the Sasse variety are exacerbated rather than diminished.
I do not wish to go into the details of the Sasse case. As I said at the outset, what is being put in pawn is the reputation of Lloyd's. If one gives the powers without some degree of immunity, even forgetting about the Sasse case, one is exposing Lloyd's to an action for failure to exercise a statutory duty, which would be an escape route for somebody who had unwisely written insurance business.
That seems to be the obvious form of protection which the Council of Lloyd's must have if Lloyd's is to be given the other powers to control the activities of its members.
I have been following the hon. Gentleman with great care as this is a very important argument. Is he arguing that the integrity of Lloyd's, which we all agree is one of its greatest assets, can be impugned only in a court of law? Would not newspaper reports and rumour have an equal, if not greater, effect? After all, allegations against the integrity of Lloyd's would then be uttered in an uncontrolled environment, which a court is not.
Of course rumour can be dangerous to the reputation of Lloyd's, but one of the most damaging things that we can do is to be dilatory about this legislation. No one can suggest that the Bill has not had adequate consideration either by the membership of Lloyd's or by the House.
I hope that in a few moments we shall be discussing the subject of immunity. As Members of Parliament, we, too, possess an immunity. We should not abuse that immunity by delaying the Bill any longer.
I should first declare an interest as a member of Lloyd's. I am grateful for the opportunity to intervene briefly to support the Bill. We must do everything we can to get an effective measure on the statute book this Session. I wish to make a few remarks about immunity, which has concerned many of my hon. Friends and other hon. Members. Indeed, it has concerned me a lot.
I initially became involved with the Lloyd's Bill because of the things that I saw during my professional life as a lawyer. They showed that effective self-regulation by Lloyd's was made grossly difficult by the present situation and the antiquated nature of the Lloyd's Acts. That led to my strong desire that those Acts should be brought- up to date, just as the Bill seeks to do.
The object of the Bill is to provide effective self-regulation of Lloyd's. I doubt whether any hon. Member would think it desirable that the self-regulation of Lloyd's should be handed over to the Department of Trade. It would be much less effective—that is not to criticise the Department—because it would not have the intimate knowledge of what goes on which, by the nature of Lloyd's, goes to the committee.
If we effectively regulate a closed community in which people are trading in circumstances involving large sums of money, to a considerable extent the regulation decisions are likely to affect the financial interests of individuals, syndicates, brokers and members. On the other hand, if one is exposed to claims for damages in the way in which the public at large are exposed, except in certain privileged positions that are to some extent synonymous, one's opportunity of acting swiftly, firmly and fairly is likely to be greatly inhibited.
What about brokers and underwriters at Lloyd's who might find themselves prevented from trading by regulation of the committee or who might find themselves suspended, or in other ways restricted, from trading at Lloyd's in the way that they would like? In my view, the limited immunity possessed by the Committee of Lloyd's is absolutely right. The committee must act fast on what might often be regarded as rumour. The litigation involving Lloyd's that I have been privileged to see from the inside shows that in a small minority of cases there are practices in the market that every hon. Member would wish to see promptly stamped out.
Those practices could be proven in a court of law, but they are not easy to prove. Indeed, one case, although it never came to trial, involved tens of thousands of documents and resulted in justice. That exposed some of the things that I am anxious that the committee should be able to regulate.
If the committee attempted to regulate those things in the present situation, or if it was likely to be sued for damages by the substantial institutions involved, it would either be greatly inhibited in the swiftness of its actions or find itself involved in litigation over damages that could continue for months or years. In addition, an enormous amount of committee time and effort would be required.
I have to admit that I am not as familiar with the dealings of the Stock Exchange as I am with the dealings of Lloyd's. There are serious distinctions, some of which hon. Members have mentioned. One difference is that the committee of the Stock Exchange is concerned with dealings on the Stock Exchange by people in this country. Some of the practices that I have seen have emanated from overseas. They stretch from the underwriter to the broker, to those who give business to the broker and to people involved in the insurance world stretching over thousands of miles and many different jurisdictions.
It is wrong to suggest that the Stock Exchange does not operate over thousands of miles and in wide areas overseas. Most of the leading stockholders in Britain have offices all over the world. They are regulated by the English Stock Exchange Council, and that operates without the immunities that my hon. Friend is now advocating.
My hon. Friend may well be right. The fact that the Stock Exchange seems to operate successfully at the moment without these immunities is not necessarily an argument that such immunities would not be desirable for the Stock Exchange, or beneficial for Lloyd's. [Interruption.] It does not follow as a matter of logic.
May I explain to my hon. Friends why I am convinced that this kind of immunity is necessary? The detailed investigation which will be necessary to establish a decision at law, and which the committee would be involved in if challenged in litigation, would take up an enormous amount of time and would be inhibiting. That has to be balanced against the rights and protections necessary for those who are operating in the market.
I am talking now about the big boys. I shall mention the underwriting names and members of the Sasse syndicate in a moment. The ability of the big boys to trade and their reputations might be greatly affected. The temptation to inhibit the committee by means of litigation would be enormous. It would be damaging because it would be so drawn out.
I am grateful for the improvements that have been introduced by the Committee of Lloyd's. The committee has taken enormous trouble over consultation. I started as a critic. I think I was rather a nuisance. The committee might still think that I am. As a result of the change, however, one of the big boys who feels himself unjustly treated—perhaps because he lacked a proper hearing or because of swift action on a rumour which could not be substantiated—can now go to the court for an injuction or a declaration. That can be done quickly. Lloyd's can be challenged in a matter of days. In those circumstances, if injustice can be shown to have been done, there is a swift remedy. That is absolutely right. It is the kind of protection which they need and it represents a fair balance.
My hon. and learned Friend's knowledge of these matters is well known within the House, as is his interest in and concern for this matter. It is important, however, that he should show why an immunity that is not available to the council of the Stock Exchange, in relation to very substantial firms which have the ability to pursue their interests in the courts if necessary should be available to the Committee of Lloyd's. I still do not follow his reasoning in saying that it should be available to Lloyd's and not available to the Stock Exchange. The argument that perhaps it should be available to the Stock Exchange is also slightly perverse.
My hon. Friend can read my speech to see whether it lacks logic or leaves something out. We are all anxious for effective self-regulation. I believe that the sums involved are so large, and so complex are the matters upon which the Committee will have to exercise its discretion, and so likely is it that there will be litigation, from people working in the market in Britain or overseas, that I genuinely believe that they will be inhibited if they are not given some protection. [Interruption.] Unfortunately, I have not examined the Stock Exchange's position and I am not able to comment on whether it is a wholly effective body. I do not know whether it feels slightly inhibited by the Bill. I am looking at the position of Lloyd's from what I know of it. I am exercising my judgment as to whether this is a fair and sensible balance in framing the legislation, and I think that it is.
I should be grateful if my hon. and learned Friend could explain to the House who are the overseas giants who will be suing Lloyd's. My understanding of clause 14 is that it protects Lloyd's only against the people within the Lloyd's community. There are, of course, 5,000 members of Lloyd's living overseas and I do not believe that they are the people to whom my hon. and learned Friend is referring. Anyone outside the Lloyd's community can still sue, so the clause will not be relevant. How does that tie up with what my hon. and learned Friend has been telling the House so far?
My hon. Friend will know—it has become particularly clear in recent years—that large insurance interests overseas are playing a bigger and bigger part in the Lloyd's community through their connections with the Lloyd's community. My hon. Friend will know, from his knowledge of the insurance market, how the tentacles spread out. Although the action may be brought by a member of the Lloyd's community in Britain, the influence which bears upon him and the financial interests affected are spread far beyond Britain.
With regard to the stock market, will my hon. and learned Friend agree that one of the major differences is the degree of competition? One cannot reasonably compare the competition that exists between stockbrokers with what goes on at Lloyd's.
I am very grateful to my hon. Friend, because I think he has a point. There are members of the Stock Exchange present in the House who will correct me if I am wrong, but I was not aware that our Stock Exchange competed with, say, the stock exchange in Tokyo, in Australia, in New York, or in any other part of the world, in the same way or for the same business as that for which the insurance markets are competing internationally. My hon. Friend has made a genuine distinction, but other hon. Members with more knowledge than I have may agree or disagree with it later.
Is not my hon. and learned Friend being very one-sided in his case? He accepted that one of the larger underwriting syndicates would or could suffer severe damage if action were taken against it—if it were suspended or restricted in any way. He referred to it as an incentive to take legal action or to seek judgment. Is it not indefensible, to use his own words, that the committee should, without any restriction upon it, be able to take such action to damage major interests on the basis of rumour, to use his own words again? That rumour could be based on prejudice or personality disputes or be affected by the make-up of the committee. Is my hon. and learned Friend saying that unrestrained action of that kind, with an element of immunity, should be able to be taken against people. merely based upon rumour?
I am afraid that my hon. Friend was not listening with his usual care to what I said on the matter. I explained, when I was mentioning some of the litigation in which I have been involved, that many of the things which need to be regulated come into the market initially as a matter of rumour. I went on to explain that they could be proven in a court of law. I have seen the processes, involving tens of thousands of documents, through which that proof is marshalled. If the Committee of Lloyd's is to be obliged to marshal tens of thousands of documents and get itself involved in repeated litigation of this kind, its powers of regulation may be seriously inhibited.
The point is not that the committee will act on rumour or prejudice but that the information may come initially as a matter of rumour. I get the impression, from my discussions with those with whom I have had the opportunity to speak in Lloyd's, that they would like to see a firm committee establishing firm control, and having the effective tools with which to do it. A balanced system of immunity is one of those tools.
I have been following my hon. and learned Friend's argument with great care. Will he speculate whether the Committee of Lloyd's might have been negligent or might become negligent? If it becomes negligent, as my hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke) said earlier, how can the victims of that negligence obtain redress if immunity is granted?
I am glad that I gave way to my hon. Friend, because that leads me to the second part of my speech, which is to consider those people who might be in the same position as the Sasse syndicate. That is what my hon. Friend has in mind.
All hon. Members will be anxious to ensure that victims are not wholly deprived of redress. However, one must consider against whom that redress should be. In the Sasse case—I do not claim to know everything about it—it is a moot point whether there was negligence in the Committee of Lloyds. It is fair to say that people settle legal actions for reasons other than the fact that they believe that they will lose them. Whether the Committee of Lloyds was negligent or not, all the members of the Sasse syndicate would have had profound causes of action against their managing agents, underwriters and others intimately involved. The reason why they did not sue them was that they were not worth the money by the time that they had taken the unwise decisions.
As I understand the position—I shall be corrected if I am wrong—in the new era that will follow the enforcement of the Bill, managing agents and underwriters will be expected to be insured in a much more effective way than they have been up to now, and in a much more effective way than the Sasse syndicate. Secondly, the prime target will be the incompetent, negligent or stupid underwriter, with whom the names are in contractual link.
He must pay up. People will have their redress and will be looking for their redress to the right source. I hone that that answers my hon. Friend's point.
Does the hon. and learned Gentleman agree that, in answer to the points raised by his hon. Friends about the danger of the council taking damaging action against members on the basis of rumour, under the Bill that is much less likely to occur because of the increased power that will be put into the hands of the council to require disclosure of all relevant documents and to cross-examine all relevant parties? In the light of that, they will be taking action on the basis of knowledge and not rumour.
I agree with the hon. Gentleman. I became interested in the Bill because I was anxious that the committee should have adequate powers to deal with fraud and to stretch those powers beyond those with whom it is intimately related so that it can force documents out of people who would not be obliged to provide them by law and to look for explanations in the same way that the hon. Gentleman has pointed out. I was grateful to the Committee of Lloyd's for considering in enormous detail the points that I raised, of which all my hon. Friends approve.
To return to the Sasse case, does my hon. and learned Friend admit that, whether or not negligence was proved, the basis of that negligence was that the Conunittee of Lloyd's had information about what was gong on in America which it failed to hand on to the managing agents of the Sasse syndicate? If we have an equivalent problem in the future, it may well be that the management agents of the syndicate are doing everything right and have behaved immaculately and there will be a repeat of the position whereby the Committee of Lloyd's failed to hand on information that was relevant to the managing of that syndicate. Is my hon. and learned Friend happy that, in those circumstances, the Committee of Lloyd's should be immune from being sued for negligence?
I am not informed to the last degree about the Sasse case, but I understand that if there was an element of what my hon. Friend suggests it was lot the major cause of the problems that led to the downfall of the syndicate. It was probably a tiny drop compared to some of the buffoonery and incompetence with which some of the affairs of the syndicate were handled. Perhaps I should modify my Ianguage and refer to unwise underwriting practices involved in the management of the affairs of that unhappy syndicate.
Rumours or information may reach the Committee of Lloyd's and if it were its duty to pass such information to everybody, some of those trading with Lloyd's might be protected from loss, but heaven help us if that is to become an obligation of the committee. Its function is to regulate the market fairly, equitably, swiftly and efficiently and not to seek to protect everybody against everything that is going on. There is a risk involved in trading at Lloyd's and hon. Members will agree that the people involved should look primarily to those who are managing their business.
It may be helpful if I draw one or two parallels with the outside world. It has hardly been mentioned in the debate, but I know that, against the background of the public discussion of the position of trade unions, the question of immunities has worried many hon. Members on both sides of the House. However, there are enormous distinctions between the immunities granted to trade unions and those that I hope will be granted to the Committee of Lloyd's as a regulatory body.
To put it crudely, the immunities granted to trade unions allow them, for reasons of public policy which some think are time-expired, deliberately to cause damage to those with whom they are in dispute and often to the public. The immunities for Lloyd's ar e to be allowed to assist it in regulating the conduct of the market to protect its members and those who do business with it, including policyholders. That is a fundamental distinction.
I respect the views of my hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke), but I do not believe that a system of filtering claims would greatly assist Lloyd's. Indeed, it would be a frightful millstone around its neck. If, in order to bring a claim against Lloyd's, a person had to show a prima facie case, all that he would have to do would be to establish facts that disclosed a cause of action and raised triable issues at law. Everyone would say "Oh my goodness, he has a triable case against the committee." That would be embarassing for the committee and it is not the sort of protection which I hope my friends would offer me.
It is important that the committee has decided that there is to be no immunity for what is rather undescriptively called clerical or administrative error. The Committee of Lloyd's will have the duties of requiring people not to write too much business and of seeing that they make proper returns. If those returns are not properly scrutinised or show that people are writing business that they should not be writing, and names or others suffer losses, there will be no immunity. That is a sensible decision.The committee seeks immunity in circumstances where it has to exercise discretion.
We are dealing with a quasi-judicial function and in such circumstances we often grant immunities. There is complete immunity for those in the courts and, for sound reasons, immunity for counsel practising in the courts, although it is possible for them to do damage to people in the course of their work. It is sensible public policy. It would be possible for Lloyd's to exclude the right to sue by contract. Those who have read the Fisher report will recognise that. Doing that for 19,000 people would lead to loopholes. It would be practical for the vast majority of those 19,000 people, but it is more sensible to provide the right through Parliament than to force Lloyd's back to contract.
We give immunity to public officials under National Health Service Acts, public health Acts, food and drugs Acts and highways Acts in a number of public functions which, to a greater or lesser degree, are comparable with the position of the Committee of Lloyd's as a regulatory body. We should think long and hard after all the debate before we sink the Bill on the immunities issue.
I follow the hon. and learned Member for Hemel Hempstead (Mr. Lyell) in broadly commending the Bill to the House. I hope that it will make reasonably speedy progress. Although it is before us under the Private Bill procedure, it is important to remember that it is not, in spite of what one has heard, entirely sectional legislation. There is a very strong element of public interest to be borne in mind, as the Minister said. The Minister is responsible for overseeing the insurance industry. He has extensive powers. The public would find it strange if the legislation were to falter now.
I join hon. Members in congratulating the Committee chaired by the hon. Member for Oldham, West (Mr. Meacher). The Committee contained a wide spectrum of political opinion. Its judgment is to be commended in terms of quantity—as can be seen by the documents on my Bench—as well as quality. That such a Committee can agree as it has is a powerful reason for accepting its recommendations and the House should take that into account.
I am in no doubt about the divestment issue. The Committee was right to have that written into the Bill. The formula is right. I listened with care to the hon. Member for Oldham, West on the immunity issue. Superficially one might be attracted, as perhaps he was, to an insurance policy to cover all errors and omissions, but that is a simplistic solution, as I think the hon. Gentleman recognises. It does not take us away from litigation. There would still be litigation unless there were a "no fault" provision, and that would be outrageous.
I had to agree with the hon. and learned Member for Hemel Hempstead on the immunities issue that the analogy with the Stock Exchange was spurious. It is right that there should be a level of immunity for many disciplinary bodies, but not, of course, as the hon. Member for Hackney, Central (Mr. Davis) said, total immunity. If one joins a club—and in an sense we are talking about a club—one must accept certain self-denying ordinances.
The Bill is good. It might be only 99 per cent. perfect, and it might have some flaws, but the duty of the House is to weigh the few flaws that might be left in the Bill against what would be a greater fault—not having the Bill at all. Although few of my constituents are members of Lloyd's, my and other hon. Members' constituents have insurance policies, and the overwhelming public interest is to ensure that this important' element in the British insurance structure is properly regulated under a system that is compatible with the age in which we live. If the House were to delay the Bill unduly, there would be no Bill of this sort, which would be dangerous both in Britain and outside.
The hon. Gentleman suggests that the immunities involved in the Bill are necessary to allow Lloyd's to work. Can he tell the House what he will be doing on Monday when the trade union movement will advance the argument that it requires immunities to allow it to work? If he is consistent, will he vote for or against the Employment Bill?
The hon. Member for Dewsbury (Mr. Ginsburg) said that it would be wrong if the Bill faltered or was delayed. Why does he assume that the normal process of negotiation and seeking amendments on Report should not apply in this case? Other hon. Members seem to suggest, as he did, that the Bill would be killed if no agreement were reached on certain matters. Is that not the normal procedure with Public Bills and, very much so, with private legislation?
I am not the sponsor of the Bill or a Minister. The Minister explained the Government's point of view and the Bill has already taken up much time. It is not for the Government, but, presumably, the Chair, to say how much time will be made available. However, it is pretty clear that if the Bill were to be extensively debated night after night there would be insufficient time and it would fall. I should regard such a failure as thoroughly undesirable.
I am grateful for the opportunity of supporting the Bill and the argument for it put forward by my hon. Friend the Member for Harrow, Central (Mr. Grant). This is an important measure. The net overseas earnings of Lloyd's during 1980 were no less than £560 million as against the net overseas earnings of the United Kingdom banking institutions of £314 million. We are, therefore, talking about a subsantial matter.
All hon. Members who have spoken this evening agree about the urgency of bringing Lloyd's into the 1980s. It is no longer a gentleman's club with a membership of 450; it is now nearly 20,000 strong.
I support the point made by the hon. Member for Dewsury (Mr. Ginsburg) that consideration of the Bill has been long and that thanks are due to the hon. Member for Oldham, West (Mr. Meacher) and the members of the Committee, to whom I pay tribute. I shall comment briefly on some of the points made in the debate. Many of my hon. Friends made full and eloquent speeches. Others, by means of interventions, also made many good points.
My hon. Friend the Member for Epsom and Ewell (Mr. Hamilton) said that on three issues—fraud, divestment and immunity—Lloyd's was subject to considerable criticism. I believe that, that was right. However, he failed to recognise or acknowledge the way in which on every one of those issues Lloyd's, and the Bill, reflects a considerable shift, bearing in mind the comments made.
We fail to appreciate that we are talking about establishing a system of self-regulation. To do that, we have laid down in considerable detail rules and regulations, some of which Lloyd's will adopt. The nature of any self-regulatory system is that it saves public expenditure and bureaucracy, and my hon. Friend the Under-Secretary has made that clear. However, disciplinary powers must be vested in the body running the system, and there must be rights of appeal as a result of the exercise of those disciplinary powers. That does not exist in the present Lloyd's community, but it is embodied in the Bill. Those regulatory powers must be exercised promptly and efficiently. My hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell) dealt extremely well with many of the points on immunity.
Many of our institutions have self-regulatory systems, and it is essential that those powers should be exercised promptly. The council or committee is in a quite different position from that of professional bodies, such as my trade union, the Law Society. The members of the council or committee are more like judges, albeit in a self-regulatory system. Lloyd's is very different from some of the institutions cited. It deals with substantial risks. It is not a professional body; it is a body of traders, and the risks are quite different.
Lloyd's is also different because it has sleeping partners in a way that most professions do not. One of the Bill's essential functions is to protect sleeping partners who are the external members. That is only right. An unusual aspect of Lloyd's is that the potential liability of members is unlimited. That is the basis on which people become members of Lloyd's.
My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), who made a considerable speech in a number of small slices, seemed to ignore the provisions in paragraphs 6.05 and 6.07 of the Fisher report dealing with the potential need for some form of immunity. Indeed, the hon. Member for Oldham, West made that point. I am informed that Mr. Kiln—whose resignation from the committee has been mentioned—had threatened to resign on an earlier occasion if the immunity under debate was not included in the Bill.
I share the concern about the immunities that has been best expressed by my hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke). However, my hon. and learned Friend the Member for Hemel Hempstead has answered the points that he made. In what he said, however, he evinced less than complete familiarity about the circumstances in which the Sasse case was settled. Lloyd's was not proved to have been guilty or negligent. It believed that it had a full answer to the allegations that were made. However, the Sasse members extracted a settlement of the affair on practical grounds. Those grounds were that, if a settlement had not been reached by Lloyd's, its certificate from the Department of Trade—which allows it to continue in business and to trade—would have been threatened by the action by the Sasse members. That was one of the motivating interests that brought about that settlement. There is no secret about that.
The result achieved in the Sasse affair was wrong. It may have brought some relief to the members concerned. No doubt, they will regard it as fair. However, the wrong people paid. Instead of the agents—the professional people involved—paying as they should, under the normal provisions of professional negligence that are in no way affected by the provisions of clause 14, it was the members of Lloyd's who, by a contribution, in the end paid the settlement to the Sasse members. Therefore, the Sasse case illustrates the danger to Lloyd's and the threat to the capacity of the council and the committee of being effective and proper self-regulatory bodies.
I apologise to my hon. Friend. He has made many points. There are many points that I should like to get through if I am to try to answer some of the questions that have been posed.
The hon. Member for Hackney, Central (Mr. Davis) made a point that may not cut any ice in the debate this evening—the importance of protecting Lloyd's reputation. He referred to the incredible and immeasurable damage that can be done to that reputation by small or minor allegations, disturbances or arguments. The protection of Lloyd's reputation is central to the confidence that people have in that institution.
I apologise to my hon. Friend. I must continue. I cannot give way, even to my neighbour in the splendid county of Dorset. I assure him that that is only temporary.
The answer to my hon. Friend the Member for Nantwich (Sir N. Bonsor), who is disturbed about immunity, is that, in the light of the comments made by my hon. and learned Friend the Member for Hemel Hempstead, we should consider who should serve on the council and on the committee of Lloyd's given the financial risks that are apparent if that limited degree of immunity were not available.
I am sorry, but I shall not give way. My hon. Friend has had plenty of opportunities to make his points.
The potential risks for members serving on the Committee of Lloyd's compared with members serving on the Committee of the Law Society are immeasurably greater. We are talking about a trading exchange dealing with risk. It is not a professional body.
I have adumbrated the need for the limited immunity. The principal reason for that immunity, which has concerned every hon. Member, is that, if it were not allowed to the Committee of Lloyd's, there would be a gap through which a member, who wished to put liability on the members of Lloyd's would at least have some encouragement to drive a coach and horses. That would make the Committee of Lloyd's difficult to work and would discourage anyone serving on it.
This is the last practical opportunity to get the Bill through Parliament. My hon. Friend the Under-Secretary of State said nothing that would contradict that conclusion. The present rules are unsatisfactory. Nationalisation under a totally statutory system would be worse. The Bill has been the subject of widespread consultation, and prolonged consideration by the House and our Committee. I commend it to the House.
I first declare an interest in the subject of the debate. I am an external member of Lloyd's, and I am also, in particular, a member of the syndicate headed by Mr. Posgate and Mr. Kiln. In case there should be any misunderstanding, let me make it clear that the views that I express tonight—and which I shall express, I hope, when the amendment standing in my name on immunity is called—are my own, and are put forward in a serious attempt to get the Bill into a form which is generally acceptable—which, I am sad to say, at the moment it is not.
I want to return to two or three of the matters that my hon. Friend the Under-Secretary of State for Trade raised earlier and on which he did not feel able to give way to me at the time. Despite the fact that the scent may now be a little cold, I shall pursue those matters.
My hon. Friend said, first, that there are plenty of potential buyers for the businesses that will have to be sold off under the divestment clause. However, he did not mention the fact that many of those buyers will be foreigners. I cannot believe that it is the 'Government's policy to encourage good profit-making British industry to be sold off to foreigners.
Secondly, my hon. Friend mentioned the overwhelming support that had been given by the membership of Lloyd's to the representation in the proposed council. I cannot understand where my right hon. Friend got that idea. The external association of the members of Lloyd's who are not working in the community is adamant that it is not happy with the make-up of the council. As hon. Members are no doubt aware, the proposal for the council is that there shall be 16 working names, eight external names, and three co-opted members. That is not a satisfactory breakdown of the representation in that council. Unfortunately, I have only four minutes left, so I shall not have a full opportunity to explain why.
Under the proposals, the chairman and deputy chairman of Lloyd's will be chosen by the council. I understand that they will be chosen on a straight vote—one vote for one man—and therefore there can be no question of the representatives of the outside names having anything other than an extremely marginal interest in who will be the chairman and deputy chairman of the Lloyd's community. That is not a proper representation, when one takes into account the enormous imbalance whereby there are 15,000 external names and 4,000 working names. I do not believe that the election of the chairman and the deputy chairman should be so exclusivey a matter for the working names.
Furthermore, it was suggested—I think by the hon. Member for Oldham, West (Mr. Meacher) —that only the working names knew working names. No one who is a member of Lloyd's could possibly follow that argument. Working names in Lloyd's are known by a wide number of external names, and the relationship between them, in many cases, is quite close. To suggest that external names are not well qualified to vote for the working names to represent Lloyd's as members of their council is not right.
In saying that, may I add my congratulations to the hon. Gentleman on the excellent work that the Committee did upstairs and for the way in which most—but, unfortunately, not all—of the Bill's shortcomings were dealt with in that Committee. It is unfortunate that the immunities clause, despite the undertaking given by the late Sir Graham Page in the House that it would be put into a schedule, is now back in the main body of the Bill as a result of what occurred in Committee. The fact that it is back in the main body of the Bill is a matter of concern to many of us. The immunities that it is sought to give to the council and the Committee of Lloyd's are not acceptable to many of the external names and to many of the people involved in the community.
There is one—
On a point of order, Mr. Deputy Speaker. I should like to know where we stand at the moment and I think it might be of assistance to all hon. members if you were to clarify to the House exactly where we stand. Are we discussing the Lloyd's Bill? Have we moved on from the Lloyd's Bill? Are we discussing amendments to the Lloyd's Bill? Or have we indeed moved on to the Local Government (Miscellaneous Provisions) Bill?
First, may I make it clear that I was going to speak on new clause 1 of the Lloyd's Bill, not about sex shops? Could I also ask for your clarification, Mr. Deputy Speaker, as to what happened with regard to further consideration of this Bill, because when you asked when this business was to be taken further the only voice that was raised was that of my hon. Friend the Member for Aldridge—Brownhills (Mr. Shepherd), who said "Six months hence".
Order. The voice which reached my ears said "Tuesday 9 February" and it was the voice of the hon. Member in charge of the Bill. We are now dealing with the 10 o'clock motion.
On a point of order, Mr. Deputy Speaker. Could I just make the point, because I think it is important to have this on the record, that during the course of the debate on the Lloyd's Bill I raised with the Chair what would happen and what date there would be for the Bill if the business was not concluded tonight. The Deputy Speaker informed me that this would be considered in due course, and therefore a date has to be made available. I simply want to make that point to make sure that we do not lose the progress on the Bill.
This is a genuine inquiry about private business procedure, Mr. Deputy Speaker. You did then say that it was up to the hon. Member in charge of the Bill to name the date. Can we assume that in fact it is the Deputy Chairman of Ways and Means who allocates that time? Does it follow that the date mentioned is indeed the date for further consideration or do we still have to wait and see when time is allotted?