Judicial Review

Orders of the Day — Financial Services and Markets Bill – in the House of Commons at 4:31 pm on 1st February 2000.

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"Nothing in the provisions of this Act shall restrict, impede, or prevent a judicial review of the exercise or non-exercise of any power or discretion vested in the Authority or the Treasury by or under this Act.".—[Mr. Heathcoat-Amory.]
Brought up, and read the First time.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

I beg to move, That the clause be read a Second time.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

With this it will be convenient to discuss the following amendments: No. 13, in clause 2, page 1, line 19, at end insert

"and (c) which is reasonable, fair, open, accountable and proportionate". No. 397, in clause 264, page 134, line 41, after "Authority", insert "reasonably".

No. 398, in clause 283, page 145, line 26, after "(c)", insert "in his view reasonably".

No. 399, in page 145, line 29, after "information", insert which in the Director's view reasonably relates to any matter relevant to the investigation".

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The new clause concerns judicial review. The background is the substantial statutory immunity that the authority enjoys which, to put it bluntly, means that people will not be able to take legal action against the authority even when it behaves negligently, or recklessly.

In the debate last week, we tried to alter that and to restrict and narrow the statutory immunity. We failed, but the authority must not be completely unaccountable at law. Given the Government's resistance to our earlier proposal, it is particularly important that we explore to what extent there are other ways in which the authority can be held accountable both to the House and through the existing legal system. This group of amendments explores how and to what extent there are provisions for legal challenge, or a review of the authority's actions. The picture is not encouraging.

The authority's decisions as they affect the regulated community can be appealed to the tribunal that is set up and described in the Bill—although, again, we do not have many details about how the tribunal will operate. Those details will be introduced by regulation. The Lord Chancellor will deal with the issue. It is a subject of consultation, but the House will not be able to review the matter.

The important point is that there can be an appeal on a tribunal decision to the ordinary courts only on a point of law. We should remember that the tribunal is not like an ordinary court of law. The requirements and qualifications of those who will staff the tribunal will not be particularly onerous. It is a special legal body.

Again, the FSA is making its own rules, which have the force of law and which are not subject to parliamentary review. People can be fined unlimited sums and can lose their livelihoods under a system that allows little appeal to the ordinary, familiar courts and where there is little parliamentary scrutiny.

I think that fairly describes the system in the Bill. If I am at all accurate in my description, it will follow that the remaining aspects of legal accountability are precious and must not be weakened or removed. That brings me to the importance of judicial review. Even the Government are subject to judicial review. It is, to some extent, a blunt instrument, but it is an important safeguard none the less. It means that the Government are finally accountable at law; they are not above the law. The House makes a law. The Government are subject to it. The Financial Services Authority, too, should be subject to the law. We therefore need the long-stop safeguard of providing that the authority's decisions are open to judicial review.

The picture painted in the Bill, and particularly in the detailed wording of the clauses, is not particularly encouraging. The authority is given enormous discretion in its use of powers—in how it may make rules and how it may enforce them. The drafting really seems to be designed to preclude the possibility of a court checking that the authority has acted "reasonably", to take only one example.

We are always being assured by the Treasury and by Ministers that the authority will always act reasonably, and doubtless that is the intention. However, the Opposition would like to ensure that the courts can ensure that the authority acts reasonably and can review a decision by the authority if it is thought that an action is not reasonable. As I said, the wording makes it really very difficult for a court to conduct such a review.

Clause 10, for example, allows for reviews of the authority by an "independent person". The independence of such an investigation would obviously be very important, as there might be allegations that the Treasury or Treasury Ministers were somehow implicated in or associated with the matter to be reviewed. The independence of anyone conducting such a review of the authority is therefore essential.

Although the Bill provides that the inquiry should be independent, that is not an objective test to be applied. Clause 10(7) states: 'Independent' means appearing to the Treasury to be independent of the Authority. It will be very difficult for anyone to prove before a court that an inspector or investigator did not seem to the Treasury or to Ministers to be independent. Such a task is very much more difficult than simply requiring the inspector to be independent, a matter that would be capable of objective independent assessment. That is by no means the best example, however.

A more important example is provided in clause 139, on the appointment of inspectors to examine the affairs of the "authorised" community, which is composed of those regulated in the Bill. I own that it is important that the Treasury should have the power to appoint investigators to do that work, but it is a pretty draconian power. A firm on the receiving end of an investigation, even if subsequently cleared, could suffer great damage to its reputation—indeed, once it was known that a firm was being investigated, that in itself could drive customers away. It is a most important power.

The Bill quite rightly uses the phrase "good reason" to place limits on how and in what circumstances investigators should be appointed; the catch is that all that has to be shown is that it appears to the authority or to the Secretary of State that there is a good reason for their appointment. It will be very difficult for anyone to prove that it did not appear to the authority or the Secretary of State that there was a good reason.

It would have been much better to require a good reason. If there was such a requirement, outside bodies and courts might be able to show that there were no good reasons. To try to get inside the mind of the Secretary of State or the chairman of the authority and show that, at the time, they did not believe that they had good reason would be a very difficult hurdle to jump, and would effectively preclude the possibility of judicial review unless it was blatantly clear to everyone that the Secretary of State could not have had any good reason.

5.30 pm

I maintain that the wording throughout the Bill makes it very difficult for anyone to second-guess the judgments. I believe that it is right that we have tabled a new clause to ensure that nothing in the Bill makes it difficult to undertake such a judicial review. New clause 43 does exactly that, by requiring that nothing in the Act shall restrict, impede or prevent a judicial review". That would provide a safeguard against the claim that judicial review would always fail because the detailed and rather cunning wording in some parts of the Bill would make it so difficult.

Amendment No. 13 adds a general requirement that the authority acts in a way that is reasonable, fair, open, accountable and proportionate". Again, the background is clear. We are dealing with a powerful body with a great many discretionary powers: it can make rules; it can authorise people—or decide not to; it can investigate; it can intervene in the market; and it can fine people.

There is no absolute requirement because clause 2 says that that should be done only so far as is reasonably possible". In the circumstances, the Government should find it difficult to oppose our proposal, as they have assured us throughout the Committee, and more recently, that the authority will always act in those ways. If that is the case, let us put it in the Bill.

Amendment No. 397 again adds the "reasonably" requirement to the FSA powers to request information in relation to applications by recognised investment exchanges and clearing houses. On this, too, the Minister has assured us that the FSA will always act reasonably, and therefore he cannot object to our inserting the word in accordance with amendment No. 397.

Amendment No. 398 relates to clause 283, which deals with the way in which the Director General of Fair Trading can investigate matters, and proposes that the director general's power to require documents to be produced to him can be exercised only where he reasonably believes that the document relates to a matter relevant to his investigations. That is a useful check on the exercise of the director general's powers.

Amendment No. 399 relates also to the information which the Director General of Fair Trading can require, as provided by clause 283. The amendment seeks to limit his power by providing that the information must in his view reasonably relate to a matter relevant to the investigation.

This is a comparatively modest package of amendments, which go no further than the assurances that the Government have given us. We have heard warm words about the openness in which matters will be conducted, the accountability that exists and the reasonable way in which the authority will exercise its powers. We want to upgrade and emphasise those assurances, and safeguard our liberties by ensuring that if this powerful and independent authority exceeds its powers, there will at least be provision for judicial review.

Photo of Sir Nicholas Lyell Sir Nicholas Lyell Conservative, North East Bedfordshire

I am glad to follow my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who has given a comprehensive introduction to the new clause and amendments. I endorse and support what he said.

The Government should not be afraid of judicial review in relation to the Bill, but I have a nasty feeling that they are unnecessarily so. I request Ministers to have the Bill examined, between the conclusion of our proceedings and its consideration in the other place, because judicial review is a safeguard for the citizen. Everybody accepts that the regulation of the City of London is a detailed and complex matter that requires great skill, and nobody would deny that the Bill will give immense powers to the Financial Services Authority and immense supervisory powers to the Treasury. The explanatory notes to the Bill make it clear that it seeks to provide for the accountability of the authority. However, those notes are slightly alarming when set against the detailed drafting of the Bill, which seems to be more concerned to make the Bill judicial review-proof than to make the authority accountable through the courts.

When I was in government, I had responsibility for the questions of judicial review in relation to legislation, and I certainly do not want the FSA to be hamstrung by over-easy and unnecessary applications for judicial review. I do not believe that there is a serious risk that that will happen. I accept that those who are being regulated are often financially powerful and might seek to use the weapon of judicial review, but the way that the courts operate judicial review rightly gives a wide discretion to the regulator.

The courts are reluctant to step in and second-guess a regulator when he decides that some piece of regulation is reasonable. However, the language of the Bill appears to be specifically designed to stop the courts doing that. It is to try to counter that that we have tabled new clause 43 and amendment No. 13. New clause 43 is designed more to flag up that serious issue than to provide perfect drafting. It would be much better to go through the Bill and insert the word "reasonably" where we suggest it is necessary, or to take out expressions such as "in the Authority's view", which seek to exclude the intervention of the courts and give an even wider discretion to the FSA than the courts would leave to it.

I commend the thought behind new clause 43: Nothing in … this Act shall restrict, impede, or prevent a judicial review of the exercise or non-exercise of any power or discretion vested in the Authority or the Treasury". However, I ask the Government to consider the individual clauses in the light of that thought and not necessarily to agree to include the new clause as the perfect way to achieve that aim. In fact, the new clause would look a little stark set against the constant examples of restriction, of which my right hon. Friend gave several useful instances.

I commend amendment No. 13 strongly on its own account. It is reasonable and sensibly drafted and states what we would wish to achieve. Clause 2 states: In discharging its general functions the Authority must, so far as is reasonably possible, act in a way … which is compatible with the regulatory objectives; and … which the Authority considers most appropriate for the purpose of meeting those objectives. The amendment would add a new paragraph (c), stating that the above would be done in a way that was reasonable, fair, open, accountable and proportionate. I cannot believe that any Minister would say that the Government intended to be anything other than reasonable, or that the authority intended to be anything other than fair. I think that it would intend to be open, as well as accountable and proportionate.

Photo of Sir Nicholas Lyell Sir Nicholas Lyell Conservative, North East Bedfordshire

The Minister nods sympathetically to those suggestions. I hope that he will respond in similar fashion to this valuable amendment. It would be nice to have the good intentions manifested on the Government Front Bench expressed in the Bill, rather than paving the way to hell.

I shall go into more detail about the words "accountable" and "proportionate". I commend them to the Government with special confidence, as a new paper by Howard Davies, no less, has been sent by his director of public affairs, Mr. Christopher Boyce, to all stakeholders. I received it, although I am not sure how I am a stakeholder in the FSA.

On page 10, paragraph 18, the document makes it clear that the authority intends to act with proportionality. It states: The restrictions imposed on firms and markets should be in proportion to the expected benefits for consumers and the industry. Those wise words should be included in the Bill, as they embody what "proportionate" means.

The reference to accountability on page 35 of the document is slightly less comforting, as it seems to confine accountability to the annual report. Although annual reports are nice, in this case the contents would be controlled by the authority. Moreover, accountability is to include what are described as "'clusters' of performance indicators"—a dangerous phrase, as one man's performance indicator is another man's nightmare. Clusters of performance indicators are not necessarily the ideal way for the FSA to be accountable, but the notion of accountability is clearly accepted in principle, and I commend its inclusion in the Bill.

Clause 2 sets out the authority's general duties, and specifies that the Authority must, so far as is reasonably possible, act in a way … which the Authority considers most appropriate for the purpose of meeting those objectives. The slightly inelegant legal description of such wording is that it is a "self-reference" clause. I suggest that the words "which the Authority considers" have been expressly used to try to oust the jurisdiction of the courts in the exercise of judicial review.

The Government cannot blame the Conservative Government and say that we took similarly extensive measures to fend off judicial review. About 10 years ago, we published a useful document for circulation in the civil service called "The Judge over your Shoulder". I hope that it is still in play. It was designed to explain that judicial review is not the enemy of good administration, but is a reasonable and proportionate monitor of good administration. I commend that approach, which I am sure in principle the Government would wish to accept and continue.

5.45 pm

Let me finish by saying a word about the European convention on human rights. I wish to encourage the Government to be up-front, in your face and open about their willingness to be fair, reasonable and proportionate. I believe that the Government have little to fear from unreasonable judicial review. However, if they keep using legal techniques such as the phrase "which the Authority considers" to oust judicial review, counsel, who are proliferating in the human rights field—I declare an interest here—will draw on the European convention on human rights to get round the anti-JR provisions. Incidentally, in this case JR does not wear a 10-gallon hat; it is usually a scratch-wig.

Article 6 of the European convention provides for due process for a fair hearing in public. Article 7 provides for no punishment without law. Article 1 of protocol 1 deals with the right to own property and not to be deprived unfairly of property. All those articles are relevant to the areas in which the Financial Services Authority operates. Those articles—which are JR-proof, stand in an overarching position above our statutory legal frameworks and, according to the Chancellor of the Exchequer in the statement that he has to make, complied with in the Bill—will all be brought to bear. One does not quite know where they will stop.

I think the Government would be better off with judicial review in accordance with United Kingdom law in the context in which our courts have thought it reasonable to proceed, and not with great extensions. The Government would be wiser to accept a reasonable measure of judicial review and not to exclude it. They cannot, of course, exclude the European convention on human rights, and I do not ask that they should. But the Government's reasonableness regarding the terms of the convention will cause Strasbourg to be less likely, rather than more likely, to intervene inappropriately.

What I propose is in support of good legislation; it will improve the Bill.

Photo of Mr Nick Hawkins Mr Nick Hawkins Conservative, Surrey Heath

It is always a pleasure to follow my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell), who has just spoken so well about the importance of the European convention as applied to the Bill and, in particular, the amendments, which I strongly support. I have not, until now, played much of a part in the deliberations on the Bill, but I particularly want to speak to these amendments, both as a lawyer and—as I mentioned in an earlier intervention—an officer of the all-party group on insurance and financial services. I am delighted to see the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) in his place. He and I have been actively involved in that group, and I know that he would agree that we try to have a positive effect on the consideration of all financial services and insurance issues in the House. It is one of the more active all-party groups and, as recently as last Thursday, we had a meeting with senior FSA officials.

As a corporate lawyer, I specialised in this field for a number of years and dealt with all the problems arising from regulatory rule books. At that time, however, we did not have the additional problems of a Government trying to exclude new legislation from the supervision by judicial review, nor was there the overarching supervision of the European convention, to which my right hon. and learned Friend referred.

I wholly agree with my right hon. and learned Friend that the Government are running a huge risk; they cannot exclude the operation of the convention. It is inevitable that at some stage the measure will be challenged, and if the Government do not accept the new clause and the amendments—if the concept of reasonableness and judicial review is not accepted—all the provisions will be struck down. The Government would be extremely wise to accept the importation into the measure of the concept of reasonableness. The amendments are essential because they would introduce the concept of what is reasonable, proportionate and open.

I was one of the many lawyers of my generation who were influenced by the late great Lord Denning. I can still hear him saying, in his dulcet Hampshire burr: Be you never so great, the law is above you. A generation of lawyers was brought up with that phrase ringing in their ears. Many of us were privileged to appear in the Court of Appeal when Lord Denning was presiding as Master of the Rolls; he ensured that the principles of natural justice were observed—especially in cases of judicial review.

It is extraordinary that, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out, the Government propose to create a situation whereby a decision can be made that will not be subject to any scrutiny, appeal or review. They are setting out, specifically and in terms, to exclude the operation of judicial review. That is wrong. It runs contrary not only to the European convention but to all the principles of English law and all the principles of natural justice. My right hon. Friend did not exaggerate when he made that point.

The Government's proposal should be anathema to all hon. Members. It is absolutely wrong in principle. I urge Ministers seriously to reconsider the matter. The new clause and the amendments are a vital improvement to the Bill. My right hon. and learned Friend the Member for North-East Bedfordshire referred to the words in amendment No. 13: reasonable, fair, open, accountable and proportionate. How could anyone possibly object to that?

I am also reminded of the principles set out in one of the most notable post-war cases of Government abuse—about which all law students of my and subsequent generations were taught—the Crichel Down case. The case concerned an abuse of process—I think, by the Ministry of Agriculture, Fisheries and Food. After many years, it was declared that the Ministry had behaved wrongly and the then Government were severely embarrassed.

If the Government persist with the measure unamended, they will face the same type of criticism. One day, a judge in Strasbourg will refer to the fact that—as Pepper v. Hart decrees—Ministers' words can be taken into consideration in the courts' interpretation of statute. If Ministers do not accept the new clause and the amendments, they may face severe embarrassment when some judge in Strasbourg asks, "How can it be that an Administration who believed in open government and reasonableness suggested the exclusion of judicial review and scrutiny?"

The proposal is outrageous. I am sure that even those who are running the FSA would be embarrassed at the suggestion that it should not be open to scrutiny by judicial review. I earnestly urge Ministers to think again—even if they do not do so today—and, in due course, to accept the proposals tabled by my right hon. and hon. Friends. The new clause and the amendments are vital. No one could possibly object to the concept of reasonableness and challenge by judicial review; authorities should not act above the law. If the Government do not accept our amendments, Lord Denning will turn in his grave.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

On a point of order, Mr. Deputy Speaker. Some hon. Members have been advised that the right hon. Member for Horsham (Mr. Maude), who served as the shadow Chancellor, has been swept away and replaced by the right hon. Member for Kensington and Chelsea (Mr. Portillo)—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. That is not a matter for the Chair or for this debate.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I begin with the perhaps slightly unusual comment that I am extremely wary of the growth of the power of the courts and of the intrusion of the judiciary into what has traditionally been the prerogative of this place—to make and frame laws. I do not instinctively want the courts to exercise judicial review over everything that they can lay their hands on.

However, the pass has largely been sold. Through judicial review, the courts intrude increasingly into many matters that were traditionally considered to be the concern of legislators. Furthermore, as it is now clear that the European Court of Human Rights will become closely involved, the Government have no choice but to examine the matter—whether they want to or not—in regard to the Bill.

I will not reiterate the many good points that have been made by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) and by my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell). I have one or two minor comments. I strongly agree with my right hon. and learned Friend—

Photo of Mr Nigel Beard Mr Nigel Beard Labour, Bexleyheath and Crayford

The hon. Gentleman is following the same line that was pursued by many of his hon. Friends—to open up legislation to progressive legal interference; to lower the point at which there is the possibility of such interference; and to pile on consultation and review. The danger is that such proposals seem to be a wrecking tactic—to sink the Bill because there will be no possibility that the FSA can operate.

As the head of the shadow Treasury team has changed, would it not be sensible for Opposition Members to confer with their new authority to find out whether they are pursuing the true line?

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I hardly think that that question is worthy of reply.

It is obvious that we want to find a balance, so as to enable the courts to examine egregious poor performance by the FSA in certain cases. I agree with my right hon. and learned Friend the Member for North-East Bedfordshire that the last thing that we want to do is to hamstring the regulator. We want some recognition of the need for judicial review over part of the FSA's activities, because that is lacking.

It is beholden on the Government to justify why immunity should be granted in a case where, for example, the FSA has behaved unreasonably. When such bad behaviour is clear, why should the authority be immune from judicial review? Why should it be immune if it acts recklessly? We must remember that, at the other end of that unreasonable or reckless behaviour are individuals or firms, who are unable to obtain redress in the courts. The Bill as drafted does not offer us the right way to proceed. In any case, the European Court of Human Rights will not permit that lack of immunity in the long run, and the Government will have to return to it. They will either be dragged to accept it or they will choose to show some flexibility in their response to our proposals.

In Standing Committee, it was pointed out that the existing bodies had much immunity and some hon. Members asked why that immunity could not be passed on to the new body. I noted that Tim Herrington, a partner at Clifford Chance, made the important point that Accountability under the law is vitally important for any public authority and we do not believe that the case for the continuation of the immunity"— for existing institutions— has been clearly made in the light of the increased powers of the FSA.—[Official Report, Standing Committee A, 13 July 1999; c. 143.] He was right.

That is the nub of the matter. The FSA is a new, extremely powerful institution, unprecedented in Britain in many ways. It has a quasi-legal role, being able to make law, and a quasi-judicial role, being able to judge on it, and even powers of investigation and powers effectively to pass sentence. It is an extremely powerful institution, and the Government really should think twice before they give it the level of statutory immunity that they currently intend to.

6 pm

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

We have had an interesting discussion, in which Conservative Members have presented some well-formed arguments. However, we are in a little difficulty in taking this debate forward, in the light of the report that my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) brought to the attention of the House a few moments ago, informing us that the shadow Chancellor had been sacked and replaced by the right hon. Member for Kensington and Chelsea (Mr. Portillo). Presumably, that change reflects, in no small measure, dissatisfaction on the part of the Leader of the Opposition with the policies being advanced by the—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I am loath to stop the Minister in full flow, but I have already ruled on that and I do not think that it is pertinent to the debate. He should address the new clause before the House.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

I am grateful for that guidance, Mr. Deputy Speaker.

It is of course the case that any body exercising public functions is subject to judicial review when it behaves in a way that no reasonable comparable body would have behaved, and there is no provision in the Bill restricting anyone's right to seek judicial review of the FSA's decisions in appropriate circumstances. Some of the speeches by Conservative Members implied that there is. There is not. The High Court will of course always take into account such matters as whether there is an alternative remedy that should be exhausted before resorting to judicial review. Where an appropriate remedy is provided under the Bill—before the tribunal, say—it is plainly right to use it rather than wasting the High Court's time on something that has its own special remedy.

New clause 43 is unnecessary. One or two Conservative Members have fastened on particular clauses whose wording, they believe, would make it difficult for judicial review to be pursued. That matter should be dealt with in the debate on those clauses. New clause 43 does not advance the cause that they seek to make. It is unnecessary. Worse, it is unclear what the effect would be of including such a provision in the Bill. I understand that no other legislation contains such provision. Its absence does not impede judicial review elsewhere, and it would not in this case. Moreover, it would cause people to ask themselves whether judicial review could not be resorted to in connection with other legislation that did not contain such wording.

Photo of Sir Nicholas Lyell Sir Nicholas Lyell Conservative, North East Bedfordshire

I am very glad that the Minister recognises that, on Treasury matters, the lead should come from the shadow Treasury team, but the purpose of my intervention is to ask a question. Are we to understand that he is accepting that there should be the power of judicial review, that it should not be inhibited by the detailed wording of the Bill, and that he will look sympathetically at the individual points, many of which we have flagged up in the debate, to ascertain whether they could be improved?

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

No. I am saying that any body, including the FSA, exercising public functions is subject to judicial review, that nothing in the Bill impedes that, and that new clause 43 is not necessary and would have a damaging effect.

Photo of Sir Nicholas Lyell Sir Nicholas Lyell Conservative, North East Bedfordshire

I would agree with the Minister if he said that nothing ousts the jurisdiction of the court. However, does he accept that self-reference clauses, such as those that I referred to, definitely impede judicial review? They do not ultimately prevent it and, if the authority were to act in a way in which no reasonable authority could act, they would not oust it, but they certainly impede and restrict it.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

In a debate on new clause 43, it is difficult to respond to a variety of points that relate to various parts of the Bill. I have said that, if we were to have a debate on those matters, we would need to do so in relation to amendments when we debate the parts of the Bill to which they relate. I am arguing that the new clause is unnecessary, and I do not believe that it helps with the case that Conservative Members have presented.

The amendments on reasonableness give me a further opportunity, beyond the opportunities that we had in Committee, to rehearse how the Bill already ensures that the FSA will act in a way that is reasonable, fair, open, accountable and proportionate—all of which I gladly sign up to, as invited to by the right hon. and learned Gentleman.

I have said that any body that exercises public functions is subject to judicial review where it behaves in a way that no reasonable comparable body would have behaved, but we have not relied on that alone. The FSA will also be subject to review, as appropriate, by the independent tribunal, the independent investigator, the competition regulators and the Government, and to public scrutiny through independent inquiries and reviews, or the appropriate parliamentary Committee.

However, the Bill does not impose abstract subjective requirements in the way envisaged by amendment No. 13. It makes clear, practical provisions to ensure that the authority acts in the way that one would expect of a responsible regulator.

First, the Bill gives the FSA clear objectives and principles which do not impose petty or bureaucratic requirements but provide practical guidance in the discharge of its functions. Secondly, the Bill requires the FSA to adopt key procedures, which will ensure that it acts fairly. Those procedures are backed up by an independent tribunal, an independent investigator and the requirements of the Human Rights Act 1998, which has brought the European convention on human rights into English law.

Thirdly, the Bill imposes clear disclosure and consultation requirements, which would require the FSA to consult on its regulating provisions and practices, to have regard to the representations that it receives and to provide feedback. Fourthly, the Bill imposes unprecedented accountability requirements on the FSA. Fifthly, the FSA will be required to have regard to the principle of proportionality. It will have to justify any costs that it imposes through its regulating provisions by publishing a cost-benefit analysis, and that analysis will now take into account the wider economic costs of its proposals.

That framework is not just an accident. It is the result of an unprecedented level of consultation and scrutiny by the Select Committee on the Treasury and the Treasury Joint Committee on Financial Services and Markets, and detailed consideration in Standing Committee, precisely in order to achieve the result that is intended by amendment No. 13. I willingly acknowledge the contribution that Conservative Members have made to that process. On the basis of that exercise and of the resulting improvements that have been made to the Bill, I hope that the Opposition will not feel it necessary to press their new clause.

Amendments Nos. 397 to 399 would also require the FSA and the Director General of Fair Trading to act reasonably in specifying particular information requirements. In the case of the FSA, that is information that it may require from an applicant for recognition under clause 264. In the case of the Director General of Fair Trading, it is information that he may require as part of his competition scrutiny function under clause 283.

As I have said several times, any body exercising public functions is subject to judicial review where it behaves in a way that no reasonable comparable body would have behaved. That applies just as much to the way that a body sets its information requirements as to any other exercise of its public functions.

There is, of course, a separate defence to default proceedings for anyone who has a reasonable excuse for refusing, or failing, to comply with the director general's requirements. However, on the issue of "relevance" in amendment No. 399, we have already said that we will consider further the need to include a relevance provision for the director general's information requirements. We also said in Committee that we would look again at the need to make reasonableness explicit in the way that duties and tasks must be carried out. That assurance stands. On the basis of that, and the additional look that we shall take at the matter, I hope that the Opposition will not feel it necessary to press amendments Nos. 397 to 399.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

As the Minister just reminded us, we raised these issues extensively in Committee and we discussed the self-reference clauses that were specifically designed to limit the scope for judicial review. The FSA is constitutionally in a sense a totalitarian government of a particular economic sector in our economy. It is right and proper that there should be appropriate checks and balances of power.

I thank my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) for his comments about amendment No. 13. Our lawyer friends gave us a tremendous amount of help on the Bill, but I drafted the amendment myself. It is key and right up-front. It would qualify how the authority should act in relation to discharging its duties. The Minister continues to undertake that he will consider the issue of reasonableness, but why has that not been done already? The amendment would cover the matter in one fell swoop.

New clause 43 raises the issue of judicial review. I am afraid that it is an issue that we wish to put to a vote. The new clause is fundamental to having the right checks and balances in the Bill.

Question put, That the clause be read a Second time:—

The House divided: Ayes 142, Noes 336.

Division No. 56][6.11 pm
Ainsworth, Peter (E Surrey)Beresford, Sir Paul
Arbuthnot, Rt Hon JamesBlunt, Crispin
Atkinson, David (Bour'mth E)Body, Sir Richard
Atkinson, Peter (Hexham)Boswell, Tim
Baldry, TonyBottomley, Peter (Worthing W)
Bercow, JohnBottomley, Rt Hon Mrs Virginia
Brady, GrahamLyell, Rt Hon Sir Nicholas
Brazier, JulianMacGregor, Rt Hon John
Brooke, Rt Hon PeterMcIntosh, Miss Anne
Browning, Mrs AngelaMacKay, Rt Hon Andrew
Burns, SimonMaclean, Rt Hon David
Butterflll, JohnMcLoughlin, Patrick
Cash, WilliamMadel, Sir David
Chope, ChristopherMajor, Rt Hon John
Clappison, JamesMaude, Rt Hon Francis
Clark, Dr Michael (Rayleigh)Mawhinney, Rt Hon Sir Brian
Clarke, Rt Hon Kenneth (Rushcliffe)May, Mrs Theresa
Moss, Malcolm
Collins, TimNicholls, Patrick
Colvin, MichaelNorman, Archie
Cormack, Sir PatrickO'Brien, Stephen (Eddisbury)
Cran, JamesOttaway, Richard
Curry, Rt Hon DavidPage, Richard
Davies, Quentin (Grantham)Paice, James
Davis, Rt Hon David (Haltemprice)Paterson, Owen
Day, StephenPickles, Eric
Dorrell, Rt Hon StephenPortillo, Rt Hon Michael
Duncan, AlanRandall, John
Duncan Smith, IainRobertson, Laurence
Emery, Rt Hon Sir PeterRoe, Mrs Marion (Broxbourne)
Faber, DavidRowe, Andrew (Faversham)
Fabricant, MichaelRuffley, David
Fallon, MichaelSt Aubyn, Nick
Flight, HowardSayeed, Jonathan
Forsythe, CliffordShephard, Rt Hon Mrs Gillian
Forth, Rt Hon EricShepherd, Richard
Fowler, Rt Hon Sir NormanSmyth, Rev Martin (Belfast S)
Fox, Dr LiamSoames, Nicholas
Fraser, ChristopherSpelman, Mrs Caroline
Gibb, NickSpicer, Sir Michael
Gill, ChristopherSpring, Richard
Gillan, Mrs CherylStanley, Rt Hon Sir John
Gorman, Mrs TeresaSteen, Anthony
Green, DamianStreeter, Gary
Greenway, JohnSwayne, Desmond
Grieve, DominicSyms, Robert
Gummer, Rt Hon JohnTapsell, Sir Peter
Hague, Rt Hon WilliamTaylor, Ian (Esher & Walton)
Hamilton, Rt Hon Sir ArchieTaylor, John M (Solihull)
Hammond, PhilipTaylor, Sir Teddy
Hawkins, NickThompson, William
Heald, OliverTownend, John
Heathcoat-Amory, Rt Hon DavidTredinnick, David
Hogg, Rt Hon DouglasTrend, Michael
Horam, JohnTyrie, Andrew
Howard, Rt Hon MichaelViggers, Peter
Howarth, Gerald (Aldershot)Walter, Robert
Hunter, AndrewWardle, Charles
Jack, Rt Hon MichaelWaterson, Nigel
Jackson, Robert (Wantage)Whitney, Sir Raymond
Jenkin, BernardWhittingdale, John
Key, RobertWiddecombe, Rt Hon Miss Ann
Kirkbride, Miss JulieWilkinson, John
Laing, Mrs EleanorWilletts, David
Lait, Mrs JacquiWilshire, David
Lansley, AndrewWinterton, Mrs Ann (Congleton)
Leigh, EdwardWinterton, Nicholas (Macclesfield)
Letwin, OliverYeo, Tim
Lewis, Dr Julian (New Forest E)Young, Rt Hon Sir George
Lidington, David
Lilley, Rt Hon PeterTellers for the Ayes:
Lloyd, Rt Hon Sir Peter (Fareham)Mr. Geoffrey Clifton-Brown
Loughton, Timand
Luff, PeterMr. Keith Simpson.
Abbott, Ms DianeAnderson, Donald (Swansea E)
Adams, Mrs Irene (Paisley N)Anderson, Janet (Rossendale)
Ainger, NickArmstrong, Rt Hon Ms Hilary
Ainsworth, Robert (Cov'try NE)Ashdown, Rt Hon Paddy
Allan, RichardAshton, Joe
Allen, GrahamAtkins, Charlotte
Baker, NormanDonohoe, Brian H
Ballard, JackieDoran, Frank
Barnes, HarryDowd, Jim
Barron, KevinDrew, David
Bayley, HughEagle, Angela (Wallasey)
Beard, NigelEagle, Maria (L'pool Garston)
Beckett, Rt Hon Mrs MargaretEdwards, Huw
Bell, Martin (Tatton)Efford, Clive
Bell, Stuart (Middlesbrough)Ellman, Mrs Louise
Benn, Hilary (Leeds C)Etherington, Bill
Benton, JoeFearn, Ronnie
Berry, RogerField, Rt Hon Frank
Best, HaroldFisher, Mark
Betts, CliveFitzpatrick, Jim
Blackman, LizFitzsimons, Lorna
Blears, Ms HazelFlint, Caroline
Blizzard, BobFlynn, Paul
Borrow, DavidFoster, Rt Hon Derek
Bradley, Keith (Withington)Foster, Don (Bath)
Bradley, Peter (The Wrekin)Foster, Michael Jabez (Hastings)
Bradshaw, BenFoster, Michael J (Worcester)
Brake, TomFoulkes, George
Brinton, Mrs HelenGapes, Mike
Brown, Russell (Dumfries)Gardiner, Barry
Burden, RichardGeorge, Andrew (St Ives)
Burgon, ColinGeorge, Bruce (Walsall S)
Burnett, JohnGerrard, Neil
Burstow, PaulGibson, Dr Ian
Butler, Mrs ChristineGilroy, Mrs Linda
Cable, Dr VincentGodsiff, Roger
Caborn, Rt Hon RichardGoggins, Paul
Campbell, Alan (Tynemouth)Golding, Mrs Llin
Campbell, Ronnie (Blyth V)Gordon, Mrs Eileen
Cann, JamieGrant, Bernie
Caplin, IvorGriffiths, Jane (Reading E)
Casale, RogerGriffiths, Nigel (Edinburgh S)
Cawsey, IanGrocott, Bruce
Chapman, Ben (Wirral S)Grogan, John
Chaytor, DavidGunnell, John
Chidgey, DavidHall, Mike (Weaver Vale)
Clark, Rt Hon Dr David (S Shields)Hall, Patrick (Bedford)
Clark, Paul (Gillingham)Hamilton, Fabian (Leeds NE)
Clarke, Charles (Norwich S)Hancock, Mike
Clarke, Eric (Midlothian)Harris, Dr Evan
Clarke, Rt Hon Tom (Coatbridge)Heal, Mrs Sylvia
Clarke, Tony (Northampton S)Healey, John
Clelland, DavidHeath, David (Somerton & Frome)
Coaker, VernonHenderson, Doug (Newcastle N)
Coffey, Ms AnnHenderson, Ivan (Harwich)
Cohen, HarryHeppell, John
Colman, TonyHesford, Stephen
Cotter, BrianHill, Keith
Cousins, JimHinchliffe, David
Cox, TomHodge, Ms Margaret
Cranston, RossHome Robertson, John
Crausby, DavidHope, Phil
Cryer, Mrs Ann (Keighley)Hopkins, Kelvin
Cryer, John (Hornchurch)Howarth, Alan (Newport E)
Cummings, JohnHowells, Dr Kim
Cunningham, Rt Hon Dr Jack (Copeland)Hoyle, Lindsay
Hughes, Ms Beverley (Stretford)
Cunningham, Jim (Cov'try S)Hughes, Kevin (Doncaster N)
Curtis-Thomas, Mrs ClaireHughes, Simon (Southwark N)
Dalyell, TamHumble, Mrs Joan
Darling, Rt Hon AlistairHurst, Alan
Darvill, KeithHutton, John
Davey, Edward (Kingston)Iddon, Dr Brian
Davey, Valerie (Bristol W)Illsley, Eric
Davidson, IanIngram, Rt Hon Adam
Davies, Rt Hon Denzil (Llanelli)Jackson, Helen (Hillsborough)
Davies, Geraint (Croydon C)Jenkins, Brian
Davis, Rt Hon Terry (B'ham Hodge H)Johnson, Alan (Hull W & Hessle)
Johnson, Miss Melanie (Welwyn Hatfield)
Dawson, Hilton
Dismore, AndrewJones, Rt Hon Barry (Alyn)
Dobbin, JimJones, Helen (Warrington N)
Jones, Ms Jenny (Wolverh'ton SW)Perham, Ms Linda
Pickthall, Colin
Jones, Jon Owen (Cardiff C)Pike, Peter L
Jones, Dr Lynne (Selly Oak)Plaskitt, James
Jones, Martyn (Clwyd S)Pollard, Kerry
Keeble, Ms SallyPound, Stephen
Keen, Alan (Feltham & Heston)Powell, Sir Raymond
Keetch, PaulPrentice, Ms Bridget (Lewisham E)
Kelly, Ms RuthPrentice, Gordon (Pendle)
Kemp, FraserPrescott, Rt Hon John
Kennedy, Rt Hon Charles (Ross Skye & Inverness W)Prosser, Gwyn
Quinn Lawrie
Kennedy, Jane (Wavertree)
Kidney, DavidRadice, Rt Hon Giles
King, Andy (Rugby & Kenilworth)Rammell, Bill
King, Ms Oona (Bethnal Green)Rapson, Syd
Kirkwood, ArchyRaynsford, Nick
Kumar, Dr AshokReed, Andrew (Loughborough)
Ladyman, Dr StephenReid, Rt Hon Dr John (Hamilton N)
Laxton, BobRendel, David
Leslie, ChristopherRoche, Mrs Barbara
Levitt, TomRooker, Rt Hon Jeff
Lewis, Ivan (Bury S)Rooney, Terry
Lewis, Terry (Worsley)Roy, Frank
Linton, MartinRuane, Chris
Lloyd, Tony (Manchester C)Ruddock, Joan
Llwyd, ElfynRussell, Bob (Colchester)
Lock, DavidRussell, Ms Christine (Chester)
Love, AndrewRyan, Ms Joan
McAvoy, ThomasSalter, Martin
McCabe, SteveSanders, Adrian
McCafferty, Ms ChrisSavidge, Malcolm
McCartney, Rt Hon Ian (Makerfield)Sawford, Phil
Sedgemore, Brian
McDonagh, SiobhainShaw, Jonathan
Macdonald, CalumSheerman, Barry
McFall, JohnSheldon, Rt Hon Robert
McGuire Mrs Anne
McIsaac, ShonaShipley, Ms Debra
McKenna, Mrs RosemaryShort, Rt Hon Clare
Mackinlay, AndrewSimpson, Alan (Nottingham S)
McNulty, TonySingh, Marsha
MacShane, DenisSkinner, Dennis
McWalter, TonySmith, Rt Hon Andrew (Oxford E)
Mahon, Mrs AliceSmith, Angela (Basildon)
Mallaber, JudySmith, Miss Geraldine (Morecambe & Lunesdale)
Marsden, Gordon (Blackpool S)
Marshall, Jim (Leicester S)Smith, Jacqui (Redditch)
Marshall-Andrews, RobertSmith, Llew (Blaenau Gwent)
Martlew, EricSnape, Peter
Maxton, JohnSoley, Clive
Meacher, Rt Hon MichaelSouthworth, Ms Helen
Meale, AlanSquire, Ms Rachel
Michie, Bill (Shef'ld Heeley)Steinberg, Gerry
Miller, AndrewStevenson, George
Mitchell, AustinStewart, David (Inverness E)
Moffatt, LauraStinchcombe, Paul
Moonie, Dr LewisStoate, Dr Howard
Moore, MichaelStrang, Rt Hon Dr Gavin
Moran, Ms MargaretStraw, Rt Hon Jack
Morley, ElliotStringer, Graham
Mountford, KaliStunell, Andrew
Mudie, George
Mullin, ChrisSutcliffe, Gerry
Murphy, Denis (Wansbeck)Swinney, John
Murphy, Jim (Eastwood)Taylor, Rt Hon Mrs Ann (Dewsbury)
Naysmith, Dr Doug
Norris, DanTaylor, David (NW Leics)
Oaten, MarkTaylor, Matthew (Truro)
O'Hara, EddieTemple-Morris, Peter
Olner, BillThomas, Gareth R (Harrow W)
O'Neill, MartinTimms, Stephen
Organ, Mrs DianaTipping, Paddy
Palmer, Dr NickTodd, Mark
Pearson, IanTonge, Dr Jenny
Pendry, TomTouhig, Don
Trickett, JonWilliams, Rt Hon Alan (Swansea W)
Truswell, Paul
Turner, Dr Desmond (Kemptown)Williams, Mrs Betty (Conwy)
Turner, Dr George (NW Norfolk)Willis, Phil
Turner, Neil (Wigan)Winnick, David
Twigg, Derek (Halton)Winterton, Ms Rosie (Doncaster C)
Twigg, Stephen (Enfield)Wise, Audrey
Tyler, PaulWood, Mike
Tynan, BillWoolas, Phil
Vis, Dr RudiWorthington, Tony
Walley, Ms JoanWray, James
Ward, Ms ClaireWright, Anthony D (Gt Yarmouth)
Wareing, Robert NWright, Dr Tony (Cannock)
Watts, DavidWyatt, Derek
Webb, Steve
White, BrianTellers for the Noes:
Whitehead, Dr AlanMr. Greg Pope and
Wicks, MalcolmMr. David Jamieson.

Question accordingly negatived.