Financial Services and Markets Tribunal Rules 2001

– in the House of Lords at 3:23 pm on 23 October 2001.

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Photo of Lord Kingsland Lord Kingsland Conservative 3:23, 23 October 2001

rose to move, That this House calls upon Her Majesty's Government to withdraw the rules (S.I. 2001/2476) and replace them with rules that preserve the confidentiality of proceedings in the Financial Services Appeals Tribunal.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I shall be as brief as I can in speaking to the Motion. The rule in issue is Rule 17 entitled "Hearings in Public" of the Financial Services and Markets Rules 2001. Until the rules were published some six months after the Financial Services Bill became an Act of Parliament, there was a common understanding that disciplinary hearings in financial matters would be heard in private. When the tribunal resolved the issue on one or other side of the argument, then and only then would a public statement be made.

Most of those involved in the financial services world, not only the practitioners but also those involved who chair tribunals, have always taken the view that this was the right approach. People in the City are responsible for other people's money. Any taint or suggested taint on their competence or honour immediately has an adverse and damaging effect on many others, even if, subsequently, that person turns out to be blameless. Therefore, a strong argument has always been advanced for private proceedings in financial tribunals. That is a characteristic of the Financial Services Act 1986 and of the Banking Act 1987.

Throughout the debates held on the Financial Services Bill, both in another place and in your Lordships' House, I think I can say that all noble Lords believed that that presumption would remain enshrined in the Act and would affect every delegated order made under it. The first draft of the Act did suggest that public hearings should be held, but as a result of the joint committee chaired by the noble Lord, Lord Burns, the Government changed their view. The basis of the Bill, as it went through the House of Commons, remained unchanged. Indeed, in the course of November 1999, in another place, the Economic Secretary to the Treasury said in terms that the presumption of privacy would be maintained.

When the Bill came to your Lordships' House on 30th March last year, an amendment was tabled by the noble and learned Lord, Lord Fraser of Carmyllie. The noble Lord, Lord Bach, responded to it in the following manner:

"The remainder of my remarks relate to publication. The new clause on publication, therefore, requires the authority to publish such details about a final notice as it considers appropriate, except for information the publication of which would, in its opinion, be unfair to the person concerned or prejudicial to the interests of consumers.

The Government believe, however, that it is necessary to avoid any risk that a person might be unfairly tainted, by giving publicity to the fact that some contravention had been alleged by the FSA, before the person concerned had had an opportunity to refer the matter to the tribunal, or before a matter referred to the tribunal had been finally determined by the tribunal or the appeal courts. Under the new clause on publication, the authority is, therefore, prevented from publishing details about warning and decision notices".--[Official Report, 30/3/00; cols.915-916.]

I submit that that statement is unequivocal. In quoting it to noble Lords, I hasten to add that it is not in any way my intention to make any criticism of the noble Lord, Lord Bach. I am convinced that, when he made that statement, that was the situation as he understood it.

Contrast Rule 17 in the rules published six months after the Bill became law:

"(2) Subject to the following paragraphs of this rule, all hearings shall be in public.

(3) The Tribunal may direct that all or part of a hearing shall be in private--

"(a) upon the application of all the parties; or

(b) upon the application of any party, if the Tribunal is satisfied that a hearing in private is necessary, having regard to--

(i) the interests of morals, public order, national security or the protection of the private lives of the parties; or

(ii) any unfairness to the applicant or prejudice to the interests of consumers that might result from a hearing in public, if, in either case, the Tribunal is satisfied that a hearing in private would not prejudice the interests of justice".

I understand that the Government now take the view that financial services tribunals ought to hold their hearings in public because they are required to do so by the terms of Article 6.1 of the Human Rights Convention. I shall say something about that at the end of my remarks, but, in my submission, that is not the real issue in this debate.

The real issue is that the Government never signalled that they were going to make this change during the course of the Bill. Worse, as we have seen from the remarks of the noble Lord, Lord Bach, they made statements which led your Lordships' House to believe that the presumption of privacy was safe in their hands. Had your Lordships' House had the slightest knowledge that this was not so, it is certain that your Lordships would have required a full debate on the issue, with amendments tabled, when we reached the stage in the Bill where the provision for making orders was to be discussed.

It is also very important for your Lordships' House to recall the basic deal that was struck over the Financial Services Bill. It was often said, especially by many of your Lordships who have great experience in the City, that the FSA was judge and jury, investigator and prosecutor in its own cause, and conducted all these functions with very few constraints. It was therefore decided that there should be an independent tribunal to which someone who had been subject to an investigation and an adverse decision by the FSA could appeal.

It was part of that balanced and structured deal between the City and the Government that the proceedings of the tribunal should be held in private. That was for the reason that it would be a deep disincentive for anyone subject to an adverse decision of the FSA--which would be taken in private and not publicised--to go to a tribunal knowing that the alleged offence would be discussed in public. Were the tribunal proceedings to be conducted in public, therefore, there would be a very strong disinclination for someone judged to have contravened the FINSMA rules by the FSA to appeal. He would rather take his medicine knowing that at least no one would ever find out about what he had done. The addition of the independent tribunal, together with privacy, was, I repeat, an essential part of a balanced and structured deal to which we all thought the Government had signed up. Indeed, it could be argued that publicity in financial services tribunals contravenes Article 6.1 of the Human Rights Act because it militates against an individual using his full rights to appeal against a potentially unjust decision.

What have the Government had to say in response? They have said, really, two things. First, that some two weeks before the noble Lord, Lord Bach, made his statement in your Lordships' House, the first set of draft tribunal rules were circulated signalling the Government's change of policy. These rules were not circulated to the general public but to select Members of the Committee of your Lordships' House which was responsible for the Financial Services Bill. I know that the Minister will say that a letter was sent to my noble friend Lord Saatchi. I believe she will also say that she knows that a letter was not sent to me.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, that is the first time that I have heard a letter was sent to me. Neither my noble friend Lord Saatchi nor I have received those letters. I have a complete file of all the letters that the Government sent to me during the course of the Bill--it is a very large piece of furniture--and, curiously, that letter is not in it. Nor is it, I understand, in the file of my noble friend Lord Saatchi.

It would be an extraordinary coincidence if a letter sent to both of us failed to reach either of us. The Government are not suggesting, I hope, that we are not telling the truth?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, this is very strange because I have a photocopy of the letter, topped and tailed by me--"Dear Maurice", "Yours ever, Andrew", "March 14th 2000". I have it here. It is clear that it went to the noble Lord, Lord Saatchi. Others on the receiving list--notably the noble Lord, Lord Burns--did receive it.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I entirely accept that the noble Lord, Lord Burns, received it because the noble Baroness, Lady Scotland, has informed me that that was so. But neither my noble friend Lord Saatchi nor I received it.

In any event, if it was the Government's plain intention on 14th February to reverse the presumption, why did they not announce that on the Floor of your Lordships' House at some stage after 14th February? Such a dramatic change in government policy surely merited some explanation on the Floor of your Lordships' House.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I hope that the House will forgive me, but this is becoming so personal that I have to intervene. I hope that my noble friend Lady Scotland will also forgive me. There is no dramatic change. The letter simply had attached to it a copy of the summary of the rules for the Financial Services and Markets Tribunal. I do not think that the noble Lord, Lord Kingsland, is claiming that these were not in the public domain. They certainly were.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, they were not in the public domain. The rules were not put out for consultation until long after that. They may have been circulated to some Members of the Committee, but they were not put out to general circulation. In any event, why was this crucial provision not drawn to the attention of your Lordships' House? Moreover, the speech of the noble Lord, Lord Bach, to your Lordships' House was made two weeks after the document was circulated. So it would be reasonable for your Lordships to conclude that, in respect of any suggestion in that document that the presumption was going to be changed, on that issue the Government had thought again.

The other objection to the presumption of privacy is the suggestion that public hearings are necessary to conform with the Human Rights Act. I find that a curious proposition. It is of course true that Article 6.1 of the convention requires a public hearing. The reason for that is that at the time the convention was drafted many states on the Continent did not give citizens the benefit of public hearings, sometimes in criminal cases and sometimes in other kinds of cases. The public hearing is an entitlement that an individual citizen of Europe rightly has; but, just because it is an entitlement, it should not become a burden to that citizen in circumstances where he believes that his rights are better served by having a contentious matter heard in private. There is nothing that I have seen in cases in the European Court of Human Rights which states that my contention is not so.

Photo of Baroness Crawley Baroness Crawley Labour

My Lords, in the light of the statement of the noble Lord, Lord Kingsland, the Government are on strong ground to say that it would be a breach of the Human Rights Convention if such tribunals were to be heard in private. The noble Lord, Lord Kingsland--

Photo of Lord Tordoff Lord Tordoff Chairman of Committees, House of Lords

My Lords, I hope the noble Baroness will forgive me. I did not hear the noble Lord, Lord Kingsland, move his Motion. However, I understand that he has done so.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I moved my Motion at the beginning of my speech. In doing so, perhaps I breached some crucial rule of your Lordships' House. I shall therefore move it again. I beg to move.

Photo of Baroness Crawley Baroness Crawley Labour

My Lords, I apologise to the House for "jumping up" too quickly.

The remarks of the noble Lord, Lord Kingsland, have not convinced me that he has dealt with the issue of the human rights convention. Nor, I believe, has he convinced many Members of this House who were of the opinion that such tribunals were to take place in public. This praying against the rules by the Opposition goes contrary to the mood in the country; namely, people want more and more tribunals to be heard in public. I understand the present political consensus to be in favour of a whole agenda of greater transparency. In relation to financial matters in particular the public are angry at unnecessary confidentiality. Many would say that there should not be one rule for the City and one for the rest of us. I believe that the public will increasingly want transparency in these matters, particularly in the light of a number of recent controversies over pensions.

The noble Lord, Lord Kingsland, referred to paragraph 17 of the rules, which contains a provision--if the tribunal is in agreement--for cases to be heard in public. When he responds to the debate, perhaps the noble Lord will tell us why the protection laid down in the rules is not sufficient.

Photo of Lord Newby Lord Newby Liberal Democrat

My Lords, I have considerable sympathy with the Motion. I shall refer to two aspects: first, the way in which the Government behaved during the passage of the Bill and subsequently; and, secondly, the substance of the issue. Having sat through virtually every debate during the passage of the Bill through this House, the Motion accords with my belief regarding the view that the Government were giving to those of us who were involved.

Faced with the recommendation in the report of the Joint Select Committee that privacy should be maintained in respect of tribunals, we began with the presumption that that would be the Government's view. It is my belief that that view was not openly challenged by the Government during the passage of the Bill. We believed that privacy would be the rule and I cannot remember an occasion on which that belief was challenged. Furthermore, to the extent that statements regarding privacy were made during the passage of the Bill, as the noble Lord, Lord Kingsland, said, the only construction that could be placed on them was that the tribunals would, as a matter of course, be held in private.

Much has been made of the question of a letter that we may or may not have received. I was almost certainly on the list of recipients. The only point I make is that at the time the letter was sent I and other noble Lords involved with proceedings on the Bill were probably receiving at least six letters a day from the noble Lord, Lord McIntosh. They were not merely billets-doux; each letter had attached to it possibly 20 pages of amendments. If I received a letter with a covering note stating merely, "Here is a set of statutory instruments" among a pile of papers several inches thick, I can say with almost complete certainty that I did not give that letter the attention that we are now invited by the Government Benches to believe it deserved. It was frankly impossible, under the "blizzard" of letters and amendments--many hundreds were put forward over a short time-scale--for anyone on this side of the House to spend hours poring over every page to check whether the Government had changed their mind without telling us.

Also, the consultation process did not allow outside bodies to comment on the statutory instruments before the Bill became law. I therefore believe that, on the first question about how the Government behaved during the passage of the legislation, they are guilty as charged.

The second point relates to the substance. Should the tribunals created by the Financial Services and Markets Act be based on a presumption of privacy or on presumption of public hearings? During the passage of the Bill in this House we supported a presumption of privacy. We did so because we took the strength of the argument that financial institutions could be put at risk if information about tribunal hearings was made public at an early stage. We believed that the decision as to whether a hearing should be held in public or in private should be essentially in the hands of the appellants. We did so, believing that this was compatible with the European Convention on Human Rights--a view which I believe went unchallenged by the Government.

Since this Motion was tabled, I have, however, received advice from our own experts in human rights law. It is their clear view that the tribunal rules proposed by the Government are compatible with Article 6 of the European Convention on Human Rights and that the proposal contained in this Motion would be incompatible with that provision.

The Motion seeks to do two things. It seeks to give the Government a bloody nose on their handling of this issue, and to persuade them to reverse their policy. I believe that they deserve the bloody nose; but I do not now believe that a policy reversal is compatible with our international human rights obligations. I shall, therefore, advise my colleagues to abstain on the Motion.

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Conservative 3:45, 23 October 2001

My Lords, I was not a Member of this House when the Financial Services and Markets Bill was debated, so I was not a recipient of the "blizzard" of correspondence from the noble Lord, Lord McIntosh. However, I want to speak in support of my noble friend's Motion. This issue is of great importance to the City and to the financial community generally.

The Government's approach may be ingenuous. As my noble friend said, the noble Lord, Lord Bach, gave a clear undertaking to the House during the passage of the Bill, and later. If, as has been said, the Government now wish to argue that the tribunal is outside the processes of the Financial Services Authority, that is extraordinary. Lawyers may be able to construct otherwise; but, to a mere layman like myself, a body with the title "the financial services and markets tribunal" is clearly part of the processes of the Financial Services Authority and is, therefore, covered by the undertaking given by the noble Lord, Lord Bach. If they are not being ingenuous, I fear that the Government have simply decided to change their mind and for some reason do not want to admit it. The only other possibility is that they are taking a rather more duplicitous approach: namely, they now want to push the matter through in the blizzard of statutory instruments accompanying the coming into force of the new Act.

Before going further, I must declare two interests. I am the chairman of an investment bank in the City which is regulated under the present provisions and will be regulated under the provisions of the Financial Services and Markets Act. More importantly, I was until March this year a member of the board of the Securities and Futures Authority, which will be subsumed within the new provisions. For the next few weeks, at least until N2 on 30th November, I remain the deputy chairman of its Enforcement Committee, which is concerned with the provision and enforcement of discipline on the City community. So for the past six or seven years I have seen at first hand the challenges of discipline in the financial services industries.

I have absolutely no problem with making public the names of individuals and firms that have transgressed, once the disciplinary process has been exhausted. Publicity and the threat of publicity is an extremely powerful weapon in the hands of a regulator. It may not be appreciated by many of your Lordships how much even the largest firms hate publicity of that nature. A disciplinary notice published by the authority on 18th October carries a headline reporting that a firm and an individual were expelled. Notices of that nature, which are made public, are invariably fought line by line by even the largest firms because the financial services industry often deals with intangibles. It cannot, probably perforce, prove a better mousetrap. The successful firm depends on the twin pillars of confidence and reputation.

During my years on the SFA enforcement committee, it has not always been able to convince defendants of the view that they have transgressed and should accept a penalty. Instead, they have chosen to go before a tribunal. I regret that my committee's view has not always prevailed before the tribunal--which has, from time to time, found in favour of the defendant.

Under the current system, all that takes place in private. The defendants were left with no stain on their public reputation and therefore with none on their business. If the Government's approach is accepted, that carefully constructed balance will be upset. Regulated firms, knowing that there will be publicity whatever the outcome, will inevitably be reluctant to avail themselves of their full legal rights.

Despite tribunal hearings being in private, there is a significant disciplinary element. The SFA always believes that there is at least an element of sailing close to the wind. The firm in question will know that the authority holds that belief and will be doubly careful in future.

Nowhere is confidence and reputation more important than in the case of smaller firms. Over the past half century, the City of London has been one of this country's great success stories. Part of that success has come about because smaller firms have continuously promoted new ideas and approaches--so nipping at the heels of their larger, lumbering rivals. Not all ideas have been good. Some have been downright bad. However, the overall effect has been beneficial--providing fresh impetus to the City as a whole.

Small firms are not always welcomed by regulators because they represent risk--something regulators hate. From a regulator's point of view, it is much safer to have fewer, larger firms with which one can establish a long-term relationship than small firms engaged in freelance pioneering.

A referral to a tribunal with proceedings held in public, no matter what the outcome, would almost certainly be fatal to a small firm. Even if the defendant is found not guilty, the aura of being so referred will take a long time to dispel. The City has a long collective memory: "Wasn't that the firm involved in a tribunal? I don't remember the details." Such recollections would make a significant dent on any firm's operations for a long time.

What will all that matter in the short term? Probably not much. But over time, there will be a slow blunting of the City's innovative edge to its cost and to the cost of the whole country.

I conclude with a parallel point. Clause 23(b)--which I think should be (a) anyway--uses the word "anonymising". The Oxford English Dictionary in the Library does not endorse the use of "anonymous" as a verb--although its use as an adjective, adverb or noun is fair enough. To render or make anonymous or even to ensure anonymity is fair enough, but "anonymising" is a dumbing down of the English language. I hope that the Government will think about producing a better and more current word. It may be that on that point, as with so much of the statutory instrument, the Treasury is in touch with some higher authority than we mere mortals can understand. I support my noble friend's Prayer.

Photo of Lord Fraser of Carmyllie Lord Fraser of Carmyllie Conservative 3:54, 23 October 2001

My Lords, my noble friend Lord Kingsland fully and carefully narrated the response, which he characterised as unequivocal. It seems impossible to characterise the response as anything other than unequivocal. Had I sought to challenge that response, when it was made by a Minister at the Dispatch Box in such unequivocal terms, your Lordships would have viewed it as a shameful waste of time.

As I understand the principle now enunciated by the noble Lord, Lord McIntosh, we should prefer in future not an unequivocal statement by a Minister but a set of draft regulations attached to a letter that appears in an avalanche of other paperwork circulated to all those interested.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I said no such thing. I did not refer to the speech by my noble friend Lord Bach, which will be dealt with by my noble friend Lady Scotland when she winds up. I do not accept the noble Lord's observation. I simply wanted to establish that the letter had been written and included the details that I mentioned.

Photo of Lord Fraser of Carmyllie Lord Fraser of Carmyllie Conservative

My Lords, I may have misunderstood the Minister. I will read carefully what he said, but it seems clear from four interventions that the noble Lord attached a great deal of significance to the letter. It seemed as though he wanted to set aside the noble Lord's unequivocal statement.

Your Lordships spent hours examining the Bill, not only in this House but in Joint Committee, to ascertain which aspects of it might not be compliant with the European Convention on Human Rights. Not only did Ministers appear before the Joint Committee to say that the Bill was compliant but, as is now the custom, attached to the Bill was a statement by a Minister that the legislation was compliant. It would be interesting, in circumstances in which we are told that the Bill does not comply, to know who was that Minister.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I am being referred to again. I signed the certificate under Section 19 of the Human Rights Act, in the belief that the Bill was compliant. It is compliant. There has been no suggestion that the Bill is not compliant. It has emerged from the Liberal Democrat Benches that the Motion in the name of the noble Lord, Lord Kingsland, would not be compliant.

Photo of Lord Fraser of Carmyllie Lord Fraser of Carmyllie Conservative

My Lords, the noble Lord might consider his position because if this is to be the outcome months after the Bill has passed through your Lordships' House, such statements are rendered utterly worthless. If we are to understand what is required of us by the convention when passing legislation, Ministers should not lightly give such undertakings. I regret that seems exactly what has been going on in the present circumstances. It is more than a matter of giving the Government a bloody nose and raising the noble Lord's blood pressure. We should establish the important principle that where Ministers make a statement that proposed legislation complies with the human rights convention and it subsequently emerges that that is not correct, we should at least receive the most profuse apology from the Government for their failing.

Photo of Viscount Bledisloe Viscount Bledisloe Crossbench 4:00, 23 October 2001

My Lords, I was not involved in the Financial Services and Markets Bill when it passed through this House. My intervention is prompted by the suggestion that the rules relating to appeals to which the noble Lord, Lord Kingsland, referred do not accord with statements in this House and in another place during the Bill's passage. Having approached the matter with no preconceptions, it is absolutely clear to me that the rules fundamentally depart from what was said to both Houses.

As there has been some discussion about the modes of correspondence, I shall refer to the amazingly unsatisfactory way in which my inquiries have been dealt with. I tabled a Question for Written Answer and the reply from the noble and learned Lord the Lord Chancellor was--if one was being kind--somewhat disingenuous. I wrote to the noble and learned Lord and about one month later, I received what appeared to be his reply--although it was somewhat deficient, as it lacked a date, a superscription and a signature. As that reply referred to the letter from the noble Lord, Lord McIntosh, of 14th March, I wrote a preliminary letter back to the Lord Chancellor asking him if his department could let me see the mysterious list of people to whom the letter was notionally despatched.

Three weeks later the Lord Chancellor's Department rang my secretary to query my second letter because according to them the Lord Chancellor had never replied to me at all. When, at their request, she faxed them a copy of the unsigned letter, they told her that it had been sent out in error, that it had not been seen either by the Lord Chancellor or by his staff and that he would send a proper reply--a promise which has not been fulfilled. Quite how that letter came into being as it had not even been seen by his staff, I am not entirely clear. But this matter appears to be bedevilled with actual pieces of paper which are not letters and real letters which do not appear to have reached those for whom they were intended. But the content of that "non-letter" was, again, entirely unsatisfactory and failed to remove my concerns.

I indicate to your Lordships two ways in which it seems to me that the matter is not acceptable. In his letter the noble and learned Lord the Lord Chancellor denies that this House was led to believe that tribunal hearings would be in private on the basis that on 4th November 1999 the other place was told that the rules would comply with best practice laid down by the Council on Tribunals. That statement to the other place could have referred only to the rules as they existed at that date. So far as I am aware, those rules did not at that date have the presumption of publicity which the Government now contend. But the noble and learned Lord, in answer to my question as to the statements made by the Government on this issue, referred only to the statement of the Financial Secretary and did not in any way mention the statement made in this House by the noble Lord, Lord Bach, to which the noble Lord, Lord Kingsland, has referred.

Perhaps I may be forgiven for repeating the essence of what the noble Lord, Lord Bach, said. I entirely endorse what the noble Lord, Lord Kingsland, said; namely, that no one is accusing the noble Lord, Lord Bach, of having got it wrong. He just appears to have been caught up in something which has now become somewhat messy. He said,

"The Government believe, however, that it is necessary to avoid any risk that a person might be unfairly tainted, by giving publicity to the fact that some contravention had been alleged by the FSA, before the person concerned had had an opportunity to refer the matter to the tribunal, or before a matter referred to the tribunal had been finally determined by the tribunal or the appeal courts. Under the new clause on publication, the authority is, therefore, prevented from publishing details".--[Official Report, 30/3/00; col. 916.]

The Government seek to say--or the "non-letter" sought to say--that that statement related only to the publication by the authority of its decision and not to the conduct of the tribunal proceedings. However, that is not what the noble Lord, Lord Bach, said. Anyhow, even the Government's version makes total nonsense of those words. The aim of not publishing the decision plainly has to be to allow someone to appeal without being tainted if, in fact, it turns out that his appeal succeeds. That is the plain and, indeed, the only point of preventing publication of a decision pending the appeal.

But what is the point of preventing publication of a decision pending appeal if, the moment the appeal starts, that whole decision is announced? One cannot conduct an appeal against conviction without making, at least fleetingly, some slight reference to the fact that one has been convicted. It would be a somewhat odd procedure if the Court of Criminal Appeal heard an appeal against conviction without any mention of the nature of the conviction. Therefore, if it is really being said that the point of not publishing the decision is to prevent tainting, plainly that is totally nugatory if the moment the appeal is opened the decision is published.

In a court, if a party obtains an order without being fully frank to the tribunal from which he obtains his order, the normal course is to set the order aside and allow him to start again on a proper basis. If that is good enough law to be administered by the judges appointed by the noble and learned Lord the Lord Chancellor, surely it should apply to the Lord Chancellor himself.

I entirely support the Motion of the noble Lord, Lord Kingsland. The right thing to do is to set these rules aside, let the matter be retabled and debated and, if the matter has changed and people now have different views about the effect of the Human Rights Act, that can be fully investigated instead of being slipped through as an afterthought reason for what appears to have happened.

Photo of The Earl of Erroll The Earl of Erroll Crossbench

My Lords, I may be able to assist your Lordships on the matter of the missing mail. There was a point some months ago at which I used to receive batches of letters from the noble Lord, Lord Steve Bassam, addressed to senior Members of the House on both sides. However, the sticker on the envelope was addressed to me. Someone in the Home Office was clearly putting the letters in the wrong envelopes. As I received no mail from the Home Office at that point, nor did I expect any, I was even more surprised. I used to slit them open and hand them to the attendants. However, others may have received those letters and not slit them open or handed them to the attendants but put them in the bin. That may explain the missing letters.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

My Lords, there are three issues here. The first is whether or not Ministers in the House of Commons and in this place inadvertently misled the House with the result that the rules before us today are inconsistent with assurances given. The second issue is whether or not the advice on which Ministers spoke in the debate was correct; namely, in terms of the effect of Article 6 of the European Convention on Human Rights. The third issue is whether or not, quite apart from all that, the merits support the proposal in the rules that tribunal hearings should be held in public subject to a caveat, or whether they should follow the assurances given in debates here and in the other place.

I entirely support the Prayer put forward by the noble Lord, Lord Kingsland, at least as to the importance of the issues concerned and the lesson they may have for this place. Like other noble Lords, I would not be at all content if the point made by my noble friend Lord Newby concerning the many billets-doux which shower upon us during the course of these Bills, quite apart from the mass of amendments that come up night after night, was ignored. It would be not merely futile but counter-productive were those communications in any sense to have priority over what is said on the Floor of this House in debate. I hope that the Minister in responding to the debate will agree with that proposition.

I say a few quick words about the advice which I assume Ministers were given before they spoke as they did in the debates. In particular I refer to the words spoken by Miss Melanie Johnson, who was then Economic Secretary to the Treasury, on 4th November 1999. I am sure that some noble Lords may not have picked this up. Miss Johnson said:

"As long as that [namely a tribunal hearing in private] is consistent with the interests of justice and everyone's right to a public hearing under ECHR, it is intended that that [the private hearing] will generally be at the request of the person referring the case", namely, the appellant to the tribunal.

That is absolutely clear. It is quite clear too that she had had advice on the meaning and intent of Article 6. I note that Halsbury makes the point--as is clear from Article 6, which is primarily a protection for individuals caught up in civil or criminal process--that,

"The convention does not require a public hearing if an accused or a party has waived the right to such a hearing, provided that the waiver is unequivocal and there is no important public interest consideration that calls for the public to be present".

I am sure we await to hear with great interest what the Minister will say about the Government's present view of Article 6. However, if the prayer of the noble Lord, Lord Kingsland, is no longer consistent with their interpretation of Article 6, we deserve an explanation as to why different advice was apparently given in November 1999 and when the noble Lord, Lord Bach, spoke to the same intent in March 2000.

Finally, France has private hearings before the Conseil d'Etat which are subject to the same European convention. On the other hand, New York is not subject to the convention and has public hearings. I have earned my living in a law firm in the City over the past 35 years. I am not convinced by those in the City who argue that a private hearing is in the best interests of the City. In an obvious and superficial way that case can be and is made; but it is in the greater public interest that the tribunals should be heard in public.

There is a mystique around the City. Many people believe that it is a law unto itself. There is a degree of unhappiness about the small number of disciplinary proceedings which are brought with regard, for example, to insider trading and the even smaller number of proceedings which are successful. I take issue with my friends in the City who believe that privacy is the best way to effective policing.

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Conservative

My Lords, the noble Lord referred to the question of insider dealing. That is a matter for the Department of Trade.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

My Lords, of course I accept that. I sought to draw a picture of the way in which the general public views this extraordinarily powerful institution with extraordinarily rich and powerful players (as they are inappropriately called) involved in the City. Far from it being against the interests of the City that the tribunal hearings should be in public, in the interest of public satisfaction with the conduct of affairs within the City--on the whole they are honourably and effectively undertaken--they should be reported. It is idle to pretend that the Sun or the Star, or any of the other "red tops" will be interested in the normal disciplinary proceedings which come before the tribunal. It is more important that the financial press should be able to report the details, background and story behind cases which could prove not only a deterrent to others but, above all, could give them insight into the background of many of those cases.

In conclusion, I agree with the noble Baroness, Lady Crawley. It would be a bizarre state of affairs if the man who steals a bottle of milk or the confused old woman who takes a packet of sweets from the supermarket store and does not pay for them should suffer the extreme pain of the deterrence of local publicity until he or she is acquitted but that the greatest and most powerful institutions in our land should be free of those constraints.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I am most grateful to the noble Lord for giving way. Throughout the proceedings on the Bill it was one of the Government's contentions that the nature of the offences dealt with by the FSA were not criminal. I understand why the noble Lord seeks to draw the parallel that he does but it is not an exact one.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

My Lords, I accept that. I speak at large. However, the noble Lord, Lord Kingsland, will accept that the issues brought before the tribunal are important to those concerned and the market place. Since the City is vital to our economy, they are important to us all. I simply attempt to rebut the argument that somehow these firms would suffer irreparable damage if the tribunal proceedings were publicised. The City is the most sophisticated market on earth and knows precisely how to deal with responsible reports of tribunal proceedings. While I agree with the noble Lord's remarks on the way in which the matter has been dealt with, I beg to differ with him as to the merits of the open private tribunal debate.

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department) 4:15, 23 October 2001

My Lords, perhaps I may say how grateful I am for this opportunity to debate the procedural rules. It is rare indeed that your Lordships have been treated to such passion in relation to rules of any kind. I was rather troubled when I first became aware of the issues which seemed to divide a number of noble Lords in this House--there appeared to have been a misunderstanding about what was said by my noble friend Lord Bach during the Committee stage on 30th March--not least because it was a misunderstanding as to the proper interpretation to be given to the comments made by my noble friend. That was shared by a number of noble Lords. A number of people have referred to the passages; therefore, at this stage I shall not repeat them but I shall come back to them in due course.

As your Lordships know, I come rather fresh to the fray regarding this Bill and the rules. Therefore, I thought that the best way of understanding how we came to this sorry pass was to look at the history to see whether I could work out the chronology and how we came to be in the position we now are. With your Lordships' leave, I ask you to come on the journey with me because we may be able to draw the sting out of what appears to be the disagreement.

We all appear to agree on certain matters. I start with the agreement. The following appears to be clear and, I hope, not subject to disagreement. First, the Financial Services Authority should have a clear remit. Secondly, the tribunal should be independent, robust and Article 6 compliant. We put to one side for the moment what that involves. There should be proper safeguards in place to ensure that procedures adopted by the FSA and the tribunal are fair, open and transparent; and that any legislation brought forward would be ECHR compatible and enable the Government to make a Section 19 compatibility statement in respect of it. All those appear to be given.

Therefore, perhaps we may start our journey quite a long time ago when the matter came before the Joint Committee on Financial Services and Markets. The first report, volume II, was printed on 27th April 1999. I invite noble Lords' attention to Appendix 2. In Appendix 2 the Government set out their overall objectives. Your Lordships will recall that this appendix was submitted as a note by Her Majesty's Treasury on enforcement procedures. It states:

"The Government's overall objectives, which appear to be shared by many of the witnesses the Committee has heard on the subject, are:

"(i)A procedure that is objectively fair and secures a person's rights to a fair hearing as enshrined in the ECHR and Human Rights Act".

Sub-paragraph (iii) states:

"The procedure must also allow justice to be done, and be seen to be done, from the point of view of any victims of regulatory breaches and the wider public, whose confidence in the financial services industry is central to the wider aims of this Bill".

That is consistent with what the noble Lord, Lord Phillips, outlined to us.

Paragraph 2 states:

"The way in which we have sought to achieve these objectives is by making a distinct separation between the regulatory procedures of the FSA, which are administrative in nature, and the judicial procedures of the tribunal. The Government would welcome the Committee's views on whether the separation is sufficiently clear at present".

There we have it. The FSA's procedure was going to be separate and apart from the tribunal's procedure.

Paragraph 8 states that the precise procedural rules for the tribunal will be a matter for the Lord Chancellor and will be consulted on in draft in due course.

There has already been reference to the speech of my honourable friend, Melanie Johnson, in another place on 4th November. She told the Standing Committee:

"As the Minister for Small Business and E-Commerce, my hon. Friend Ms Hewitt--my predecessor as Economic Secretary--explained to the Joint Committee, the tribunal will be a first-instance tribunal. It will be able to consider all the facts and all the merits of the case, in full compliance with the requirements of Article 6(1) of the European Convention on Human Rights.

The tribunal will also comply with the current best practice, as laid down by the Council on Tribunals. The council will oversee the tribunal's working in accordance with its role under the Tribunals and Inquiries Act 1992. Our amendments make it clear that the tribunal comes within the council's responsibilities under the Act".

The rules that were current at that stage--the 1991 model rules--were published as a Command Paper. However, the version on the council's website was the September 1999 revision of those rules, which would have been available by 4th November 1999, though they had not been laid before Parliament. As I understand it, those new September 1999 rules provided for publicity.

We then move on to the troubled letter. The Government have throughout tried to be helpful. Although I hear and have sympathy for what the noble Lord, Lord Newby, says about being showered with a piece of paper, many people would prefer to be showered than not showered at all and remain unclean and uninformed about what was in the Government's mind.

The letter was written by my noble friend Lord McIntosh in his usual inimitable style in an attempt to be helpful. It might help if I read it, because we have been talking about the letter. It was not in any way intended to supersede what was said by my noble friend Lord Bach; it was intended to better inform the debate that was then proposed to take place on 30th March. My noble friend Lord McIntosh said in his letter:

"Please find attached a draft of the procedural rules for the Financial Services and Markets Tribunal, which are to be made by the Lord Chancellor under clause 123 of the Bill. I am circulating this draft to assist noble Lords when we reach Part IX of the Bill in Committee.

I must stress that this is only a working draft. An earlier draft has been shown to the Council on Tribunals, the Court Service, the Northern Ireland Court Service, and the FSA, but this draft does not yet reflect all of their comments. I am sorry that it has not been possible to circulate a more final draft, but I hope that you will nevertheless find it a useful guide as to the sorts of issues being covered in the rules and that it will thereby help to inform our debate.

I also attach a brief summary of the rules".

That was an attempt to be entirely helpful and to make sure that there was a degree of clarity and a better understanding that when the noble Lord, Lord Bach, came to discuss the issues there would be a discussion about the FSA and then a separate issue in relation to the tribunal. That was on 14th March.

We then move on to the comments of my noble friend Lord Bach. However, before I do that it might help noble Lords to know what was contained in the document that was circulated by my noble friend Lord McIntosh. Paragraph 18 of the Explanatory Notes, which was the summary of the rules of the Financial Services and Markets Tribunal, helpfully says, under the heading "Hearings in Public":

"All hearings, including preliminary hearings and pre-hearing reviews, will be conducted in public except in limited circumstances which reflect the exceptions permitted under the European Convention on Human Rights (namely where a private hearing is required in the interests of morals, public order, national security or the protection of the private lives of the parties, or where it considers that publicity would prejudice the interests of justice)".

That is pure Article 6 on public hearings. That was sent by the noble Lord, Lord McIntosh, in order to better inform the debate that took place on 30th March. I hear what the noble Lord says about the Government deserving a bloody nose. I hope that he will find that the punch will not be directed at me--although I dare say that it would enhance my looks.

We then get to the noble Lord, Lord Bach, himself. For the whole of the period of about a year before, it had been strongly urged that there should be a clear distinction between the FSA rules and the tribunal rules. They were two separate, distinct entities and the independence of the tribunal was key.

One of the fears, as noble Lords may remember, was that the FSA would behave in a way that would prejudice those who might wish to appeal the notices issued by them. It was therefore very important to make sure that the constraints that were going to be put on what they could and could not do were fair, open and transparent. My noble friend Lord Bach set the context in which this discussion should take place. He said:

"This group of government amendments all deal, in one way or another, with the end of a notice procedure and the manner in which the final determination of the matter may be notified to the person concerned and published more widely".--[Official Report, 30/3/00; col. 914.]

I respectfully suggest that he was dealing there with the FSA only, not the tribunal. He went on to deal with the Government's position. I understand the way in which a number of noble Lords have said that this has been interpreted and I can see that that interpretation might be possible if one does not put it in the context of what went before, but once the comments are put in context, my respectful submission is that that interpretation does not hold water.

Let me help your Lordships on why that is the case. My noble friend said:

"The Government believe, however, that it is necessary to avoid any risk that a person might be unfairly tainted, by giving publicity to the fact that some contravention had been alleged by the FSA,"-- not the tribunal--

"before the person concerned had had an opportunity to refer the matter to the tribunal, or before a matter referred to the tribunal had been finally determined by the tribunal or the appeal courts".--[Official Report, 30/3/00; col. 916.]

I am sure that none of your Lordships will suggest that they were misled into thinking that if the matter was referred to the Court of Appeal, those hearings would be heard in camera by the Court of Appeal and would not have the normal publicity that goes with the full panoply of the court. Under the new clause on publication, the authority--I repeat, the authority--is therefore prevented from publishing details about warning and decision notices. The Government have accepted that there should be a division between FSA procedures and tribunal procedures. When my noble friend Lord Bach referred to that, he was referring to the procedure in relation to the FSA, not in relation to the tribunal.

The matter was not specifically dealt with. That is why I understand how the confusion arose, even though I am surprised by it. I am surprised because it certainly appears that in what went before there was no indication that the Government were irrevocably wedded to private hearings. The belief was that that matter was going to be looked at when the rules were prepared. The rules were prepared and circulated before--

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

My Lords, before the Minister passes on from this part of her speech, will she refer back to what Miss Melanie Johnson said about the ECHR, because she did not refer to it?

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, I did refer to it, but I am happy to do that. The noble Lord said, in relation to the ECHR, that there is provision if the applicant wishes to waive the publicity and have it in private. In due course, I shall come to Rule 17, which we argue does just that in terms of how Article 6 was intended to operate.

Photo of Viscount Bledisloe Viscount Bledisloe Crossbench

My Lords, before the noble Baroness moves on from the words of the noble Lord, Lord Bach, can she explain to us how, not as a matter of semantics but as a matter of substance, one prevents a taint, pending the determination of an appeal, by preventing publication of the conviction by the convicting body but allowing total publicity of the hearing against that conviction? How does that prevent taint until the appeal is determined, which is what the noble Lord, Lord Bach, said?

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, it enables a constraint to be put on the FSA--the authority--not to so act, whereas it enables the court to exercise its judicial judgment, first, as to whether to decide that the matter should be heard in private and, secondly, which part of the hearing should be heard in private and how disclosure should be managed. Therefore, it does not impinge improperly on the exercise of the tribunal's discretion or the exercise of the discretion of the Court of Appeal. However, it does constrain the FSA from publicising those matters in any other way. We argue that that must be right.

Perhaps it would help your Lordships if I were to refer to Rule 17, which makes plain how the hearing should be provided for. In that rule, "the hearing" means any hearing under the rules. Sub-paragraph (3) is of importance. It states:

"The Tribunal may direct that all or part of a hearing shall be in private ... upon the application of all the parties; or ... upon the application of any party, if the Tribunal is satisfied that a hearing in private is necessary, having regard to--

(i) the interests of morals, public order, national security or the protection of the private lives of the parties; or

(ii) any unfairness to the applicant or prejudice to the interests of consumers that might result from a hearing in public, if, in either case, the Tribunal is satisfied that a hearing in private would not prejudice the interests of justice".

Therefore, a very flexible tool can be used by the tribunal.

If, as the noble Lord, Lord Kingsland, suggests--I believe that he has set his case rather high--terrible consequences would flow for the public and for the financial institution as a result of publicity, I am sure that the institution would be able to employ the most eloquent advocate to voice that concern on its behalf and to make a sufficiently persuasive application to the tribunal for the argument to hold water.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I am most grateful to the noble Baroness for giving way. I am prepared to accept that there are other points of view on this matter. However, they were not aired in the debate on the Bill because both the Government and the Opposition appeared to agree about them at that time. The point of this Motion is not to address the substance of the arguments one way or the other; the point is to say to the Government, "You never gave us an opportunity to talk about them at all during the Bill".

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, I hear what the noble Lord says; I simply do not agree with him. There was such an opportunity, but it was not taken and the matter was not discussed. However, there was an opportunity to consider the rules. They were considered after they were first published in January, although I accept that that was after the Committee stage. There was a consultation period and these matters were examined. I see that the noble Lord is agitated. I do not know whether he wants to intervene a second time.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, the rules were published only several months after the Bill became law. No public circulation of the draft rules was made until long after the Act was on the statute book.

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, I know that the vexed question of the letter has been raised. However, with regard to what was circulated, I understand that the noble Lord says that he did not receive a copy, and I do not seek to say that he misleads on that. I understand, too, that the noble Lord, Lord Saatchi, says that he did not receive his copy. However, the Government believed that what was circulated was in general currency, and, on its face, it stated that the hearings would be held in public. The original draft of the rule did not have the specificity of the later rule, as set out in Rule 17. But Rule 21, as it was at that time, provided that the hearings would be heard in public.

Therefore, I hear what the noble Lord says but, simply and frankly, I say that we do not agree. There was a Division. The noble Lord, Lord Bach, did not mislead the House. I understand that there may have been a misunderstanding and, of course, I bitterly regret that such a misunderstanding appears genuinely to have occurred.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I have never said that the noble Lord, Lord Bach, misled the House. I took great care in my opening remarks to cast no aspersions on the noble Lord. It appears that the noble Lord, Lord Bach, genuinely believed what he said. I suspect that what happened is that the noble Lord's position was the Government's position until responsibility for these matters shifted from the Treasury to the Lord Chancellor's Department. However, that is merely a speculation. The noble Lord, Lord Bach, was quite splendid throughout the passage of the Bill. He had a very heavy task to fulfil, and I do not believe that any of my noble friends had any complaint about the noble Lord.

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, perhaps I may deal with the speculation. There has been no shift in policy. The Government are united in that regard. Her Majesty's Treasury is clear that it had understood that hearings would be held in public. That was consistent with the position at that time. I do not know how often the noble Lord wants to rise but I am happy to sit down again.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, perhaps I may humbly say to the noble Baroness that having an exchange such as this is a good way in which to clear up the issues between us. When the Bill was originally published by the Government, it reversed a presumption in the Financial Services Act 1986 and the Banking Act 1987 by suggesting that the hearings should be held in public. It was only as a result of the progress report of the Joint Committee of the noble Lord, Lord Burns, in March 1999, that the Government thought again. When the Bill finally came to another place, the original draft had been changed to exclude the proposal that the tribunal hearing should be in public. Therefore, to that extent, the Opposition were perfectly entitled to draw the conclusion that the Government would support private hearings at independent tribunals.

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, again, I hear what the noble Lord says, but I am left with saying "no", "no" and thrice "no". The Government have not changed their position. We have thought about the matter long and hard. The position advocated in the draft rules, which we hoped had been circulated properly on 14th March, made clear that we had intended the hearings to be held in public. The rules were redrawn. Rule 21 became Rule 19 and, finally, was expressed as Rule 17. In each manifestation the principle was retained that a public hearing would be preferred, although there was extensive provision for the exercise of judicial discretion by a properly constructed, independent tribunal which would discharge the duties properly.

My noble friend Lord McIntosh was right. When he signed his statement of compatibility, pursuant to Section 19, it was in contemplation that the Lord Chancellor would bring forward rules in relation to the tribunal. I can assure your Lordships that the Lord Chancellor has no intention of bringing forward rules which would not be compatible with Article 6. The rules that we have brought forward are compatible with Article 6; that was always the intention.

I say most humbly that I regret very much that there appears to have been a misunderstanding. I accept the genuineness of that misunderstanding although, regrettably, I cannot accept that the Government behaved badly or deserve a bloody nose--I was invited by the noble Lord, Lord Newby, to do so. I am genuinely concerned about the fact that this misunderstanding has occurred. Until this stage, the way in which the scrutiny of the Bill had been undertaken was exemplary--the procedure was working at its best.

Although I express that regret, I cannot say that there is any reason for noble Lords to think that the Prayer should be supported, and I invite noble Lords not to so pray. If I may respectfully say so, I also invite all noble Lords to consider very carefully the Government's explanation. If noble Lords feel that compatibility with Article 6 would be put at risk, I invite them to vote with their conscience.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I shall be extremely telegraphic. One point of detail should be made. I am afraid that I have to say to the noble Baroness that I do not accept that the statement that was made by the honourable Melanie Johnson, the Economic Secretary to the Treasury, in November 1999 referred to the draft rules that were quoted. As the noble Viscount, Lord Bledisloe, said, it was clear that the expression "current rules" referred to the rules that were then binding on tribunals. The fact that a set of draft rules had begun to circulate two months previously cannot undermine that interpretation.

The noble Baroness said in her opening remarks that she was glad that we had an opportunity to debate this matter on a Prayer. I am sad, by contrast, that we have to do so. The right moment to debate this matter is not on a Prayer in your Lordships' House but during the course of the Bill--in the course of the primary legislation. The fact that we are not doing so is as a result of a statement that was made by a member of the Government, which innocently misled your Lordships' House. In those circumstances, I regret the fact that the Government are not prepared to withdraw the regulations and to reconsider the matter. I therefore wish to put the Motion to the House.

On Question, Whether the said Motion shall be agreed to?

Their Lordships divided: Contents, 129; Not-Contents, 140.

Division number 1 Private Parking: Ports and Trading Estates — Financial Services and Markets Tribunal Rules 2001

Aye: 127 Members of the House of Lords

No: 138 Members of the House of Lords

Aye: A-Z by last name

Tellers

No: A-Z by last name

Tellers

Resolved in the negative, and Motion disagreed to accordingly.