Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

Clause 32

Banking Bill – in a Public Bill Committee at 11:00 am on 11th November 2008.

Alert me about debates like this

Transferable property

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I beg to move amendment No. 136, in clause 32, page 14, line 23, leave out ‘(including legislation of the European Union)’.

The amendment relates to subsection (1)(e), which is one of those pieces of drafting where one suspects that the draftsman and the Government have something in mind. The aim of the amendment is to find out what  that is and whether it is possible for the clause to be more explicit. My amendment would remove some wording, which I am keen to replace with more specific wording, but until we know what the Government have in mind it is not possible to propose an amendment that is more specific.

The subsection refers to a property transfer instrument transferring property rights or liabilities, including rights and liabilities under an enactment

“(including legislation of the European Union)”

—the words that I seek to remove. What EU legislation do the Government have in mind? Do they have in mind passport rights under the markets in financial instruments directive or the banking co-ordination directive? The passport rights in those directives enable a branch of a European economic area institution to locate in the UK. Are those the sort of rights and liabilities that the Government envisage? If not, what do they have in mind? The amendment is intended to press the Government to elaborate on what they are seeking to address, with a view to tightening up the Bill so that we know what sort of enactment under EU legislation they mean.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I support my hon. Friend’s amendment. It is clear that the idea of the parliamentary draftsman and his interpretation of the Minister’s wish was that the provision would be governed by the sovereignty of Parliament, otherwise there was no need to put those words in. We were told earlier that the Government believe that the measure complies with EU law, so it is not necessary to say that because it is implicit. If that is the case, the additional words are not necessary and my hon. Friend’s amendment is correct.

I suspect that the draftsman included those words because he intended in the previous clause that we would override EU law. The Bill does not seem to match the Government’s intentions and my hon. Friend’s amendment is most helpful to the Government. I expect the Minister to accept it.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

No, I am afraid that I shall not do so. The hon. Member for South-West Hertfordshire asks a good question. If I explain the intention behind the wording, perhaps matters will become a little clearer.

Clause 32 provides that a property transfer instrument may transfer any property, rights and liabilities, and gives specific examples of the types of property that that may include. For instance, the instrument may transfer property acquired between the making of the instrument and the transfer date. It may also make provision for foreign property owned by the bank to be transferred. Having consulted those who prepared the Bill, I want to make it clear that the intention is to enable the transfer of the broadest possible range of property, rights and liabilities. As we explained elsewhere during the passage of the Bill, we have tried to future-proof it, which is a matter of course in legislation, so that we do not have to keep revising it.

The final example of what transferable property may be, as the hon. Gentleman noted, is rights and liabilities under the enactment, including legislation of the European Union. The hon. Gentleman seeks to probe us by removing that reference to Community law. I tried to  think of examples in which that might be appropriate. The first example that my officials came up with was milk quotas, which would not normally apply to the banking sector, but it is an example of a property right under European law. Carbon trading permits under the EU emissions trading scheme may well be an appropriate example. We do not know what instruments may be included in the future.

Why is there a problem with including EU legislation, given the possibility that something might be applicable and could be transferred if the special resolution regime was engaged? It seems a sensible and logical thing to do. It would be rather perverse to exclude something because it originated in EU legislation.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Earlier in the debate—indeed, throughout the debate—we have heard that we do not need to put the words in the Bill because it already complies with Community law. Anything in Community law applies to the Bill, so the words are unnecessary. If we take them out, and if the Government are right, the context does not change because the European Communities Acts apply. The wording seems superfluous and we try not to include such wording in Bills. I cannot see the logic of putting it in when it already applies and we have not put those references in anywhere else.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I cannot see the logic of taking the wording out. I am advised that those are not superfluous words and that they are needed to ensure that we have a broad and encompassing definition to make it very clear that any property rights and liabilities that are included in EU legislation could be transferred under the powers in clause 32, if the special resolution regime was engaged.

I want to be clear. The reference is not intended to suggest that the Government will legislate in a manner incompatible with Community law, as I explained previously. That is not possible and the Government would not seek to do it. I hope the hon. Gentleman and members of the Committee are satisfied that the provisions in the clause are appropriate, needed and sensible, and I hope the hon. Member for South-West Hertfordshire will withdraw his amendment.

Photo of David Gauke David Gauke Shadow Minister (Treasury) 11:15 am, 11th November 2008

I am grateful for the Minister’s response. As I said in my opening remarks on the amendment, my intention was to flush out exactly what the Government had in mind when they referred to EU legislation. I was not expecting milk quotas. The provision would appear, from what the Minister has said, to be largely precautionary and I have no objection to it other than that it seems vague. The Minister did not refer to passporting rights—I anticipated that they would be considered rights under an enactment, including EU legislation. I do not know whether passporting rights would fall under the provision. Although we did not receive the expected clarification, the Minister’s remarks were helpful. The wording does no particular harm, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I have one question, which we could also address under clause 36 on foreign property. It concerns the rights and liabilities under the law of a country or territory outside the UK, which, according to clause 32, a property transfer instrument may transfer. There will always be foreign law issues, and there may be a clash between these provisions and foreign law. A particular issue is that under our arbitration Acts we acknowledge and respect decisions made by foreign arbitrations, but it is not entirely clear how the provisions in clauses 32 and 36 relate to those Acts.

I do not expect the Minister to respond on that point, but I mention it as something that he and his advisers might want to consider. There may be nothing to it, but it might be helpful for the Committee that I have mentioned it. It also might be helpful if the Minister, either now or under clause 36, told the Committee how the relationship between foreign law and the provisions will work, and whether there are difficulties with transferring rights and liabilities under foreign law when we are not necessarily in a position to do so.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

It is important that a property transfer instrument is able to transfer all of a failing bank’s property. If a crucial element of a bank’s business were left behind, that could jeopardise the effectiveness of the transfer. If a private sector purchaser believed that to be a material risk, it might not agree to take part in the transaction. With a property transfer to a bridge bank, if some property could not be transferred, that might reduce the likelihood of an ultimate sale or increase the risk to public funds. That is why the clause is particularly necessary.

The inclusion of foreign property in the scope of the clause is crucial, given the international and multi-jurisdictional nature of many of the UK's banks. At the moment, I do not have a direct answer to the arbitration point raised by the hon. Gentleman, but we can discuss it further under clause 36 and the obligations there, because we need to ensure that a transfer of foreign property is effective. Overall, the clause underpins the effectiveness of the Bill’s property transfer powers, and I urge that it stand part of the Bill.

Question put and agreed to.

Clause 32 ordered to stand part of the Bill.

Clause 33 ordered to stand part of the Bill.