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Clause 34

Banking Bill – in a Public Bill Committee at 11:15 am on 11th November 2008.

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Licences

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I beg to move amendment No. 137, in clause 34, page 15, line 20, leave out ‘despite the transfer’ and insert

‘as if the transferee is the transferor’.

The amendment addresses a drafting issue. Clause 34(1) states:

“A licence in respect of anything transferred by property transfer instrument shall continue to have effect despite the transfer.”

Concern has been raised with us that the clause, as currently drafted, appears to have the effect that the licence endures only for the benefit of the transferor, as opposed to the transferee, which I do not think is the  intention. The amendment would mean that both the transferor and the transferee gain the benefit of the licence. I expect the Minister to confirm that the amendment accurately reflects the intention behind clause 34(1) and that the clause, as currently drafted, would not have that effect. Our intention in tabling the amendment is to ensure that the Minister dispels any ambiguity that might exist in the current drafting.

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

The clause provides for a property transfer instrument to make provision in relation to licences, and the purpose is to ensure that, if any banking business transfer relies upon a licence, appropriate provision may be made to ensure that the transfer is effective. An important example is any form of IT licence granted to a deposit taker that might give it permission to use a particular type of system to operate its business. To ensure continuity of banking services, it is important that those licences are valid after a transfer.

The hon. Gentleman proposes to amend the phrasing of subsection (1). I accept that the provision set out in subsection (1) is broad, but I also point out that subsections (2), (3) and (4) provide for the power to be refined to the particular resolution. For example, if it was in the public interest to exclude a licence from the operation of the clause, the property transfer instrument could provide for that. There is also the flexibility to apportion responsibility for compliance with a licence between a transferor and a transferee. Given the scope for refinement and honing, I consider the original wording to be preferable. The amendment also overlaps with the continuity provisions, which can be made under clause 33. Therefore, I ask the hon. Gentleman to withdraw the amendment, and if it is pressed to a vote, I urge members of the Committee to reject it.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I am not sure that the Minister has quite got to the heart of my concern, which was not so much that subsection (1) was too broad, but that in a way it was too narrow. It seemed to suggest that the licence endured only for the benefit of the transferor, which is not the intention behind the clause, unless the Minister wishes to say otherwise. What the Minister has said makes the intention of the clause clear: the licence will apply for the transferee as well as the transferor. That provides sufficient clarification for me, so I will not press the amendment, but I am not sure that the Minister’s remarks quite got to the heart of my concern.

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 apologise for not covering that point. Subsection (1) states that the licence has effect with respect to the transferred property. The transferred property is transferred to the transferee. So I can confirm that it is the intention of the clause that relevant licences apply to the transferee.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I am grateful for that explanation. 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)

My question relates to subsection (3) which states:

“Where a licence imposes rights or obligations, a property transfer instrument may apportion responsibility for exercise or compliance between transferor and transferee.”

In a scenario where the responsibilities are apportioned to the transferor and transferee and the transferor does not comply with the responsibilities under the licence—perhaps he is in breach of a systems licence—what rights does the transferee have? How is the apportionment enforced? The transferee could be dependent upon the transferor complying with a particular licence and if the transferor does not do so, the transferee appears to be in a vulnerable position. Again, this comes back to the question of certainty and ensuring that we have a system in place that is supportive of transferees to make it an attractive proposition.

There is nothing about this in the clause—it may be elsewhere—and in those circumstances it seems that apportionment may leave the transferee vulnerable. An amendment to the clause might provide the transferee with an ability to enforce the obligations contained within a licence or perhaps for it to take over those obligations subsequently. I am sure that the Minister will appreciate my concern. I do not claim that there is an easy solution, but I throw it open to the Committee and ask the Minister to explain how the Bill as currently drafted seeks to address the problem.

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 understand the point that the hon. Gentleman is making about subsection (3). In normal circumstances the property transfer instrument would determine the apportionment of responsibility for exercise or compliance between the transferor and the transferee and it would have been expected that both the transferor and the transferee would be content with the instrument that was being applied. The enforcement of the licence will depend on the circumstances, but the effect of the exercise of the power under the clause will be to alter the legal entitlements under the licence, whether under private or public law. I hope that provides at least some clarification for the hon. Gentleman. If there is anything more that he wishes to raise, I would be happy to consider it.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

For clarity, is the Minister essentially saying that the property transfer instrument is the agreement that will address this point and that the transferee may well have a contractual right against the transferor to deal with this matter?

Question put and agreed to.

Clause 34 ordered to stand part of the Bill.