Clause 21

Part of Financial Services Bill – in a Public Bill Committee at 4:45 pm on 12 January 2010.

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Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury 4:45, 12 January 2010

The effect of the amendments is to exclude small and large businesses by virtue of the definition of “consumer” given by the hon. Member for Fareham in amendment 60. I will explain why we believe it right to include in the scope of class actions businesses, especially small businesses, as well as charities, the self-employed and individuals acting in a professional capacity.

The definition of those whose claims can be represented is related closely to the definition of “consumer” in the Financial Services and Markets Act 2000. I consider it important to maintain the relationship between those who may benefit from regulation and those who may benefit from collective proceedings. It is advisable and desirable to avoid a situation in which a firm and an individual are protected by the same regulation, but the individual has access to greater or better routes of redress. I also do not see any reason why court proceedings brought by large businesses should not benefit from the more effective group litigation procedures, although for small businesses, charities and the self-employed, the scope to act in that way is clearly highly important.

The collective proceedings procedure does not create new liabilities or claims; it is simply a more efficient way of dealing with a number of similar claims. If a group  of firms or professionals have valid claims, it seems to me that they should be able to apply for a class action if that is the most efficient way of handling those claims. For their claim to be valid, businesses will have to show that they have cases with generic issues that can be dealt with on a group basis by a representative. The court will be able to authorise the action only if that is the most appropriate way of disposing of the issues. To my mind and the Government’s, the same logic applies to businesses and to individuals.

Perhaps the hon. Gentleman is concerned that the clause would allow commercial creditors to apply for a class action against a financial services provider. I draw the Committee’s attention to the definition in clause 21(1) of what types of claim they might be able to make through a class action. It is limited to cases in which they could show that their claim was connected with carrying on a regulated activity or dealing with the authorised person in the course of a regulated activity.

Ultimately, of course, it is for the court to decide the most appropriate way to manage a large number of claims. I believe that our approach is preferable to excluding a whole category of potential claimants, as the hon. Gentleman’s amendment would. I hope that I have persuaded him not to press his amendment.