asked Her Majesty's Government:

What progress has been achieved in relations with Russia on the enhancement of human rights and the promotion of a political peace settlement in Chechnya.

My Lords, progress on a political peace settlement in Chechnya has been slow. We have consistently urged this on Russia as the only way to resolve the conflict. The Foreign Secretary reiterated our concern during official talks in Moscow yesterday. He also pressed for action on human rights in Chechnya, where international pressure has secured some progress. Russia has agreed to access for international organisations and has set up a national commission to investigate human rights abuses.

My Lords, I thank my noble friend for that reply, but does she not agree that the action which has so far been taken is simply to put pieces of machinery in place which could potentially deliver results but that results are so far conspicuous by their absence? Does she not therefore agree that while it is obviously vital to build good relations with Russia and to bring her into the centre of world affairs, the issue of human rights cannot be fudged? Does she not agree therefore that the overwhelming majority of the members of the Parliamentary Assembly of the Council of Europe are absolutely right to say that, unless action and positive results can be seen, it is impossible to reconcile Russia's action in Chechnya with her continued membership of the Council of Europe?

My Lords, I understand the concern that the noble Lord expresses, but I say straight away that the process is essential. Having a process which is transparent and upon which we can rely in order to ascertain precisely what has happened, and having an independent element in that process, is critical. Therefore we should not in any way dismiss the importance of the concessions that have already been made in relation to that process. The Council of Europe—the noble Lord is right to give voice to this matter—has considered this matter seriously. It proposed a suspension of Russia. This will be reconsidered in June. Russia has made various comments about offers she is making to address these issues. They will be seriously considered. Russia is very much being put on her mettle. We shall review this issue.

My Lords, can the noble Baroness tell us a little about the tensions that the Chechnya question presents the Government with in their desire to support President elect Putin? Is it not at least possible that pursuing firmly the views that the noble Lord, Lord Judd, wants the Government to pursue could undermine the stability of President elect Putin within Russia itself? If the Government push the views of the noble Lord, Lord Judd, to the ultimate, how will the Government resolve that potential conflict?

My Lords, in relation to all such issues it is a question of balance and also a question of critical engagement. There are many levels on which we are working well with President Putin. He understands the agenda that Britain wishes to push. He also understands that we shall be robust on the matter of human rights. Getting that relationship right so that we can move forward, giving encouragement and enabling the new president to do that which is essential for Russia to be a true partner, must be our focus. At the moment we believe that that balance is being carefully handled by Her Majesty's Government and it is working as well as one can reasonably expect it to.

My Lords, following the Minister's reply to my noble friend, what representations have Her Majesty's Government made to the Government of Russia regarding the attack on the Media Most headquarters in Moscow and on NTV Television and the detention of the Radio Liberty journalist, Andrei Babitsky, by the Russian security forces?

My Lords, the situation regarding the journalist has been raised with our Russian colleagues. As I said in my initial Answer, my right honourable friend the Foreign Secretary spoke yesterday to his opposite number, Mr Ivanov. The issues in relation to Chechnya and human rights were raised. We shall continue to raise these issues with them.

My Lords, does the Minister recall that the problems in Chechnya partly grew out of Russian-armed Chechens supporting the separatists in Abkhazia as a means of destabilising Georgia? Is the Minister aware that the Abkhazia situation remains unresolved? Are the British Government bringing any pressure to bear on the Russians to resolve the problems of Abkhazia and thus help to stabilise the Government of Georgia?

My Lords, I am not able to tell the noble Lord whether that precise dimension of the problem has been raised. However, I can reassure him that issues in relation to regional stability have been a matter of constant concern, both on the part of my right honourable friend the Foreign Secretary and other Ministers within Her Majesty's Government, together with our officials. The issue of stability in the area remains critical and is very much on the agenda.

asked Her Majesty's Government:

Whether they consider that the banning of all nuclear weapons can only be achieved by the adoption of a plan by the nuclear powers along the lines proposed by the Canberra Commission, and whether they will now propose such a plan.

My Lords, I am puzzled by this Question from my noble friend. The Canberra Commission did indeed consider the merits of proposing a precise timeframe for the elimination of nuclear weapons, but, after careful thought, decided not to do so. We believe that it was right to reach that conclusion. We remain convinced that the best way to make progress towards nuclear disarmament is by pursuing achievable, incremental steps forward. Given the complexity and difficulty of the issues involved, we do not believe that the adoption of a timed plan would in practice be likely to hasten the achievement of this goal.

My Lords, my noble friend is right to say that the Canberra Commission decided in the end not to put forward its proposal for a convention. But, since that time, that matter has been reconsidered. A most remarkable document entitled Security and Survival, emanating originally from the United States although it represents also the views of several other countries, proposes a model for a convention. I suggest that that is sufficiently impressive for the Government seriously to reconsider the question of a convention. Am I wrong in thinking that the Government will agree that in the end a convention will have to take place in order to prevent the disaster which will occur if we have no such agreement among nations?

My Lords, as my noble friend knows, the Government have made it crystal clear—I hope—that our goal is the global elimination of nuclear weapons. That fundamental commitment has already been made. We also want to see faster progress in that direction. I shall, of course, note what is stated in the document to which my noble friend refers, but the Government feel that it is most important that we target our attention on achievable goals so that we make incremental improvements in the situation as quickly as we can manage that.

My Lords, does my noble friend agree that unless the nuclear powers show some evidence of their intention to fulfil their obligations under the non-proliferation treaty, the non-nuclear powers will eventually renounce the treaty? Can she instil some sense of impending doom into our partners before we reach the point of no return?

My Lords, the noble and learned Lord is right to express his concern. However, there have been some glimmers of hope in the recent past. It is significant that in Russia the Duma has ratified Start II; it has also ratified the comprehensive test ban treaty. We are moving—slowly, admittedly—in the right direction. I can reassure the House that all of those in Her Majesty's Government who have the privilege of dealing with this matter have their eyes clearly focused on our long-term goal of the global elimination of nuclear weapons. We shall not be distracted from the path towards that long-term goal.

My Lords, can the Minister say when we can expect to see some results from the review of NATO's nuclear weapon policy, which was set in hand in a council meeting at the summit last April?

My Lords, I wish I was able to give your Lordships a specific timetable in relation to that matter. I do not have one. All I can say is that this matter is moving forward as quickly as it reasonably can. I wish that I could tell your Lordships more.

My Lords, have Her Majesty's Government made representations to the Russian Government regarding the decree that the Russian President, Mr Putin, signed amending the 1992 presidential decree on export control over nuclear materials, equipment and technologies?

My Lords, I am not able to answer the noble Baroness in regard to that matter. I shall write to her in due course.

My Lords, what action have the Government taken to persuade the Israeli Government—which no longer make any secret of having a nuclear capability—to sign the nonproliferation treaty?

My Lords, all countries engaged in this kind of activity have been approached with a view to, first, encouraging acknowledgement and, secondly, dealing with it. The noble Lord is right: Israel has not made the necessary concessions in this regard.

My Lords, further to the question of the Canberra Commission, does the Minister recall that in its report the commission stated that one of the most important means of ensuring the success of the Canberra plan was effective verification? It then went on to say that no verification plan can ever be 100 per cent effective. Can she reassure the House that none of the plans for disarmament, denuclearisation and all the other processes will be entered into unless there is a full and reliable verification procedure?

My Lords, the noble Lord is right; Britain will retain its nuclear deterrent for as long as it appears necessary for our safety. We have made that commitment; there is no reason at the moment to revise it.

My Lords, the Minister will be aware of a debate in another place in which the Foreign Office Minister pledged, in regard to the whole question of non-proliferation, that he would be working with the New Agenda Coalition to make progress in this area. Can she inform the House of any developments in those discussions?

My Lords, I can confirm that our delegation in York has been working extremely hard to forge agreement on the way forward for nuclear disarmament and non-proliferation. In particular, it has made a major effort to bridge our remaining differences with the countries which make up the New Agenda Coalition. We have shown a good deal of flexibility and imagination in seeking an agreed outcome from this conference and we hope that others will do likewise. I am sure that the whole House will join with me in expressing the hope that these efforts will bear fruit. If agreement is not reached by the time the conference ends tomorrow, it will not have been for any want of effort on our part.

My Lords, am I correct in believing that the Russian President, Mr Putin, has stated that if the Americans go ahead with their new missile defence system based in space there will be no further moves towards nuclear disarmament? If that is so, what representations have Her Majesty's Government made to the United States Government about that issue?

My Lords, we have been speaking to both Washington and Moscow about the anti-ballistic missile treaty and the need for an agreement. We have been encouraging both sides to negotiate so that an amendment to that treaty will be possible. The treaty has been amended in the past; it is possible for it to be amended again. We are very hopeful that our Russian and American colleagues will take this matter seriously and resolve it between them. We are not a party to that treaty, but we obviously wish them well in coming to some accommodation.

asked Her Majesty's Government:

Whether the extension of the age profile of the bus fleet operated by Ulsterbus is consistent with their policy of encouraging the use of public transport.

My Lords, it is the aim of the Department of Regional Development that Translink should replace vehicles as they reach their target replacement age of 12 years for coaches and 18 years for buses. Over a period of time this would give average fleet ages of six years for coaches and nine years for buses. The extent of the Ulsterbus requirement for public funding to help to meet this aim is being considered as part of the current spending review. Like the noble Lord, we recognise that a modern bus fleet will encourage the use of public transport.

My Lords, I thank the noble Baroness for that reply. I declare an interest as a past chairman of the public sector bus companies in Northern Ireland. Is the Minister content with the fact that moneys from bus fares—which are of course paid by the poorer section of the community—which were prudently set aside by the bus companies in order to replace the fleet, have been taken away and used to subvent other government expenditure programmes, including road building? Does the Minister agree that this is a most unfortunate example of regressive taxation?

My Lords, I recognise the noble Lord's commitment to public service, which he demonstrated in the early 1990s as chairman of Ulsterbus and Citybus, and I compliment him on it. The Northern Ireland Transport Holding Company is a public corporation; its reserves are public money and its expenditure is only possible within the overall Northern Ireland public expenditure control total. However, in May 1998, the Chancellor of the Exchequer agreed that £25 million of those funds should be used for Northern Ireland, providing a significant boost to the local economy. The boost to public expenditure provided by the Chancellor's initiative was a major factor in enabling an additional £21 million to be spent on public transport over the years 1999–00 and 2001–02, and we still have this year's spending review in which spending on public transport is being given serious consideration.

My Lords, does my noble friend agree that the Northern Ireland Transport Holding Company is desperately short of money to modernise its fleet of buses and, indeed, Northern Ireland Railways, and to improve standards of safety? Can she comment on why the Northern Ireland Transport Holding Company has not so tar achieved any significant relationship with the private sector, through either PFI, PPP or leasing, as a way of improving public transport in Northern Ireland?

My Lords, I agree with the basic premise behind my noble friend's question, but would add that additional expenditure also assists improvement of access for those with disabilities. We are actively looking at the prospects for public/private partnerships for public transport in Northern Ireland. It is clear that the Northern Ireland Transport Act 1967 would need to be amended to enable PPPs to be introduced. Work would also have to take place on contract specification and negotiation. However, PPPs offer the prospect both of introducing greater efficiencies into public transport and making the phasing of public expenditure requirements easier to cope with.

My Lords, if the Government's policy, as outlined by the Deputy Prime Minister, that the average age of a bus fleet should be only eight years does not apply to Northern Ireland, the purpose of that policy being access for disabled people, does not that show a case of discrimination against disabled people in Northern Ireland who use public transport?

My Lords, the noble Lord's interest in and knowledge of transport issues in Northern Ireland are well known. In the report From Exclusion to Inclusion, which was published last December, the Disability Rights Task—Force recommended that the exemption for transport operators from the first and October 1999 phases of DDA—access to services duties—should be removed in civil rights legislation. We are considering how to achieve that. I accept that replacing old buses with new buses that make access easier is desirable. However, the decisions that have been taken by successive Secretaries of State with regard to public expenditure in Northern Ireland have been made on the basis of careful judgment. I am sure that the noble Lord, Lord Laird, will join all other noble Lairds —

Oh!

My Lords, I am aware that there is only one noble Lord, Lord Laird. I am sure the noble Lord will join all other noble Lords in hoping that the Assembly and the Executive will be making these vital judgments in Northern Ireland as soon as possible.

My Lords, does my noble friend agree that quality bus driving is as important as quality buses? Do the Government have any plans to improve the quality of the training of bus drivers so that travelling on a bus becomes a pleasure rather than a "hanging on like grim death" experience, as is so often the case at the moment?

My Lords, I have not received any specific complaints about the driving of vehicles in Belfast or other parts of Northern Ireland. Maintaining high quality in terms of driver training and retraining, and monitoring that quality are extremely important. I shall look to see whether any further initiatives are taking place.

My Lords, I support the comments made by the noble Lord, Lord Laird. Is there any way in which the Minister can bring pressure to bear so that Northern Ireland is not discriminated against in terms of disabled people's access to public transport? From my knowledge of the Province, I would say that there is probably a greater need in that part of the United Kingdom than there is in the rest of it.

My Lords, I accept the point made by the noble Baroness and repeat my earlier comment. The Government are presently considering the recommendation on the right of access and other recommendations which need primary legislation in order to go forward. The point is very well made.

My Lords, does my noble friend agree that if we are to reduce pollution and congestion in this country and in Northern Ireland as well, there has to be provision of personal services? A bus cannot provide that because it is bound by law to go on fixed routes at certain times. Does she further agree that the time has come to change the legislative structure in which public transport operates?

My Lords, my noble friend makes an important point, but I am at a disadvantage, not having detailed knowledge of public transport legislation. I cannot foresee a day when buses are not required to go on a predetermined route and stop in predetermined places. However, having made that point, I understand that the former Prime Minister, Mr Macmillan, is reputed to have assumed that it was possible to get a bus to go wherever one wanted to go. My noble friend raises an important point with regard to access to transport and the possibility of providing a variety of community services, including services such as Dial-a-Ride.

asked Her Majesty's Government:.

Which areas of inequality, highlighted by the Office for National Statistics' report on social inequalities, concern them most.

My Lords, the report to which the noble Baroness refers portrays the inequalities in income, health, education and work that this Government inherited.

Oh!.

Yes, my Lords, the report is based on statistics which go up to 1997–98, so by definition it is true that it analyses the problems which the Government inherited and are currently addressing. It will not surprise the noble Baroness that the inequality which concerns me most is the poverty, and therefore the inequality in life chances, of children.

My Lords, I thank the Minister for her reply. The Government are to be congratulated on producing such clear statistics, but are they not horrified that the report reveals that women earn on average 42 per cent less than men? That is totally unacceptable. The same report highlights the fact that girls achieve consistently better results at school and yet by the age of 20 they earn on average 10 per cent less than men. Does the Minister accept that this lower pay, combined with the fact that women take time out for childbirth and childcare, means that they may also face a poorer old age, with less good pensions? What are the Government going to do to root out this institutionalised sexism in pay? Are they thinking of reforming the Equal Pay Act?.

My Lords, the noble Baroness has addressed a very important point and the House is right to be concerned about it. I think I am right in saying that her statistic that women's pay is 42 per cent behind that of men is in terms of total income through earnings coming in. That may not take full account of the fact that women's work is more part-time while men's is full-time and men do more overtime. My statistics show that in the 1970s women's pay was 60 per cent of men's and in terms of full-time equivalence it is now 81 per cent of men's. That 19 per cent gap, comparing like with like, is no more acceptable than the kind of statistics offered by the noble Baroness. She is entirely right.

The noble Baroness asked what the Government are doing. The biggest leap forward in women's equal pay came, as she mentioned, with the Equal Pay Act 1970. The next biggest leap forward has come with this Government's national minimum wage. Twelve per cent of all women now benefit from the national minimum wage compared with 4 per cent of men. If one adds to that not just the national minimum wage but the working families' tax credit, which effectively pays women on, say, £4.50 an hour a man's wage of £9, one sees a real improvement in women's income and, as the noble Baroness hoped, a real improvement in women's pensions in the years to come.

My Lords, in the light of my noble friend's earlier Answer, does she agree that, of all the inequalities which trouble us, the most worrying are those relating to child poverty, because they are likely to be passed on from generation to generation?.

My Lords, my noble and learned friend is absolutely right. We know that if children are born poor they go on to experience poorer health, they go on to experience more truancy and they go on to experience fewer opportunities of employment. They are born poor, they live poor and they die poor.

The best way we know of to break child poverty, thus springboarding such children into the prospect of living a decent life, is to ensure that one or other or both of their parents are in work. The source of poverty is lack of access to the labour market. That is precisely why on the one hand we are endeavouring to bring lone parents into the New Deal while on the other hand, through our reform of the Child Support Agency, we will ensure that their children enjoy the maintenance that they should receive. If we get parents into work and child maintenance payments flowing, we hope the result will be that those children will have a decent chance in life.

My Lords, the Minister has implied that the statistics quoted all relate to inherited circumstances. Why, then, have the Government still done nothing to address inequalities in health, in particular as regards the indices of deprivation in physical health as well as those for my own field, that of dentistry? Is it not the case that the Government have done nothing to reach children who simply cannot get any form of National Health Service treatment?.

My Lords, as regards the second point made by the noble Baroness, my noble friend Lord Hunt has told me that we are working on the dental health strategy. In response to the noble Baroness's wider point, the Government's response to the Acheson report has been to state that local authorities must develop health improvement programmes. One of the primary functions of those programmes must be to address the real health inequalities reflected in cancer rates, strokes and the like. From the statistics that we inherited, we know that life expectancy at birth for a boy is around five years less in the two lowest social classes as compared to the two highest classes. If you are born poor, you will live for five years less. Those are the kinds of inequalities that my noble friend Lord Hunt and his team at the Department of Health are seeking to address. I am sure that we all wish them well in their task.

My Lords, I beg to introduce a Bill to establish a body to be known as the General Psychotherapy Council; to provide for the regulation of the profession of psychotherapy, including making provision as to the registration of psychotherapists and as to their professional education and conduct; to make provision in connection with the development and promotion of the profession; and for connected purposes. I beg to move that this Bill be now read a first time.

Moved, That the Bill be now read a first time.—(Lord Alderdice.)

On Question, Bill read a first time, and to be printed.

My Lords, I beg to introduce a Bill to make provision enabling a court to require the dissolution of a religious marriage before granting a civil divorce. I beg to move that this Bill be now read a first time.

Moved, That the Bill be now read a first time.—(Lord Lester of Herne Hill.).

On Question, Bill read a first time, and to be printed.

moved Amendment No. 1:

Page 1 line 19, at end insert ("; and

(c) which does not unnecessarily impair the competitive position of the United Kingdom").

The noble Lord said: My Lords, in moving Amendment No. 1, perhaps I may speak also to Amendment No. 2. This Bill is a response to the trend towards consolidation in the financial services industry. Hence, nine regulators are to be merged into one. That is all well and good, but since the Bill arrived in your Lordships' House, a 10th regulator has been added—a German regulator. That is because there is a more powerful force behind the changes in this industry; namely, globalisation. The two amendments in this grouping reflect that aspect.

The first amendment has the modest objective of seeking to ensure that the new regulatory system under the FSA,

"does not unnecessarily impair the competitive position of the United Kingdom".

It seeks no more than what is described in a letter to The Times this morning submitted by several noted practitioners in the financial services world. They have written to urge the Government to,

"carefully weigh regulatory purity against competitive innovation, and to seek a balance between the two".

They go on to say that,

"Not to do so would be to put at risk the UK's extraordinary achievement in financial services, an industry in which the UK has retained a disproportionate share of the global market".

That lies at the root of our concerns and sets out the philosophy that, from the beginning, has guided our approach to this Bill.

The financial services industry is unique. It is Britain's largest industry. Without it, Britain would be in a state of balance of payments deficit permanently. That is why so much concern has been expressed about UK competitiveness and also reflects the second aspect of this group of amendments: the sudden appearance on the scene of a 10th regulator, the German regulator, as a result of the proposed merger of the London and Frankfurt stock exchanges.

The chairman of the proposed new merged exchange has said that this merger "has to happen". Perhaps I may quote his reasoning.

"The London Stock Exchange could not go it alone".

Perhaps, but if one accepts that as a sad fact then, as happened on Report, a number of questions must be raised about the impact of that merger on this Bill.

As a consequence of amendments introduced by the Government in your Lordships' House, the FSA is now the responsible listing authority for the London Stock Exchange. But the result of the merger is that we shall have one exchange and two regulatory regimes. We are uneasy about that situation.

The Minister has conceded that the,

"appropriate regulatory arrangements for the merged body are not clear".

The FSA has stated that it is,

"working closely with our German supervisory colleagues to arrive at a sensible regulatory outcome for iX, the new exchange".

However, will the resulting system bear any resemblance to the Bill that Parliament has been considering over the past two years? The Government state that the outcome of those talks between the regulators is,

"not a responsibility of the Government".

Who, then, will be responsible for the fair and equal regulation of Smith plc and Schmidt gmbh—two companies in the same sector quoted in Frankfurt, in euros? How will the Government ensure that a level playing field of regulation is in place for all the participants in the merged exchange? Who will address the concerns of the Treasury Select Committee in another place about regulatory arbitrage; that is, companies listing in one place or another to gain a competitive advantage? Who will answer Mr Arthur Levitt, chairman of the American Securities and Exchange Commission, who has asked:

"How they are going to apply, and the likelihood of, a common listing and common governance structure?"?

In a few moments I am sure the Minister will say that all these concerns are groundless and that the Government considered all this carefully when drafting the Bill. However, if that is the case, how odd it has been to hear the chairman of the Stock Exchange yesterday in his submission to the Select Committee of another place, where he stated:

"No representations had been made to the London Stock Exchange about this merger from the Treasury; none from the Bank of England and none even from the Financial Services Authority itself".

We have the uneasy feeling that this merger is shifting the ground underneath our feet and is in danger of making obsolete all of the epic two years' worth of parliamentary scrutiny of this Bill.

For those reasons, Amendment No. 2 is intended to address these growing concerns and to give the Government a chance further to reflect on them. First, the amendment states that the merged exchange must be "regulated to common standards" in both countries. That principle should apply both to the exchange itself and to those who are members of the exchange. Secondly, the amendment states that the treatment of market abuse, in particular the nature of the prohibition and the deterrent intended to prevent it, must be the same in both countries. Noble Lords will be well aware that both of these issues are highly relevant to the FSA's market confidence objective and so we have tabled our amendment under that heading.

If, having completed its review of the regulatory implications of the merger, the FSA does conclude that there are substantial differences in approach to market regulation and market abuse in Germany—which I have been assured is certainly the case—then this amendment would confirm that the FSA would be charged with the task of ensuring, so far as is practicable (we realise that the obligation cannot be unqualified) that a regulatory level playing field, both in relation to the operation of the market and to market abuse, is in place.

We should recognise the globalisation of markets in the Bill and reflect that in the objectives of the FSA. I beg to move.

My Lords, I am grateful to the noble Lord, Lord Saatchi, for having raised this issue. When he first did so, a couple of weeks ago, many noble Lords, and indeed many in the City, were barely aware of the merger of the London and Frankfurt stock exchanges. It has been interesting to watch the volume of interest, comment and disunity on the issue grow with every passing day. A cloud no bigger than a man's hand has rapidly developed, like the thunderstorm earlier today. This is a major issue. It has far-reaching implications for the way in which the City, and indeed Frankfurt, operate. I suspect that there is a bumpy road to travel before the merger is consummated, if it happens.

To that extent, I share the analysis of the noble Lord, Lord Saatchi, but then our paths diverge. The problems with which we are faced in terms of the Bill stem from the fact that the merger has not yet taken place. By definition, we cannot know what form it will take. Its longer-term consequences are unclear, even to many of the players in the market. When the final structure of the new entity is clear, a view may be formed that the Bill requires amendment. The problem is that we are asked now whether it should be amended. Given the complete lack of clarity as to where the process is going, we simply cannot have the degree of certainty that would enable us to accept the amendment.

On examination of the draft amendments before the House, that view is reinforced. Frankly, Amendment No. 1 adds little to the existing provisions of Clause 2. As for Amendment No. 2, as a declaration of intent it sounds fine; however, I am at a loss to know how the FSA can ensure that the German regulator adopts measures consistent with those in the Bill—just as I am unsure how the FSA would respond if the Frankfurt regulator said, "This is the way we do it in Germany. I hope you will now amend your regulations so that they are consistent with the way in which the system operates in Frankfurt". So I fear that I cannot support either amendment.

However, this is a substantial issue. The Bill's provisions will not deal adequately with it for the longer term. I suspect that, just as some in the City have been somewhat complacent about the consequences of the merger of the two exchanges, there may be a certain complacency at the Treasury, and possibly even among Ministers, about the longer-term consequences of the merger. Therefore, although I have great sympathy with the thought behind the two amendments—and a sinking feeling that we shall be returning to financial services regulation sooner rather than later—I cannot support the amendment.

My Lords, I congratulate the noble Lord, Lord Saatchi, on a timely intervention at the previous stage in asking us to think about the important proposed merger between the London and Frankfurt stock exchanges. It is clearly relevant to so much of the Bill's provision, although, as I think the noble Lord will accept, not to the whole of it. There are aspects of the financial markets which will he unaffected. Nevertheless, it was only right that the noble Lord should bring these matters forward at the previous stage and again now.

In somewhat light-hearted vein, I congratulate him also on ensuring that the media are well aware of his proposed amendments—the Financial Times in particular. I do not, however, congratulate him on reviving a proposal of which, frankly, many of us are rather tired. The amendment seeks, inappropriately, to elevate to subsection (1) a matter that we all recognise as important; namely, the competitiveness of London and the UK in these matters. As the noble Lord knows better than any of us, the clause recognises that the authority, in discharging its general functions, should,

"have regard to … the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom".

We all agree on that, and it seems that the provision is in the right position, alongside the other matters. The noble Lord wants once again to elevate this albeit important point to become one of the principal regulatory objectives of the Bill.

Perhaps I may again contrive to bore your Lordships by citing the four regulatory objectives. Surely they are unexceptionable; they are accepted on all sides of the House. They are: market confidence; public awareness; the protection of consumers; and the reduction of financial crime. What more do we want? Of course, we all want international competitiveness to be considered, and there is provision for that in Clause 2. It must be the prime objective of the many firms that operate in London. It must be right at the top of their enterprise agenda. But we are talking about the agenda and objectives of the regulatory authority.

There may be different views on either side of the House as regards our relative keenness on regulation at all, or on having a regulatory authority such as this. But surely it is eminently appropriate that it should have public interest objectives. I have cited the four immensely appropriate public authority regulatory objectives in Clause 2, and I do not think that we want to alter the provision now. That has nothing to do with the proposed merger between London and Frankfurt.

I share the thoughts of the noble Lord, Lord Newby, in regard to Amendment No. 2. But I am not privy to the thoughts of my noble friend the Minister. Like other noble Lords, I look forward to hearing his response.

My Lords, I was rather disappointed to hear that although the noble Lord, Lord Newby, was sympathetic to the purport of Amendment No. 2, he did not feel that he could support it. He offered two reasons, the first being that the authority would not be in a position to ensure common standards from one country to another. There is a simple answer to that. The amendment uses the expression,

"so far as is practicable".

That seems a perfectly reasonable way of dealing with the point.

The noble Lord's other reason seemed to be that these are early days; that if the Stock Exchange merger with Frankfurt goes ahead, this will be a big change and it is difficult at this stage to consider all the potential implications and, therefore, what the legislative response should be. However, I find it difficult to see how one can quarrel with the wording of the new subsection (3) (in Amendment No. 2), which has been drawn up to provide a requirement that the Financial Services Authority should do two very general and desirable things. The first is, so far as is practicable, to ensure that markets and exchanges are regulated to common standards when those markets and exchanges operate both in this country and in another; the second is to encourage overseas regulators to adopt similar measures, or measures consistent with those in the Bill, in relation to the prohibition of market abuse.

The amendment may not be perfect, although given its source—my noble friend Lord Saatchi—it is obviously of high quality. It is very important that today the amendment is not only moved but accepted by the Government. When the Bill goes back to another place it will give the Government an opportunity to table an amendment which meets the points that have been made and incorporates them into the Bill before it is enacted. If we had to wait for new regulatory legislation to follow up this matter the process would be very much longer.

In view of the tremendous effort that has been made by the Government, noble Lords and others to put the Bill into the right form, it is unlikely that the Government will be enthusiastic about introducing another regulatory Bill on this subject in the near future. I believe that if we gave the Government more time to think how to deal with the matter we would be doing them and the Treasury a favour. Without wanting to sound sycophantic, my officials in the Treasury were some of the most intelligent and conscientious people with whom I have ever had the privilege to work. I have no doubt that for some time they have been grappling with the implications of the potential merger which has arisen at a very late stage in our consideration of this Bill and which raises new and fundamental questions about how the regulatory system will operate where there are shared markets. It would assist the House and the proper formulation of this Bill, at a late stage before it becomes an Act, if the Treasury had a further opportunity to consider this new and vitally important issue. I hope that on reflection the noble Lord, Lord Newby, will be able to support this amendment and that it will find general favour in your Lordships' House this afternoon.

My Lords, I did not speak at the Report stage of the Bill. However, I detect a philosophical contradiction in Amendments Nos. 1 and 2, which have been spoken to by the noble Lord, Lord Saatchi. Amendment No. 1 and all the gloss that we have read in today's newspapers mean, more or less, that there are limits to the regulation of financial markets and there should be a hands-off attitude. Those matters which are self-regulatory ought to be left alone and the FSA should not intervene too much. Whether or not that is right, that is the gloss which has been put on the amendment. After all, as my noble friend Lord Borrie said, the competitive position has been covered in subsection (2). However, Amendment No. 2, which concerns the super-regulator, states that matters cannot be left to themselves. The logic of the amendment is that there is a need for a European financial services authority. If the noble Lord, Lord Saatchi, had said that I am sure that the noble Lord, Lord Newby, would have supported a super-European financial authority.

Given the fact that it is premature to speak of a merger and a number of matters must be sorted out, we should leave it to the markets, the stock exchanges and the financial authorities in the two countries to deal with it. Let them do their work and not complicate their lives and ours. As happens with all financial services Bills, no doubt when this legislation passes into law it will be out of date. That is in part a matter of regulating financial markets. In one, two or three years' time we shall return to the subject and have another nice Bill comprising several hundred clauses to deal with, but this is not the time to do it. I believe that that would contradict the philosophy behind Amendment No. 1.

My Lords, the noble Lord's reference to another nice Bill of several hundred clauses caused the Minister to close his eyes for a moment. I sympathise with him.

I hope that the Minister will start by confirming or otherwise my noble friend's opening remarks about the degree of consultation on the developing situation. I hope that he will tell noble Lords that the Government have been in touch with the very important bodies which were listed. I also hope he will tell your Lordships (if the Minister can listen with his right ear to what I say) to what extent Her Majesty's Government are in touch with the German Government and their regulator's thinking about how the developing situation is to be dealt with. The noble Lord, Lord Newby, is right to say that at the moment everything is uncertain, but that is the worst possible ground for failing to prepare for whatever may happen.

The weight of my noble friend's second amendment is to give the authority an objective to achieve in the developing situation, however it may develop. The amendment requires it to ensure, as far as practicable, equality of regulation in either part of the market. The British people can expect nothing less than that the Government will do their best to ensure that those who earn their bread and butter in foreign exchange do so as nearly as possible on a level playing field. Perhaps the noble Lord will say that that is clearly expressed elsewhere in the Bill, and that is quite possible. I make no apology for not being certain about it because I have never taken part in legislation in this style before. My perception of the Bill is very much that which a porpoise has of a sailing ship. In the time available and with the resources at one's command one cannot be apprised of the whole subject. We must grasp whatever is put before us. This particular matter is exceedingly important, and I believe that we should grasp it firmly. I hope that the noble Lord, Lord Newby, will see the merit of that before the debate is over and that your Lordships will join my noble friend in pursuing the matter.

My noble friend suggests that it is as well to table an imperfect amendment in order that it can be rectified in another place. We should not proceed in that way. If it is agreed that the amendment is necessary but imperfect the proper procedure is to recommit the clause to Committee. I am aware that that is a matter for the usual channels. However, we have bodged this matter to such an extent and in such haste given its scope—the Minister may say that two years does not represent haste, but the length of time must be proportionate to the work done—that I hope what my noble friend seeks in this amendment will be achieved by one route or another.

My Lords, my noble friend Lord Saatchi has very properly taken us back to the question which he raised robustly last week on the final day of Report stage. On that occasion the Minister gave an equally robust answer. I am bound to say that his answer did not entirely satisfy me, and perhaps it did not satisfy other noble Lords. I refer to the implications of the proposed merger of the London and Frankfurt Stock Exchanges. One recognises that the merger is not yet complete and that the noble Lord, Lord Newby, has reservations. However, we do not have the luxury of time. This is the last day, at any rate in theory, on which the House is able to consider this particular Bill. We cannot wash our hands of an important question because the precise event which gives rise to this debate has not yet concluded. At least it should focus our minds on the kinds of questions that will arise when trading transactions and markets extend beyond one national area. Therefore, it is incumbent on this House at least to express a view on the general question, even if we are conscious that we cannot deal with all the detailed points that may arise if the merger goes through.

The Minister said last week that no amendments to the Bill were called for and that neither the Government nor himself as the Minister piloting the Bill would be responsible for the consequences of the merger. I am not entirely certain that that is so, but let us debate the matter on those terms. He and the Government are responsible for the Bill and for offering to the country and to us some conclusions about the implications of major operations such as those posed by the proposed merger before we wave goodbye to the Bill and it moves to another place.

I offer my sympathy to the Minister who has had o carry the burden for so long. After many wearisome weeks no doubt he and the whole House want to be certain that this Bill will provide at least some kind of practical regulatory framework. We cannot simply wash our hands and say, "Well, there are certain problems arising on the horizon and let us wait until they arrive". We should indicate to the world outside that we have focused a little on this particular question. It is not entirely an academic one. No doubt German residents are trading at the moment on the Stock Exchange and UK residents are trading on the Frankfurt Exchange. The Mannesman Vodaphone transaction focused our minds on matters that spill over national boundaries.

We have to focus a little more closely. I do not believe that we can take the rather bland view offered by the noble Lord, Lord Newby, and say, "We may have to come back to it at a later stage". At the moment the Stock Exchange is still within the jurisdiction of the FSA. If I understand the German position correctly, the Frankfurt Exchange is within the regulatory regime of Hessen and possibly of some German federal regulatory regime.

Perhaps the Government have considered the matter, but they have not taken us into their confidence. Does the Bill need to be amended in the absence of some European structure? Do not let us get involved in a debate as to how far we want to have some super European structure. But in the absence of some kind of pan-European regime on this matter, what do we do? In what area will the FSA need to develop its competence? The Minister might indicate to us the kind of points that he would like included and which he might be putting to the FSA, for all I know.

It has been an unprecedented legislative process. My noble friend Lord Elton suggests that we may have to prolong and enlarge it. I admire the rigour with which he has applied himself to the proper process. Whatever it may be, we have been subjected to cascades of government amendments and very often not long before the Sitting. I do not blame the Minister if he does not want to embark on a further exploration of a major issue and would like to shed the load for a while to his colleagues in another place. It is critically important that we attempt to ensure that the framework of the Bill is right and that it will deal adequately with activities and transactions that spill over two jurisdictions.

I appreciate that my noble friend Lord Lamont is due to mount a debate next week about the merger of the two exchanges. Alas, that is a little too late. It may be criticism of the way in which this Bill has been handled. It is very important that we form a view tonight on this question. I do not believe that it can be just brushed aside. I hope that the Minister will recognise the various difficulties when the amendments have been debated and that he will respond a little more helpfully than he did last week.

My Lords, I always like to begin with as much agreement as possible. I say from the outset how much I agree with the opening remarks of the noble Lord, Lord Saatchi, as regards the importance of financial markets not just to themselves but to this country; their importance internationally and the fact, which he emphasises regularly and quite rightly, that the world does not owe us a living in that financial markets can move from one location to another if the climate is not right for them. Having said that, I am not going to go very much further in agreement with him.

I shall deal with the two amendments in turn. Amendment No. 1 is identical to the amendment which the noble Lord moved in Committee and very similar to the one which he moved at Report. There is nothing I can do to persuade myself that they are right now when I believed they were wrong then.

The purpose of the amendment is to ensure that the FSA's regulatory activities do not unnecessarily impair the competitive position of the United Kingdom. I have said it before and I shall say it again. We all agree that that is vitally important. We need checks and balances in place to ensure that the United Kingdom's competitive position is not adversely affected by too much or too little regulation. But the Bill already provides for that and does so in a way that is effective in the requirement on the FSA set out in Clause 2(3)(e), to have regard to,

"the international character of financial services and the desirability of maintaining the competitive position of the United Kingdom".

As I understand it, the reason why the noble Lord, Lord Saatchi, has been so persistent in advancing the amendment is that he believes that without it the FSA will not take competition seriously enough. At Report stage he referred to his,

"concerns that there is no proper balance in the Bill between the pursuit by the FSA of its regulatory objectives and the desirability of encouraging competition and the competitiveness of the UK. We believe that it is essential to seek to achieve that balance, notwithstanding the difficulties to which that may give rise for the FSA in performing its functions".—[Official Report, 13/4/00; co1.335].

The Bill strikes this proper balance now, but that balance would be upset by the noble Lord's amendment. As I said at Committee and repeated at Report,

"Subsection (1) places a positive requirement on the FSA to take action. This is appropriate when we are talking about objectives; that is, the aims of regulation. In contrast, the need to take account of international competitiveness is something which should condition the way it goes about meeting the objectives. That is as true for competitiveness as the other matters dealt with in Clause 2(3)".—[Official Report, 16/3/00; col.1803].

I am sorry to repeat it again, but the argument is being put in comparable terms. It is not just that competitiveness is a matter which is properly dealt with as a principle in subsection (3)(e) but that it is, as I said at Report stage,

"by placing the same duties on the FSA in relation to this issue as it has in relation to the regulatory objectives themselves, the amendment introduces into the Bill a degree of ambivalence as to the relationship between those objectives and the proposed new duty. Is the proposed new duty inferior to the objectives, superior to them, or something which ranks equally alongside them? I do not know the answer, and I do not think that the FSA will know either".—[Official Report, 13/4/00: col.341].

The competitiveness principle that the Bill already contains does not simply oblige the FSA to turn its mind to competitiveness every now and again. It must have regard to it and give it due weight in taking all of its regulatory decisions. I believe that that is very clear. The amendment would create confusion.

I turn to Amendment No. 2, which has largely been the subject of the debate so far. As the noble Lord, Lord Saatchi, said, the amendment has been prompted by the proposed merger between the London Stock Exchange and the Deutsche Borse. I have listened carefully to the noble Lord's speech, but I have to say that the amendment seems to be based on a misconception of the extent of the proper role and jurisdiction of the Financial Services Authority.

I can hardly claim that we have been considering the possibility of such a merger since the early days of the Bill. I do not believe that anybody had been considering it because the matter had not been mooted. It is certainly true that the full details of the proposed exchanges have yet to be worked out and it is also true—it could hardly be otherwise—that the FSA will need to look carefully at the implications of what emerges. But the Bill provides the right regulatory framework. There are practical issues for the regulator, but they are issues that are within the framework that the Bill provides, and no amendments to the Bill are required. The noble Lord, Lord Rees, asked the right questions which I shall attempt to answer.

Let me say what I can about the plans that the exchanges have outlined. I understand that the intention is to create two pan-European equity markets. The first will be a market for blue-chip shares, based in London. It will continue to be a UK recognised investment exchange, overseen by the FSA. The second will be the proposed joint venture with NASDAQ to provide a market for growth company shares, which will operate in Frankfurt under German regulation. We are talking about two separate exchanges and, although there will need to be co-operation between the FSA and its German counterparts, there are separate regulatory jurisdictions.

That is not a unique situation. A similar arrangement already exists. The Swedish OM Group owns both the stock exchange in Stockholm, regulated by the Swedish authorities, and a derivatives exchange in London which is a UK recognised investment exchange overseen by the FSA. The FSA and the Swedish counterpart have their separate roles and the arrangements work satisfactorily.

We have no doubt that the provisions of the Bill relating to the recognition of exchanges are able to cope with structures such as the proposed international exchanges. We are confident that the recognition requirements for exchanges will be robust enough to cope with any issues that may arise by the operations outside the UK of UK-based exchanges; for example, the placing of dealing screens in foreign jurisdictions which enable traders to access the UK exchange.

On the amendment, as Clause 3 of the Bill makes clear, the purview of the FSA is the financial system operating in the UK. The key words here are "operating in the UK". The FSA is not and cannot be responsible for markets and exchanges located abroad which do not have operations in the UK. They are subject to the regulatory authorities of the jurisdiction in which they are located.

Of course, they all co-operate in the International Organisation of Securities Commissions and the Forum of European Securities Commissions, but it would be giving the FSA duties beyond its responsibilities and powers to suggest that it can ensure, even so far as is practicable, that markets and exchanges are regulated to the same standards as those in the UK. When we have debated home state and host state regulations, that has been a matter of debate throughout the consideration of the Bill.

It is not that we do not know what to do. We know that the provisions in this Bill are adequate for the challenges that may be placed on it by this or any comparable merger. We have no doubt that no amendments are required to the Bill. I urge the noble Lord, Lord Saatchi, not to press the amendment.

My Lords, I return to what the noble Lord, Lord Borrie, said. He was interested to know why we were so persistent—I believe he said "so tiring"—on the subject of UK competitiveness. I want to explain that by trying to thread together our first amendment, our second amendment and Clause 2(3)(e) of the Bill, which he read out, relating to,

"the desirability of maintaining the competitive position of the United Kingdom".

In doing so, I can also deal with the point made by the noble Lord, Lord Desai, about a possible contradiction between the first and second amendments.

Our interest in the first amendment is illustrated precisely by the matters dealt with in the second amendment. The UK financial services industry is a modern miracle. It is unique. To my knowledge, it is the only UK industry in which Britain leads a global market. We believe that that is the strength of our position. The chairman of the London Stock Exchange, the jewel at the heart of this great industry, tells us that Britain could not go it alone. That means that there is a serious question mark over the UK's competitiveness in this industry, despite what appears to be its dominant position.

I have no doubt that what the chairman of the Stock Exchange said is true. He is explaining to us that mergers of stock exchanges will follow in the train of mergers of companies. There will probably be many of them. Sometimes such mergers will be with stock exchanges that have an easier regulatory regime and sometimes with stock exchanges that have a harder regulatory regime. In their own interests, people will pick and choose which bit suits them best. In that process, somebody will have to be responsible for ensuring that British companies are not placed at a disadvantage by the curious new situation.

That brings me to the point made about the contradiction. If there is a contradiction, let me draw out a contradiction that is in the Bill as it stands. At some stage during our debates I recall the Minister explaining that the reason why it was inappropriate to raise up the competition objective—to elevate it as the noble Lord, Lord Borrie, said—was that other regulators in other countries would consider it offensive for the FSA, with which they were dealing, to have in the Bill an objective to maintain competitiveness, or any words that suggested that it had a duty to advance the interests of the United Kingdom. That was put forward as a reason not to elevate the competition objective.

What shall we make of the contradiction of the FSA which has to have regard to,

"the desirability of maintaining the competitive position of the United Kingdom"—

as the noble Lord, Lord Borrie, says? What will it do, as the listing authority of a combined exchange of two countries, or three countries or five countries? How can it be the listing authority for the exchanges of several countries and have the aim of looking after the competitive position of the United Kingdom?

The problem is inherent in the Bill. That is the heart of what we are trying to say with these amendments. The Bill has not anticipated the major change that is taking place before our eyes. We believe that our amendments are important in order to give the Government a little more time—perhaps while the Bill is in the Commons—to think about the implications of these huge changes. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 2:

Page 2, line 37, at end insert—

("(3) Maintaining confidence in the financial system includes ensuring so far as is practicable that markets and exchanges which operate both in the United Kingdom and in another country or territory and members of those markets and exchanges are regulated to common standards and that the overseas regulator in the relevant country or territory adopts measures consistent with those under this Act for the prevention and prohibition of market abuse in relation to those markets and exchanges.

(4) "Overseas regulator" has the same meaning as in section 190.").

The noble Lord said: My Lords, I spoke to Amendment 2 when speaking to Amendment No. 1. I beg to move.

moved Amendment No. 3:

After Clause 6 insert the following new Clause—

DUTY OF AUTHORITY TO FOLLOW PRINCIPLES OF GOOD GOVERNANCE

(".In managing its affairs, the Authority must have regard to such generally accepted principles of good corporate governance as it is reasonable to regard as applicable to it.").

The noble Lord said: My Lords, in moving the amendment, I speak also to opposition Amendment No. 5. Since Amendment No. 4, which is not in my name, is so similar to Amendment No. 5 I wonder whether noble Lords opposite will allow me to speak to the two together. It would be slightly artificial not to do so.

Amendment No. 3 reflects the commitment I gave at Report stage to look again at four amendments tabled by noble Lords opposite and, if necessary, to return at Third Reading with government amendments needed to achieve the effects which the noble Lords opposite sought.

The impact of the amendment will be to impose a duty on the FSA to have regard to certain generally accepted principles of good corporate governance in managing its affairs. My speaking note gives the lower case for those words but I think that it is generally understood that they could equally well be upper and lower case.

The corporate governance principles in question are those which it would be reasonable to regard as applicable to the FSA. Although I understand those who may prefer the FSA to be required to have regard to all principles, such a wide duty could give rise to a risk that, given its unique role, the FSA would be attacked for not applying principles which are unsuitable or undesirable.

For that reason, we are not able to accept Amendment No. 5, which would require the authority's constitution to reflect all generally accepted principles. For example, Section 1C of the combined code deals with relations with shareholders. Clearly we should not expect, nor legislate for, the FSA to adhere to those principles in code provisions when it has no shareholders. On the other hand, the top management element is clearly applicable. Therefore, while principles such as those in Section IC cannot apply, it is equally obvious that several current principles, including, for example, those relating to the chairman and chief executive officer, and board balance could reasonably be applied.

There is no incompatibility between the current principle relating to chairman and chief executive and our belief that the best governance structure for the FSA is to combine the roles of chairman and chief executive. As I have said on a number of occasions, we believe that combining the roles provides the best means of meeting the FSA's objectives and of ensuring clear accountability to Treasury Ministers and speed of decision-making. We recognise that other noble Lords hold a different view.

In particular, there is no incompatibility between combining the role of chairman and chief executive and provision A.2.1 of the combined code. Provision A.2.1 states in its entirety:

"A decision to combine the posts of chairman and chief executive officer in one person should be publicly justified. Whether the posts are held by different people or by the same person, there should be a strong and independent non-executive element on the board, with a recognised senior member other than the chairman to whom concerns can be conveyed. The chairman, chief executive and senior independent director should be identified in the annual report".

The FSA complies with all those requirements. Public justification appears at page 107 of the FSA's annual report. A strong and independent non-executive element on the board is provided for by statute. There is a recognised senior member other than the chairman: that is, the deputy chairman, Stewart Boyd QC. We have made clear in earlier debates the important role that we expect him to play on the board.

Finally, the chairman, chief executive and senior independent director are identified in the FSA's annual report. In other words, the FSA complies with all the safeguards recommended by the combined code for companies which combine the role of chairman and chief executive.

Another feature of the Government's amendment is that the principles of corporate governance which should apply to the FSA are not to be determined by the FSA itself but by reference to what it is reasonable to regard as applicable. That is also a feature of Amendment No. 4, tabled by the main opposition parties. We have no overriding objection to that amendment. It is not dissimilar to our own; indeed, we believe that it is already catered for by the Government's amendment, which speaks of the authority having regard to generally accepted principles "in managing its"affairs".

Amendment No. 4 refers to the constitution of the authority. The terms which the FSA includes in its constitution are part and parcel of its affairs; indeed, the terms of the FSA's constitution are central to the management of its affairs. It follows that the FSA would not comply with the duty imposed on it by the Government's amendment if it failed to frame its constitution in a manner which enabled its affairs to be managed in a way which had regard to such generally accepted principles of good corporate governance as may reasonably be considered to be applicable to it.

On the basis that it does not add to our amendment, I hope that noble Lords will withdraw Amendment No. 4. I beg to move Amendment No. 3.

My Lords, we are grateful to the Government for having put forward a new clause which attempts to deal with the concerns that we have raised at every stage of the Bill with regard to the corporate governance of the FSA. Noble Lords who have been with us through those debates will remember that two principal concerns were raised in this respect. One related to the role of the non-executive directors. We felt that in the Bill as originally drafted their role was inadequately broad and was not as broad as that of the non-executive directors in a company.

The second issue to which the noble Lord, Lord McIntosh, referred at some length relates to the question of the split between the roles of chairman and chief executive. I believe it is fair to say that there has not been a complete meeting of minds between ourselves and the Government on the substance of that point. However, we felt that the key issue required on the face of the Bill was a recognition that the principle of corporate governance—namely, the top end structure—and the question as to whether there should be a chairman and chief executive, with its presumption in the code that there would be such a split, should fall within such areas of good corporate governance as the FSA would be required to have regard to in conducting its business.

With the passage of this amendment, our view is that it will be presumed that when the current incumbent moves on there will be a separate chairman and chief executive. That will be determined at the time. However, if that does not happen, the key point of the amendment is that it will require the Government and the FSA to justify it in the way that the noble Lord mentioned. Therefore, given that the amendment encompasses the principles of top end structure—the principle of separation of powers at the top end of the FSA—we are pleased to accept the amendment.

My Lords, I am grateful that even at this late stage the Government have seen the merit of what was proposed at earlier stages of this process by the Liberal Democrat and our Benches. I am glad also that the wording of the proposed new government amendment has been addressed more specifically in the words expressed by the Minister this afternoon. The words of the proposed new clause are a little vague. I believe that I am right in saying that the Minister confirmed this afternoon that it is reasonable to regard the principle that there should be a separate chairman and chief executive as applicable to the FSA. Certainly I have taken it that that was his meaning.

I accept the principle of good corporate governance in the amendment, and I find it difficult to reconcile that to what the Minister said with regard to the role of chairman and chief executive. It has been held strongly by successive governments and by those involved in the business world that separation of the role of chairman and chief executive is a matter of importance. I know that on previous occasions the noble Lord said that that applied to commercial concerns and that it did not apply in this particular game. I believe that it applies more strongly in this game. If everyone is quite honest with themselves, the dominant factor is the presence of the current incumbent and his saying that he does not intend to accept a chief executive under him or a chairman above him. The Government have departed from the rules of good governance in endorsing that request. I like the amendment; I dislike the way in which it is proposed that it should be applied.

My Lords, I am grateful to both noble Lords and, indeed, even to the noble Lord, Lord Boardman, for their response to the amendment. To be absolutely precise in answering the noble Lord, Lord Saatchi, I did not say that I accepted that the split between chairman and chief executive was appropriate; I said that in this respect the combined code of good corporate governance is applicable to the FSA. I read out in its entirety provision A.2.1, which sets out what should happen if it is judged that the roles of chairman and chief executive should be combined. But I accept—and it will always be the case—that we disagree about what should happen now. We may disagree in the future about what should happen, but at least we appear to be in agreement—I am grateful for that—that the code of conduct of good corporate governance should apply.

On Question, amendment agreed to.

moved Amendment No. 6:

After Clause 9 insert the following new Clause—

DUTY TO CONSIDER REPRESENTATIONS BY THE PANELS

(" .—(1) This section applies to a representation made, in accordance with arrangements made under section 7, by the Practitioner Panel or by the Consumer Panel.

(2) The Authority must consider the representation.

(3) If the Authority disagrees with a view expressed, or proposal made, in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.").

The noble Lord said: My Lords, the two opposition parties tabled joint amendments on the first day of Report about representations made to the authority by the practitioner and consumer panels.

In response, my noble friend indicated some sympathy for certain of the points raised in debate and said that he believed that there was scope for improvements to be made to the arrangements under the Bill for giving feedback to the panels. Accordingly, he undertook to consider the matter further.

Having given the matter careful thought, we have tabled this new clause which requires the FSA to consider representations made to it by either panel in accordance with the arrangements under Clause 7 and, where the FSA disagrees with those representations, to make a written statement of its reasons for disagreeing.

We believe that this new clause adds, in a structured way, a great degree of transparency and therefore improves on the arrangements for the panels. I commend it to the House. I beg to move.

My Lords, I think I can say that this is a rare moment for the connoisseur of the arts and mysteries of Her Majesty's Treasury to savour; because this is the second acceptance in a row of amendments tabled by the Opposition.

Perhaps I may say to your Lordships that this amendment is of even greater consequence than its predecessor because, as the Minister has said on frequent occasions, the authority has legislative powers. As a regulatory authority, its position is unique in that respect. It will make rules which it will not have to bring to your Lordships' House before they become binding. Therefore, it is right that the authority should be answerable to somebody and that somebody—or perhaps I should say, those somebodies—are the practitioner panel and the consumer panel.

I am delighted that, in circumstances where there is disagreement between the authority and those panels, the authority will have to give its reasons. I have just one question to put to the Minister. Can I be assured that, in circumstances where the authority gives such reasons, those reasons will be made public?

My Lords, I join the noble Lord, Lord Kingsland, in thanking the Government for coming forward with an amendment which meets the concerns raised in our earlier amendments. Again, I express the hope that this new trend of flexibility which the Treasury has shown in relation to these two amendments may be a growing trend in the future.

My Lords, the answer to the noble Lord's question is "yes". I am delighted if we have, on this occasion, managed to please the noble Lord. Perhaps in future he will look more kindly on the Treasury and not believe everything he reads about it in the quality newspapers.

On Question, amendment agreed to.

moved Amendment No. 7:

Page 8, line 17, leave out subsection (2) and insert —

("(2) The contravention does not—

(a) make a person guilty of an offence;

(b) make any transaction void or unenforceable; or

(c) (subject to subsection (3)) give rise to any right of action for breach of statutory duty.

(3) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.").

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 7, 10, 12, 14, 17 to 19, 24, 61, 70, 71, 141 and 142, which is an opposition amendment to Amendment No. 141. The origin of this group of amendments goes back further than this House. On 20th July 1999, in another place, the Government undertook to reconsider the different provisions in the Bill dealing with rights of action where contraventions of requirements such as those that may be imposed under Parts IV, X and IX are concerned. Part IV is concerned with permission to carry out regulated activities, Part X with rules and guidance, and Part IX with incoming firms.

The broad aim is to reproduce the current pattern of rights of action as provided for under Sections 62 and 62A of the Financial Services Act 1986 as far as it is possible to do so given the different structure of the Bill.

Under those provisions, consumers enjoyed rights of action not only for breaches of rules, but also for breaches of requirements imposed using the intervention powers under the Act. Those types of requirement, both rules and interventions, will often correspond more correctly to permissions under Part IV and requirements imposed on incoming firms under Part IX than rules made under Part X.

The position is also complicated by the different circumstances in which rights of action may be enjoyed by non-private persons depending on the nature of a breach. That is a more complicated situation than is currently allowed for under either Clause 18, which confers no rights of action for permission breaches, and Clause 197, which confers rights of action by analogy with Clause 145 in Part X.

Our amendment to Clause 18 and the new clause after Clause 197 will therefore confer on the Treasury a power to prescribe the circumstances in which a person may have a right of action as a result of a breach of a requirement imposed under Parts IV or XIII respectively.

I should make it clear here that the default position will be that breaches of Part IV and Part XIII requirements do not attract rights of action. Only the cases that are prescribed by order will give rise to such rights. That is necessary to ensure that there is similar treatment between authorised persons who are subject to rules and requirements with similar effects. For example, some investment firms are constrained from handling client money by SRO rules. Breach of those rules attracts rights of action. That ensures that there is a possible right of action where a person handles client money when they should not, as well as when a person who is entitled to handle client money fails to follow the applicable rules. In both cases, it is right that the consumer should have a right of action if they suffer loss.

However, it is not our intention to create rights of action in respect of requirements which are equivalent to financial resources rules; for example, individual capital ratios for banks, or premium income limits for insurance companies. The effect will therefore be to make it clear that breaches of these requirements do not attract rights of action.

Part X already contains a power for the FSA to specify whether a breach of a rule by an authorised person attracts rights of action for private persons, and to specify that some classes of rules attract rights for non-private persons. The amendment to Clause 145 ensures consistency within the Bill by aligning the power with the new provisions in Clauses 18 and 197.

The amendment therefore replaces the FSA's power with a power for the Treasury to prescribe circumstances in which a right of action that would be exercisable by a private person can be exercised by a non-private person. This would, for example, enable the Treasury to reproduce Regulation 3 of the Financial Services Act 1986 (Restriction of Right of Action) Regulations 1991, which ensures that a non-private person—for example, a solicitor, who is acting in a fiduciary capacity for a private person, for example, a minor—can exercise the same rights as a private person. We did not feel that it was sufficiently clear that the current wording would enable us properly to address this sort of situation.

The amendment to Clause 69(2) makes equivalent provision for contraventions under Part V.

I turn now to Clause 397. Reviews of past business are in effect a mechanism for redress when there has been a widespread or regular failure on the part of authorised persons to comply with rules and private persons have suffered losses in respect of which authorised persons are liable to make compensation payments.

As Clause 397 stands, it would not be possible to set up a review of past business which required authorised persons to compensate non-private persons. Our amendment will allow them to do so in circumstances and capacities to be prescribed by the Treasury. This group of amendments has been brought about as a result of the Government's careful consideration of points made on different occasions by Members of the Opposition. I am grateful to them for expressing their concerns. I hope they will support these changes. Perhaps I may respond to the opposition amendment when it has been spoken to. I beg to move.

My Lords, apart from our own Amendment No. 142, the amendments in this group are either those with which we have no problem or those which respond to concerns we raised in Committee and on Report.

Amendment No. 142 seeks to deal with the following problem. Government Amendment No. 141 seeks to allows a non-private person acting as an intermediary, typically a fiduciary such as a trustee or agent, to bring an action for compensation under Clause 397 for widespread or regular rule contraventions even though the intermediary is not a private person.

That seems fine in principle, but in our submission the clause, as drafted, allows the intermediary to bring an action on behalf of other non-private persons. We believe that that cannot be right. Our amendment to the government amendment is to restrict the right of an intermediary to bring an action to circumstances in which it is acting solely for private persons who could bring the action themselves if they were not using the intermediary.

That was the approach adopted in the 1991 Treasury regulations which restricted the right of action for contravention of FSA rules to private investors. We think that that approach is the proper one to adopt.

My Lords, I am grateful to the noble Lord, Lord Kingsland, for his support for the other amendments in the group. I am grateful, too, for his explanation of Amendment No. 142. He is right in saying that it is our intention simply to enable a person acting in a fiduciary or comparable capacity to exercise the rights that the private person would have and nothing more. But that is clear already.

The new subsection goes on to state that the loss suffered by a A—that is, the fiduciary or equivalent—is to be treated as a loss suffered by a private person,

"in relation to whom A was acting in that capacity".

So it is only fiduciaries or persons acting in some other prescribed capacity on behalf of private persons who are added by the amendment. I hope that when the time comes the noble Lord will feel able not to pursue his amendment.

My Lords, I am grateful to the Minister for his explanation. His interpretation of the clause is the one I seek. However, with great respect to the noble Lord, I believe that it would provide the clarity that the legislation needs if he accepted the amendment which I have tabled. Litigants will now have to look not only at the Act but also at the Minister's speech in order to acquire the necessary clarity.

My Lords, we have some time between now and Amendments No. 141 and 142. Although we are occupied with other matters we shall both continue to think about it, as will my officials. My view is that what I have said is entirely clear from the Bill and therefore the amendment, though well intentioned, is not necessary.

On Question, amendment agreed to.

moved Amendment No. 8:

Page 8, line 22, leave out ("or inducement to engage in investment activity") and insert ("to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so").

The noble lord said: My Lords, in moving Amendment No. 8 I shall speak also to Amendments Nos. 9 and 82.

I understand that the Minister accepts that a mere factual statement would normally not be caught by Clause 19. We, in turn, accept that, in some cases, a statement of fact could be used as a way of persuading the person receiving the communication to buy or sell investments.

At a meeting I was privileged to attend last week with the Minister, I think it was agreed that the Treasury would think further about the wording which should be used to catch what was intended—namely, promotional communications. On the basis that the Government will ensure that it is made clear in the financial promotions exemption order that a mere statement of fact—for example, that British Land shares had gone up 10 per cent in the preceding week will not be treated as an inducement unless it is intended to act as an inducement—we will withdraw our amendment.

Amendment No. 9 is repeated from Report stage because the Minister also stated, at the same meeting last week, that he will consider again whether to accept the terms of Amendment No. 9 or something similar. The amendment seems to me, at any rate, to conform with what the Treasury wishes to achieve. We entirely accept that the amendment can be introduced in the Treasury's exemption order rather than in the Bill. We would be grateful to hear what the Minister has to say about this.

Finally, I turn to Amendment No. 82. The present wording of the Bill gives rise, for the first time, to a world-wide prohibition on marketing collective investment schemes which have not been approved by the authority for marketing to the general public. In our view it is not appropriate to impose this prohibition where the local regulator allows marketing to the particular category of investor which the firm wishes to approach. This prohibition means that the only firms which cannot market the fund, in the country concerned, to investors outside the authority's permissions, which the local regulator allows to be solicited, are firms authorised under the Bill. That is wholly contrary to the Bill's principle that the UK's competitive position should be maintained.

The Minister in another place indicated, in Committee, that she accepted that it is not necessary to impose as wide a restriction on the marketing of collective investment schemes by firms which are authorised under the Bill as the prohibition on financial promotions by persons who are not authorised under the Bill at all.

I believe that the Treasury indicated, at the meeting held last week which the Minister kindly arranged, that it intends to provide an exemption from the prohibition on marketing unregulated collective investment schemes in the case of certain communications from within the UK to investors outside it; although the exact scope of the exemption has not yet been decided. On the basis that this exemption will cover our concerns and allow marketing of unregulated collective investment schemes to investors outside the UK as now, even if the FSA has not provided a specific exemption for them, we would be pleased to withdraw the amendment.

My Lords, perhaps I may ask the noble Lord a question about the first two amendments to which he spoke; that is, Amendments Nos. 8 and 9. The phrase which the noble Lord chose is that,

"which is intended",

which is obviously clear,

"or might reasonably be presumed to be intended".

I do not know what that means. I would understand a second limb that said, "or might reasonably be understood to be intended". That would be a perfectly normal process, but presumption comes from somewhere else. Where is the presumption from? What kind of matter would be presumed to be intended other than that which would be understood to be intended?

Courts will obviously pay great attention to the fact that that word is used and not the normal word "understood".

My Lords, I am grateful to the noble Lord for his intervention. The object of the phrase,

"or might reasonably be presumed to be intended",

is to prevent the authority from having to prove mens rea in a particular case; in other words, it refers to an inference from the facts. If the noble Lord is unhappy with the word "presumed", I shall be happy to replace it with a word that he considers more appropriate. But that is the point.

My Lords, I am grateful to the noble Lord, Lord Kingsland, for taking the time to come and talk with us last week in relation to the issues behind these amendments and I can certainly confirm that in the course of that discussion we felt that the issues between us were narrowing, as has happened so often in this Bill. But that does not mean, I am afraid, that it enables me to accept his amendments; nor does it persuade me, after consideration following the meeting, that we need to make further amendments to the Bill.

Amendment No. 8 replicates an amendment at Report stage. It would delete "inducement" from the financial promotion restrictions and replace it with,

"an invitation to engage in investment activity or information which is intended or might reasonably be presumed [or understood] to be intended to induce any person to do so".

The amendment registers concerns that have been expressed throughout parliamentary proceedings on this Bill, that the language of Clause 19(1) is drawn too widely and that it requires amendment to achieve the Government's stated policy to capture promotional communications only. That is where we are generally in agreement.

I acknowledge that there are different dictionary definitions of "inducement" and one of the possibilities is to,

"bring something about or cause it to happen".

But there is a difference between the meaning that that word could be given on its own and the meaning that it will have in the particular context of this Bill.

When we met last Thursday to discuss this issue, notwithstanding the breadth of meaning ascribed to "inducement" outside the Bill, I said to the noble Lord, Lord Kingsland, that the Government do not believe that "inducement", as used in the Bill, will catch communications where the effect has been to prompt an investment decision regardless of the motivation of the communicator. We are convinced that "inducement", in its Bill usage, already incorporates an element of design or purpose on the part of the person making the communication.

When Clause 19 was amended in Committee in another place, we did not intend to move away from the idea that there must be an element of persuasion contained in the communication. If we had intended the clause to catch communications that prompted an investment activity, regardless of the communicator's intention, we would have made that clear by using a term other than "inducement".

In addition, we consider that the word "inducement" gathers some flavour from its juxtaposition with "invitation". Our intention, in relying on "invitation or inducement", has always been to capture the flavour of "old" advertising and cold calling, but without being limited to specific media implicit in those terms. That, after all, is the reason why we are making any changes at all in this Bill from the Financial Services Act 1986.

It follows that the clause as it stands will not catch communications of the type that have been put to us as giving rise to concern; for example, public announcements, exchange of draft share purchase agreements in corporate finance transactions or cases in which the recipient of a communication simply misunderstands its contents and engages in investment activity as a result. Those are not inducements.

We have considered carefully whether there would be advantage in expanding on "inducement" in the way that the amendment proposes. Inevitably, in determining whether a particular communication constitutes an inducement, much will depend on the context. Something that would not be considered an inducement in one set of circumstances could well be an inducement in another. Very often the difference will depend on the actual or perceived intent behind the communication. As we indicated, we believe that this already emerges from the word "inducement", and we do not want to compromise that.

Our objection to Amendment No. 8 is that it does not throw any light on what "inducement" actually means. In fact, it is possible that an amendment to the effect of the noble Lord's would have precisely the opposite effect to that which he intends. By making explicit mention of intention on the face of the Bill, there is a danger that the courts will take "inducement" to have the wider meaning that it may bear in other contexts outside the Bill. There is no reason to mention "intention" if one believes, as we do, that the notion of design or purpose is implicit in this context. It follows that by making explicit provision for intention, we could imply that we are using the word "inducement" in its widest sense. That could well have the effect of catching some of the things that we and noble Lords opposite do not want to catch. We consider therefore that it is best to leave the provision as it stands.

Amendment No. 9 seeks to amend subsection (3) of Clause 19 so that subsection (1), which sets out the basic prohibition, does not apply unless the communication is intended, or might reasonably be presumed to be intended, to be acted on by a person in the United Kingdom. Amendment No. 82, also proposed at Report stage, proposes a similar change to Clause 233, which relates to promotions of collective investment schemes.

Amendment No. 9 focuses on what is meant by,

"communication … capable of having an effect in the United Kingdom".

whereas Amendment No. 82 seeks to limit the prohibition to promotions which are made to persons in the UK. The noble Lord, Lord Kingsland, described them as a "world-wide ban", which contains a certain amount of hubris; as if we could impose a world-wide ban. I shall discuss those amendments together because they are related.

The Government believe that the issue of territorial scope is one which is best dealt with in subordinate legislation. For Clause 19 we have already proposed something designed to address the issue raised by Amendment No. 9 in the draft order set out in the Treasury's second consultation document on financial promotion which was issued in October last year; namely, cutting back the,

"capable of having an effect".

test in subsection (3) of Clause 19. We are giving careful consideration to representations that have been made on this and other points. We propose to ensure that the prohibition only catches cases where there are risks to consumers in the United Kingdom so far as our intentional obligations allow.

In relation to Clause 233, noble Lords will recall that in Committee a new Treasury power was introduced to make exemptions. One of the main purposes of that was to enable exemptions to be made to allow outward promotions to other jurisdictions where it was appropriate to do so. We intend to do that.

In Committee, these amendments were part of the general exercise of amending Clauses 19 and 233 to ensure that the Treasury has the necessary flexibility to adjust the scope of both prohibitions, not only to take full account of technological developments, but also to deal with our international obligations. In particular, we are subject to certain EU requirements in relation to certain outward and inward promotions.

Clauses 19 and 233 now provide for a Treasury order-making power to disapply the prohibition in both clauses in relation to communications originating in specific countries or groups of countries such as EU member states. These provisions will enable us to comply with our obligations to give effect to requirements such as a home state regime for e-commerce transactions, while at the same time enabling us to give effect to obligations which arise by virtue of general EU law under the treaty. Let me say quite categorically that the Government are committed to ensuring that the financial promotion regime set out in both Clauses 19 and 233 complies with Community requirements.

With specific regard to Amendment No. 9, we maintain our belief that it is not at all clear what "acted on" means. I refer to the example we used on Report. If a communication is sent from abroad for onward transmission by an agent in the UK, is that a communication which is intended to be "acted on" by a person in the United Kingdom?

We have met on this subject. We have thought about this subject. The noble Lord has thought about this subject. We take the view that these amendments would not add to the Bill and may indeed subtract from it.

My Lords, I thank the Minister for his very thorough reply. I derive some comfort from what he said about the prospect of delegated legislation with respect to the latter amendments.

As regards the main amendment to Clause 19, I continue to think that this would be better dealt with on the face of the Bill. The Minister's interpretation of that clause gave us some hope to think that statements of fact will be seen in their proper context. Although I should like to press him further, I feel that, in all the circumstances, the wisest thing for me to do would be to ask leave to withdraw this amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 10:

Page 10, line 45, leave out ("("the purchaser")").

The noble Lord said: My Lords, I beg to move.

On Question, amendment agreed to.

moved Amendment No. 11:

Page 11, line 10, leave out ("deposit-taking") and insert ("accepting deposits").

The noble Lord said: My Lords, in moving Amendment No. 11, I should like to speak also to Amendments Nos. 13, 15, 16, 30 to 34, 48 to 55, 75 to 79, 101 to 135, 149, 150, 168, 169 and 176 to 192. Those of your Lordships who are quicker than I will already have added those up to 78 in all. It is a rather large group and it demonstrates the difficulties that arise—incidentally, it also illustrates how the number of individual amendments can be a highly misleading guide to assessing the extent to which a Bill has been substantively amended—with a Bill of this size when a minor technical matter has to be addressed.

The two main issues which this group of amendments seeks to address are, first, to ensure that the way in which certain matters relating to insurance and deposits are described in the Bill is consistent with the structure of the Bill; and, secondly, to enable the repeal of the Insurance Companies Act 1982. Your Lordships will be happy to hear that I do not intend to go through each of the 78 amendments in turn but that I shall deal with them, as it were, by subject matter.

Under deposits, the change of references to deposit-taking in the five Amendments Nos. 11, 13, 15, 16 and 169 are—famous last words—easily explained. At the moment, the Bill refers in some places to "deposit-taking" and in others to "accepting deposits". We think it is pretty clear that these terms are intended to have the same meaning. However, by ensuring that the same term is used throughout, we remove the scope for someone to argue that accepting deposits and deposit-taking have different meanings. We have therefore standardised references to the term that most neatly meets the structure of the Bill.

Our main difficulty with the references to insurance in the Bill—I am sorry that there are so many of them—is that they all depend on definitions in the Insurance Companies Act 1982. It has always been our intention that the 1982 Act should be repealed in its entirety. Unfortunately, it has taken us a while to devise a suitable mechanism for achieving the desired result in a way that is consistent with the structure of the Bill, under which particular regulated activities will be defined off the face of the Bill.

Half a dozen of the amendments change references to "dealing" in contracts of insurance to "effecting or carrying out" such contracts. Not only does this more accurately describe the activity we are seeking to capture, but it also introduces consistency throughout the Bill and removes scope for argument about whether they were intended to mean the same, or different, things.

The next batch of 10 or so amendments removes the references to "insurance business" and inserts in their place references to,

"the effecting and carrying out of contracts of insurance".

This is because, although the concept of "insurance business" is used in the 1982 Act to identify the activities that are regulated, it does not really fit with the structure of the Bill. This simply uses a different formula to identify the activities that are regulated under the Bill; namely, "carrying on regulated activities". These amendments reflect that. Where it is necessary, in a particular provision, to refer to a business in the broader sense being maintained or transferred, the amendments describe that as,

"business which consists of the effecting or carrying out of contracts of insurance".

The next batch of amendments sets out changes needed—these account for about half the amendments in the group—to remove references to "insurance companies". "Insurance company" is a term of art borrowed from the very different regulatory structure of the Insurance Companies Act 1982. In that Act its meaning is not limited to companies: indeed, individuals and one industrial and provident society fall within that definition. It also includes any person carrying on insurance business, whether or not they are authorised to do so.

Our approach therefore has been either to refer an authorised person with permission to effect or carry out contracts of insurance, or simply to refer to an insurer which will be defined in regulations made by the Treasury in a particular context. In some cases, for example, the insolvency provisions, it will be necessary to limit the application of certain provisions to companies or to authorised persons. In other cases, a wider meaning will be necessary.

The final substantive matter dealt with in this group is the introduction of the new clause after Clause 415. This defines the concepts of "contracts of insurance", "reinsurance" and contracts of particular types of insurance by reference to Clause 20 and Schedule 2. This makes it clear that the references in the Bill are to have the same meanings as in the order. If necessary, the definitions could be amplified in secondary legislation under the provisions of Part III of Schedule 2.

The new clause also confers on the Treasury power by order to define certain other insurance-related terms: namely, "policy" and "policy-holder" and power by regulations to determine the law applicable to prescribed classes of insurance contracts.

There are also a few amendments that make very minor drafting or technical changes, many of which are intended to bring the relevant provisions into line with the changes I have already described. They include, for example, Amendment No. 101 to Clause 340, which concerns a record of authorised persons, where we have just spotted a mistake in a definition in subsection (7). When I say "just" I do not mean just now but earlier on, during the period between Report and today's proceedings. I wonder whether anyone else spotted that mistake too! The definition should have been of an "authorised unit trust scheme".

Finally, the four amendments to Clause 137 seek to ensure that the powers under that clause which relate to the creation of charges will operate properly in Scotland. As the clause stands, the word "charge" could be taken to have a different meaning here from the meaning given in Clause 109(15). Also, without the amendment in relation to Scotland, the definition would have a narrower meaning than it does for the rest of the United Kingdom. We are therefore correcting that.

As I said at the beginning, these amendments are technical and they appear to be quite insignificant, but we believe that they are necessary to ensure that the Bill works properly. I beg to move.

On Question, amendment agreed to.

moved Amendments Nos. 12 and 13:

Page 11, line 17, leave out ("("the purchaser")").

Page 11, line 27, leave out ("deposit-taking") and insert ("accepting deposits").

The noble Lord said: My Lords, I beg to move.

On Question, amendments agreed to.

moved Amendment No. 14:

Page 12, line 8, leave out ("other party") and insert ("person against whom the agreement is unenforceable").

The noble Lord said: My Lords, I beg to move.

On Question, amendment agreed to.

moved Amendments Nos. 15, 16 and 17 en bloc:

Page 12, line 22, leave out ("deposit-taking") and insert ("accepting deposits").

Page 12, line 35, leave out ("deposit-taking") and insert ("accepting deposits").

Page 12, line 36, leave out subsection (6).

The noble Lord said: My Lords, I beg to move these three amendments en bloc.

On Question, amendments agreed to.

moved Amendments Nos. 18 and 19:

Page 12, line 44, at end insert ("; and

"controlled investment" has the same meaning as in section 19").

Page 13, line 9, leave out ("an") and insert ("a controlled").

The noble Lord said: My Lords, I beg to move.

On Question, amendments agreed to.

moved Amendment No. 20:

Page 15, line 19, leave out ("its") and insert ("his").

The noble Lord said: My Lords, in moving this amendment, I shall speak also to government Amendments Nos. 21, 22, 143, 160, opposition Amendment No. 161, and government Amendments Nos. 162 to 167 and 170 to 173.

The three amendments to Clause 34 (Amendments Nos. 20 to 22) correct the incorrect and unintended implication from the use of "it" and "its" in that clause; namely, that a person authorised as a result of paragraph 1(1) of Schedule 5 may not be a natural person. The provision covers operators, trustees and depositories of recognised collective investment schemes. The question of whether these roles can be discharged by natural persons is a matter for law of the home state concerned. So these changes are a minor, but necessary adjustment.

The Government's amendments to Schedule 3— namely, Amendments Nos. 160 onwards—are part of our response to concerns raised by the Opposition at Committee stage in this House. The changes ensure that the passporting provisions work properly and are fully compatible with European law. As the Bills stands, if an incoming EEA firm fails to go through the relevant procedures set out in paragraphs 13 and 14 of Schedule 3 before carrying on regulated activities in the United Kingdom, the enforcement of the agreements provisions of Clause 24 will apply to transactions effected in the course of carrying on this business. Likewise, Clause 25 will apply to transactions effected by an authorised person in consequence of anything said or done by the incoming firm in the course of carrying on such business.

We have given a lot of further thought to the enforcement provisions over the course of our debates and have made a number of amendments to meet concerns raised by noble Lords opposite and their colleagues in another place. We have also reconsidered their application in this context and have concluded that this is probably disproportionate and possibly discriminatory.

It an outgoing UK authorised person carries on activities covered by the relevant directive in another EEA state without having gone through the relevant procedures, the Bill will not render transactions effected by that person in the course of carrying on those activities unenforceable. To apply the enforcement of agreements provisions to incoming firms that fail to follow the proper procedures might, therefore, be discriminatory.

The similarity of approach of the opposition Amendment No. 161 suggests that the noble Lords opposite share our view, at least to some extent, that these provisions need to be disapplied. The new paragraph that we propose to insert after paragraph 15 disapplies Clauses 24 and 25 in relation to any agreement entered into by an EEA firm in the course of, or any agreement entered into by an authorised person as a result of, regulated activity carried on without the relevant procedures having been completed. The amendment also disapplies Clause 27, which deals with enforcement of deposit agreements. I apologise to your Lordships for the fact that this was omitted from the list that we supplied last week. It has been corrected and relaid, and now appears in the corrected form on the Marshalled List.

Leaving aside the point about Clause 27, the Opposition alternative is less generous in terms of the circumstances in which Clauses 24 and 25 would be disapplied. The use of the term "permitted activity" may be intended to narrow the effect of this paragraph to activities covered by the directives, rather than any regulated activity. However, the definitions of "permitted activity" in paragraphs 13 and 14 of Schedule 3 are related to the activities set out in the consent notices provided for in those paragraphs. A "permitted activity" is therefore only an activity for which notification has been received by the FSA from the home state regulator.

As this is the most significant step in the procedures as far as concerns the EEA firm and its home state regulator, narrowing the effect of the new paragraph to only those cases where that step had in fact been taken would pretty well completely neutralise the purpose of the amendment.

As regards UK firms, sub-paragraphs 18(11) and 19(9) of Schedule 3 currently provide that the FSA may make rules for UK firms not subject to the rulemaking powers under Part X which offer cross-border services without having completed the necessary procedures set out in those paragraphs. This is aimed at subsidiaries of UK credit institutions which may benefit from the extended passport under Article 18 of the Second Banking Coordination Directive, but whose activities in the UK may not be regulated activities under the Bill; for example, consumer credit lenders.

We have decided that that approach is unsatisfactory. It is not clear that a power to make rules for unauthorised persons will be effective in ensuring that the necessary notification procedures are observed, which is of course necessary in order fully to meet the requirements of that directive. So the new paragraph that we are inserting after paragraph 19 makes a failure to follow the correct notification procedure a criminal offence. This follows the existing law and removes the need to make provision for the FSA to make rules applicable to persons who would not otherwise be subject to FSA rules. Therefore, we are deleting those two sub-paragraphs.

Amendments Nos. 162 to 167 address particular concerns raised by the Opposition in Committee on 21st March; namely, that the provisions of paragraph 19 did not accurately reflect the notification procedures for provision of cross-border services under the Investment Services Directive. Therefore, these amendments explicitly align the provisions on the outward passport for cross-border services with the provisions of the Investment Services, Second Banking Coordination Directive, Third Life Insurance Directive and Third Non-life Insurance Directive.

We are also responding to an issue raised by the noble Lord, Lord Kingsland, by way of our Amendment No. 163. This will remove subparagraph 19(1)(b) which prevents a UK insurance company from commencing its cross-border activities until the FSA has made the necessary notification—in the form of a "consent notice"—to the host state regulator and has informed the company of the fact. The requirement is not provided for by the insurance directives in relation to cross-border services, although it is in relation to the establishment of a branch in another member state. Therefore, imposing it here would be incompatible with the directives. Consequently, we propose to remove subparagraphs 19(3) to (6).

Finally, our amendment to paragraph 19(7)—Amendment No. 165—clarifies that the FSA must notify a firm's host state regulator of a notice of intention by sending a copy of the notice of intention to the host state regulator within a month of its receipt by the FSA. The amendment adds a requirement that when the FSA sends the notice of intention to the host state regulator it must also give written notice to the firm. The amendment also adds the requirement that if a firm's EEA right derives from the Investment Services Directive, it must wait until it receives this written notice before it begins providing the service to which the notice of intention relates.

Our amendments to Schedule 6 address a number of issues arising in relation to paragraph 2, which establishes various conditions for authorisation that relate to the location of a person's registered and/or head office and, indeed, where he carries on business. Paragraph 2(1) proceeds on the assumption that every body corporate incorporated under the law of any part of the United Kingdom will have a registered office. That may not be the case; for example, a body incorporated by a private Act of Parliament may not have a registered office.

Paragraph 2(2) imposes threshold conditions on EEA persons which, in the case of EEA firms under Schedule 3, would give the FSA a responsibility that went beyond that allowed for the host state by the home/host state division of responsibility established by the directives. We also consider that it may be disproportionate in respect of EEA persons who are not subject to the directives, particularly treaty firms qualifying for authorisation under Schedule 4.

Thirdly, we have concluded that paragraphs 2(3) to (5) impose unnecessarily restrictive conditions on persons from non-EEA States. In particular, subparagraph (5) should not apply to non-UK persons. The requirement to carry on business in the UK should be the default requirement for UK nationals and not, as it is presently drafted, for unincorporated persons from other states.

To the extent that it is necessary for the FSA to impose requirements in relation to the corporate or structural arrangements of overseas firms, this can be adequately achieved through the suitability criterion under paragraph 5, which requires the FSA to be satisfied that a person's affairs are conducted soundly and prudently.

We propose to amend paragraph 2(1) of Schedule 6 so that the requirement that a body corporate incorporated under the law of any part of the United Kingdom must have both its head office and its registered office in the UK applies only to a body corporate that actually has a registered office. In the case of any other body corporate, the requirement should be that the head office must be in the United Kingdom. This is required by the single market directives.

The other sub-paragraphs, which deal with overseas persons, are omitted. Two of our amendments to paragraphs 6 and 7 are consequential changes which reflect the fact that, by virtue of the previous amendment, paragraph 2 will no longer apply to EEA or treaty firms. The final amendment is a minor drafting amendment to insert a missing "the".

To a large part, these amendments respond to points which the Opposition have raised in debate here and in another place and we are grateful to them. They also reflect some further thinking on these issues by the Government. The result is a set of amendments which serve to reduce some unnecessary burdens on overseas persons doing business, or seeking to do business, in the United Kingdom. I beg to move.

On Question, amendment agreed to.

moved Amendments Nos. 21 and 22:

Page 15, line 22, leave out ("it") and insert ("he").

Page 15, line 23, leave out ("it") and insert ("he").

On Question, amendments agreed to.

moved Amendment No. 24:

Page 33, line 32, at end insert—

("() In prescribed cases, a contravention of that kind which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty.").

On Question, amendment agreed to.

moved Amendment No. 25:

After Clause 86, insert the following new clause—

PUBLIC CENSURE OF SPONSOR

(".—(1) Listing rules may make provision for the competent authority, if it considers that a sponsor has contravened a requirement imposed on him by rules made as a result of section 86(3)(c), to publish a statement to that effect.

(2) If the competent authority proposes to publish a statement it must give the sponsor a warning notice setting out the terms of the proposed statement.

(3) If, after considering any representations made in response to the warning notice, the competent authority decides to make the proposed statement, it must give the sponsor a decision notice setting out the terms of the statement.

(4) A sponsor to whom a decision notice is given under this section may refer the matter to the Tribunal.").

The noble Lord said: My Lords, in moving Amendment No. 25 I wish to speak also to Amendments Nos. 26, 27, 28, 137, 138, 174 and 175.

The government amendments in this group are necessary to fill three gaps in the provisions of the Bill dealing with the competent authority for listing. The first covers the arrangements for sponsors where we need to ensure that the competent authority continues to have available the range of disciplinary sanctions which it possesses at present. We signalled that we would make this change during the debate in Committee. At the moment the Bill does not provide for the intermediate power publicly to censure sponsors rather than remove them from the list of approved sponsors. The new clause, introduced by Amendment No. 25, brings in such a power, and Amendments Nos. 137 and 138 make consequential changes.

It may be convenient for me to say a few words about the Opposition amendment to the proposed new clause. I see that the Opposition nod in the affirmative. The Opposition Amendment No. 26 would extend the power of public censure to cover not only breaches of rules imposing requirements on sponsors, under Clause 86(3)(c), but also to cover rules specifying,

"services which must be performed by a sponsor",

under Clause 86(3)(b). I think that I understand what lies behind the amendment, but I do not believe that it is necessary.

The purpose of Clause 86(3)(b), in contrast to Clause 86(3)(c), is not to allow the competent authority to make rules which bind sponsors, but to allow it to make rules which bind issuers of listed securities, or persons seeking admission to the list. Rules of this kind would tell issuers, not sponsors, what activities they were not to perform themselves, but would need to ask a sponsor to take on their behalf. If such rules were breached, the breach would then be on the part of the issuer, not the sponsor. If this happened, the competent authority already has the power to impose sanctions on the issuer, including a public censure, if appropriate, under Clause 88. If, however, the competent authority wanted to make a rule requiring sponsors to do any particular thing, it will do so under subsection (3)(c).

The second change we are making, with Amendments Nos. 174 and 175, is to align the provisions on the legal immunity of the complaints investigator, when investigating complaints against the FSA as competent authority, with those applying when he is investigating the FSA as regulator. This will ensure that he is able to carry out any investigations without being inhibited by the fear that he may be subject to legal action.

Finally, I turn to Amendments Nos. 27 and 28. These pick up on a point raised by the noble Lord, Lord Kingsland, at Report stage, when he noted that this clause referred to a,

"significant adverse effect on competition",

whereas the test used elsewhere in the Bill was one of a "significantly" adverse effect. This was, as the noble Lord quite rightly concluded, an error on the Government's part, and I am grateful to him for bringing this to our attention. These amendments are intended to correct this error. I beg to move.

moved Amendments Nos. 27 and 28:

Page 45, line 13, leave out ("significant") and insert ("significantly").

Page 45, line 24, leave out ("significant") and insert ("significantly").

On Question, amendments agreed to.

moved Amendments Nos. 30 to 34:

Page 50, line 29, leave out ("deal in") and insert ("effect or carry out").

Page 50, line 35, leave out ("deal in") and insert ("effect or carry out").

Page 50, line 40, leave out ("deal in") and insert ("effect or carry out").

Page 51, line 7, leave out ("reinsurance business carried on") and insert ("business which consists of the effecting or carrying out of contracts of reinsurance").

Page 51, line 28, leave out ("reinsurance business") and insert ("the effecting or carrying out of contracts of reinsurance").

The noble Lord said: My Lords, I beg to move Amendments Nos. 30 to 34 en bloc.

On Question, amendments agreed to.

moved Amendment No. 37:

After Clause 113, insert the following new clause—

moved Amendment No. 40:

After Clause 115, insert the following new clause—

PROVISIONS INCLUDED IN THE AUTHORITY'S CODE BY REFERENCE TO THE CITY CODE

(".—(1) The Authority may include in a code issued by it under section 115 ("the Authority's code") provision to the effect that in its opinion behaviour conforming with the City Code—

(a) does not amount to market abuse;

(b) does not amount to market abuse in specified circumstances;

(c) does not amount to market abuse if engaged in by a specified description of person.

(2) But the Treasury's approval is required before any such provision may be included in—

(a) the Authority's code; or

(b) a proposed code published by the Authority under section 116.

(3) "City Code" means the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers as it has effect at the relevant time.

(4) "Specified" means specified in the Authority's code.").

The noble Lord said: My Lords, in moving Amendment No. 40 I wish to speak also, for the sake of clarity, to opposition Amendment No. 41—which is an amendment to Amendment No. 40—and to opposition Amendments Nos. 42, 63, 64 and 65.

We come now to an issue which has occupied a good deal of space in the public prints in the past few days, indeed, in the past few weeks. I hope, nevertheless, that I need not detain noble Lords too long. However, it is necessary to set out some of the background.

I have made it clear that we support the work of the Takeover Panel. We believe that it has done a good job in regulating the conduct and process of takeovers. We want it to continue to do that job in the way that it has been doing it. We also believe that it is vital that our financial markets are protected from the effects of market abuse wherever and whenever it occurs. That is why we have introduced the new market regime in the Bill.

I do not think that these aims are in conflict in any way. It is, of course, the case that market abuse, indeed serious market abuse, can occur during takeovers. Because of that it is important that proper procedures and arrangements are in place between the FSA and the Takeover Panel. We do not want unnecessary duplication or to create unnecessary uncertainty.

At the beginning of this week I wrote to noble Lords who had taken part in the earlier debates, attaching the paper which I had asked the FSA to produce after our previous debate. This sets out the progress that has been made to date on finalising procedures and agreements. As that paper makes clear, the FSA and the panel are working on three fronts: first, identifying provisions which can provide safe harbours in the FSA's code of market conduct; secondly, on an operating agreement which sets out liaison and information sharing arrangements; and, thirdly, on a policy statement on the circumstances in which the FSA would expect the Panel to lead, and the circumstances in which it might take the lead itself.

It is clear to me that this is the right way forward, as it is in the case of recognised investment exchanges which are also working with the FSA on similar arrangements to deal with possible overlap. Concern has been expressed, however, that these arrangements by themselves are not enough in the case of the Takeover Panel. Quite why the Takeover Panel is in such a special position compared with exchanges, I am not sure. But, be that as it may, the concern is, apparently, that the FSA would be forced to intervene by the courts, regardless of its stated policy that it will not seek to intervene except in exceptional circumstances.

As I said in our previous debates, fears have been grossly overstated. It is clear to us and to the FSA that the FSA could adopt a policy of not intervening where it thought that it was being dragged in for tactical reasons. It is clear that the FSA could adopt a policy of leaving it to the panel to take action where it was satisfied that the panel could deal with the mischief adequately.

It is also clear that the courts would not look kindly on parties to a bid, and on others involved in the bid, seeking to circumvent the clear position that the courts have adopted as regards judicial interference in takeovers. As I said in our earlier debate, in my view the courts would frown on any such attempt and would view favourably any effort on the part of the FSA to avoid that happening. The FSA will, of course, have to consider making exceptions to any policy it adopts—in this area as well as anywhere else—but, as long as it acts reasonably, there will be nothing to fear.

Let me make two further points. First, there is overlap now between the regulatory regime and the Takeover Panel's code, as there is between the panel's code and the criminal offences of insider dealing and market manipulation. No one has thought to frustrate takeover bids to date through these means; the only change following the introduction of the new market abuse regime will be the potential degree of overlap, not the nature of it.

Secondly, it is extremely difficult to see how involving the FSA will have any effect on the timetable of the bid. Despite this being the main concern expressed by the panel, no one has plausibly explained how this might occur. The panel has stated that it is worried about injunctions for market abuse. But such injunctions would be aimed at the abuse, not at the merits or otherwise of the bid; they would not interfere in the takeover process.

My Lords, I am grateful to the Minister for giving way. He may recall that I intervened when we discussed this matter earlier and that I asked him specifically about the issue of judicial review. He replied that he did not think that judicial review would succeed. Is not the Minister missing the point? People might apply for judicial review—it may not be successful in the courts— and that in itself will introduce delay, which could be used tactically in order to frustrate the process of the bid. These are the kinds of tactical issues which may be used by advisers that are causing concern to the Takeover Panel and to people in the City.

My Lords, it is of course possible that after the legislation has been passed someone may try that on, but the courts would get wise to that very quickly indeed. As the noble Lord, Lord Forsyth, agrees, it is hardly likely that the judicial review itself or an injunction would succeed. In any case, it is unlikely that an injunction would succeed in upsetting the timetable of the takeover bid. It would be an injunction on the abuse, not one which brought to a halt the process of the takeover bid.

I presume that that is why, as far as I am aware, no one has ever pressed the FSA to seek injunctions under Section 61 of the Financial Services Act alleging possible breach of the market manipulation offence. The fear of the noble Lord, Lord Forsyth, is one which could have been expressed at any time since the passing of the Financial Services Act 1986. The ability to seek an injunction is available under Section 61 of that Act; it has never been sought.

I move now to government Amendment No. 40.

My Lords, before the Minister moves away from that point, is there not a new factor in this argument? The Government have virtually signed up to the takeover directive, which therefore leaves the Luxembourg court lying in the background of the process that the Minister said has not yet taken place. May that not be a further encouragement to the kind of route suggested by my noble friend Lord Forsyth?

My Lords, I made it clear in my opening remarks that the Government support the work of the Takeover Panel and we believe that it has done a good job in regulating the conduct and process of takeovers. We want it to continue doing that job. Whatever action may be taken by the European Union could, of course, affect British legislation, regardless of whether this or any other amendment were included in the Bill. It has no effect on the provisions we are now making.

Amendment No. 40 seeks to establish a proper relationship between the Takeover Panel and the FSA. We have to do that because the Takeover Panel is at the moment acting legally by any standards and with the full support of government.

Perhaps I may now turn to government Amendment No. 40. We have reflected further on the points made by noble Lords in the previous debate. We have looked carefully to see whether anything could properly be added to the Bill to deal with the concerns that have been raised. I certainly share the concerns of the noble Lord, Lord Newby, about the dangers of duplication and the issue of fairness; that people who comply with one set of rules should not be pursued under another set of rules. As he said, it is difficult to see an argument for pursuing someone who has complied with the City code in the circumstances in which the safe harbour provisions already exist in relation to the market abuse code.

While we continue to believe that administrative arrangements will prove robust, we have decided to introduce a new clause (Amendment No. 40) which will allow the FSA to place provision in its code of market conduct to the effect that,

"behaviour conforming with the City Code…does not amount to market abuse".

The amendment allows the FSA to specify conditions of limitations, as do the amendments tabled by the noble Lords, Lord Saatchi, Lord Kingsland, Lord Newby and Lord Sharman. Our amendment is different from those tabled by those noble Lords in two important respects. First, our amendment provides that the FSA has to have the Treasury's approval before it can include such provisions in its code of market conduct. If the FSA were to include such a provision, it would effectively be handing over control of safe harbours in this important area to the Takeover Panel. We believe that it is right that the Treasury should be involved in such a decision by the FSA—a body for which it is answerable in Parliament—to delegate the responsibility which Parliament has given it in this area to a non-statutory regulator; that is, the Takeover Panel. Treasury Ministers will, of course, be answerable in Parliament for any decisions they make.

The second and most important difference is that, unlike Amendment No. 63, the provision allows the FSA to promote a safe harbour for behaviour in conformity with the City code and not in conformity with whatever the panel may say. If one follows through the definition in subsection (6), the way in which Amendment No. 63 would work is to allow the FSA to provide a safe harbour which is, in the opinion of the panel—and this includes any revised opinion; any changes in the opinion formed by the panel—

"in conformity with the City Code…as applied by the Panel and as amended from time to time by the Panel.

This means that in the area of takeovers, market abuse is whatever the panel at any time says that it is. I have received a letter from Mr Drayton, the director general of the panel—I believe other noble Lords have also received it—in which he describes this as,

"an amusing way of characterising the safe harbour proposal".

Unlike Mr Drayton, I do not find this amusing at all.

In the letter he prefers slightly different wording, but all he is doing is dressing up the stark fact that if the definition in this amendment were ever to find its way onto the statute books, abuse in this area would be what the panel says it is. I am astonished that any noble Lord should contemplate that. What a fuss there would be if we had said that market abuse was whatever the FSA says it is, but in this area at least the FSA can change its mind on a case-by-case basis without consulting or being accountable to anyone.

I thought that the noble Lords, Lord Saatchi and Lord Kingsland, had realised this in tabling Amendment No. 64, which, although substantially the same as Amendment No. 63, does not provide that abuse is whatever the panel says it is but is in line with the approach in our amendment.

I have been asked to confirm whether "conformity with the City Code" in our amendment means "in conformity with the City code as applied by the panel". The answer to that is "yes". The City code is the code which is drafted and applied by the panel, and no one else. The very nature of the code and the way in which it is operated in practice means that the question of whether behaviour conforms with the City code will depend to a considerable extent on the panel and its interpretation of the code. But "in conformity with the City code" does not mean that the FSA will be unable to take action unless the panel says it can. That gets us into the kind of territory covered by other opposition amendments which we cannot support. This, as I explained, would allow the panel to say what is and is not market abuse on a case-by-case basis. The safe harbours for behaviour which conforms with exchange rules will not work like this, and no one has suggested that they should.

The FSA will be the body to which Parliament has entrusted the operation of the market abuse regime. It is only right that it should take the initial view on whether action should be taken against a person under Part VIII of the Bill. Given what I have said about the nature of the code and the panel's role in interpreting and applying it, I would naturally expect the FSA to take the panel's view before it decided whether behaviour fell within the safe harbour which the government amendment would enable it to provide. It would be foolish if it did not. In what I would expect to be a very rare event—namely, where the FSA and the panel disagreed on what "in conformity with the code" meant—it would be open, under our amendment, for the FSA, as the primary regulator, to take action. But let us not forget the background in which it could take action.

First, the person accused could call the panel to give evidence that his behaviour was in conformity with the City code. That would clearly carry a great deal of weight. Furthermore, the test of whether market abuse has taken place rests on the view of the regular user of the market as to whether expected standards have been met. Clearly, the panel's views will be important in determining that question. As a result, it is clear that any disputes between the panel and the FSA on whether behaviour was or was not in conformity with the City code would be very rare. But where such a dispute did arise, it is right that the question should be capable of being tested before the tribunal to be established under the Bill. I would expect the tribunal and, if the matter came before them, the higher courts, to attach due weight to the panel's views in accordance with established case law. None of this needs interfere with the timetable of the Bill, which is the crucial issue as the panel sees it.

I hope noble Lords will agree that our amendment strikes the right balance here, given the concerns that have been expressed and which I have not, despite my best efforts, managed to convince all noble Lords are unfounded. The amendment provides what I might call a "safety valve" and in that respect is entirely in line with Amendment No. 63. I said at the beginning that I hoped I would not detain your Lordships too long. I have detained your Lordships too long. I have much more to say about the various opposition amendments, but it is probably better if I do not say it until they have been moved. I beg to move.

moved, as an amendment to Amendment No. 40, Amendment No. 41:

Line 4, after ("with") insert ("one or more specified rules or notes in").

The noble Lord said: My Lords, in moving this amendment, I should like to speak also to Amendments Nos. 42 and 63 to 65. I have no intention of wearying the House by going over ground already covered in Committee and on Report. The purpose of our amendments is twofold: first, to provide that conforming with the City code as applied by the Takeover Panel is a safe harbour for the purposes of Clause 117(1) of the Bill; secondly, to provide that:

"Except at the request or with the consent of the Panel, the Authority may not during the course of an offer exercise its powers under the Act in respect of behaviour which it considers may amount to market abuse".

We believe that, without such ring-fencing on the face of the Bill, the authority will, irrespective of its wishes—at this point I should like to draw the Minister's attention to the intervention of my noble friend Lord Forsyth—be compelled, in each and every takeover bid, to stand in the shoes of the panel, and second-guess its every move, in order to meet its market abuse responsibilities under the Bill.

In particular, we do not believe that a mere policy statement by the FSA will furnish the necessary ring-fencing. Any self-denying ordinance by the authority will be susceptible to judicial review in the courts on the grounds both of illegal delegation and illegal fettering. In short, failure to accept our amendments would destroy the panel as we know it, one of the City's greatest assets and a key to so much of its success.

I am pleased to say that, yesterday, the Minister tabled a government amendment seeking to grapple with the first, and only the first, of our two anxieties—that is to say, the provision of a safe harbour. The Minister has explained his amendment to your Lordships. From the point of view of the Opposition, it allays some but not all of our fears. In particular, we could not accept the current drafting of subsection (1) of the proposed new clause. Subsection (1) reads:

"The Authority may include in a code issued by it under section 115 … provision to the effect that in its opinion behaviour conforming with the City Code—

(a) does not amount to market abuse;

(b) does not amount to market abuse in specified circumstances;

(c) does not amount to market abuse if engaged in by a specified description of person".

That is all right as far as it goes; but the clause will not provide the safe harbour that we believe is necessary unless the amendment also embraces the interpretation that the panel places on the code in any particular set of circumstances.

These concerns could be met in one of two ways: either by the addition after the expression "City Code" of the words "as applied by the Takeover Panel"—by that I mean, as applied by the Takeover Panel in any particular set of circumstances—or, alternatively, by excising the words after "behaviour" and inserting the expression which appears in subsection (6) of our Amendment No. 63:

"behaviour of a person … which in the opinion of the Panel conforms with the responsibilities imposed on that person by the City Code".

We believe that one or other of those expressions must appear on the face of the government amendment if we are to accept it.

I know that the noble Lord cannot make anything in the nature of a manuscript amendment in your Lordships' House today; but an undertaking that such words would be incorporated in an amendment in another place would be satisfactory to the Opposition.

As regards our other concern, the Minister has directed the attention of your Lordships' House to our Amendments Nos. 64 and 65. Yesterday we tabled Amendment No. 42, which is intended to meet some of the criticisms that the Minister has laid at the door of Amendments Nos. 64 and 65. The effect of the amendment is to establish a jurisdictional boundary between the authority and the panel during the course of a bid.

The amendment would leave the authority completely free to pursue market abuse once the bid had been completed; and therefore would not fetter in any way its ability to take disciplinary action thereafter. The amendment would enable the panel, meanwhile, to get on with the regulation of bids without the parties to a potential takeover having the opportunity tactically to involve the authority and, through that involvement, the courts as well.

Amendment No. 42 comes before Amendment No. 65 in the order of voting. If the Minister is unable to accept Amendment No. 42, I must give him notice that we shall move that amendment. In the meantime, I beg to move Amendment No. 41.

My Lords, we are discussing two separate but related issues in this group of amendments; namely, what have been referred to as the "safe harbour" and the "gatekeeper"' provisions. I shall deal first with the safe harbour provisions, without reiterating the arguments for including such measures in the Bill. We were pleased that eventually the Government produced Amendment No. 40. It demonstrates a recognition on the part of the Government that a provision in respect of safe harbours was required on the face of the Bill in order to clarify the matter. That has been discussed by many noble Lords at all stages of the Bill.

The remaining key issue, referred to by the noble Lord, Lord Kingsland, and where I share his view that there is a lack of clarity in the amendment as currently drafted, is the question of who shall interpret the City code. The noble Lord's suggestion is to insert a form of words that makes it absolutely clear that the interpreter of the City code is indeed the Takeover Panel—it is its code—rather than the FSA. That is important and I hope that, when the Minister concludes the debate on this amendment, he will be able to give an assurance to that effect.

As regards the other element of this debate, that of the "gatekeeper" argument, in the debate on Report I argued that it represented an undesirable fettering of the role of a principal and primary regulatory body to include such a gatekeeper provision. I remain of that view. The key argument that has been advanced in favour of the gatekeeper provision is that made by the noble Lord, Lord Forsyth, and—most energetically over recent weeks—by the Takeover Panel. The argument states that there will be a high degree of tactical use of judicial review in order to gain a short-term tactical advantage, with no particular anticipation of success as regards the judicial review. If it were ever heard, it would take place only long after the merger had either succeeded or failed.

I have tried to weigh what, on the one hand, seems to me to be the important principle that the FSA should remain unfettered in its powers against the argument, on the other hand, that the whole conduct of mergers will be undermined by the repeated use of judicial review proceedings. Having read the voluminous correspondence that has emanated from all sides of this debate, I still remain unpersuaded of the argument set out in Amendment No. 42. I am not happy with the notion that the FSA will have to sit on its hands until a takeover is concluded and I am not convinced that we shall see the degree of judicial proceedings anticipated and feared by the panel, the noble Lord, Lord Forsyth, and others. For those reasons, we on these Benches shall not support Amendment No. 42.

My Lords, I take it that it has been generally agreed that, as a general proposition, in principle the views of the FSA on these matters should prevail over those of the Takeover Panel. However, the exceptional circumstance that gives rise to the problem is when the bid is in progress. Then the City panel necessarily, although not always, may have to take instant decisions. It will of course expect all the parties involved in the bid to comply with those instant decisions rather than acting contrary to them. In that situation, I agree that the courts would follow their ordinary practice, but it is important to outline briefly what happens in a case of judicial review.

An application for leave to apply for judicial review is made. In theory, until it has been dealt with by the courts, an application has no effect whatever. But in a sense that is theoretical. I shall explain why. Turning to a different field, that of local authority actions—an area with which, when I dealt with judicial reviews, I was much concerned—I would have been extremely put out if, having received an application for judicial review, the local authority proceeded to act in a way which made any decision by the court on judicial review entirely nugatory.

However, as a lawyer, I would have to admit that a local authority would be entitled to do exactly that. Of course, if I had learnt that an authority was acting in that way, I would have slapped an injunction on it—but that is another matter. My principal point is simply this: people may not realise that they are able—metaphorically speaking—to raise two fingers to the courts at the stage at which all that has happened is that an application for leave to apply has been made. If the court does not like it, it is for the court to make an order to hold the ring until the application can be dealt with. But people do not think in those terms; perhaps it is a good thing that they do not. The authority of the court is thought to be asserted from the moment someone applies to the court, but that is not the case and that is where the problem lies.

I should have thought that it would be perfectly possible for the FSA, when producing its code in conjunction with the City code, to cope with that situation quite simply. In whatever circumstances, but most likely during a current takeover bid, it could say that, subject to the undoubted right of the City panel to alter the rules as circumstances change during the course of the bid—I am sure that in practice that does happen—the FSA will treat the actions of those concerned as not amounting to market abuse. That would obtain during the course of the bid. However, once the bid had been cleared, the FSA will approach the Takeover Panel and say something along the lines of, "We cannot accept this. You must alter the code".

It is very likely that the Takeover Panel will agree with the FSA, because all parties have the same objectives in mind. However, if the Takeover Panel did not agree, the FSA must have the last word on the matter. The FSA would declare that if in the future anyone complied with that particular aspect of the City code, they would do so at their peril because the FSA regarded that element as being capable of being construed as market abuse.

This situation is akin to the line taken by the courts in Datafin where we would not interfere during the course of the bid—in the sense that we would give no injunctive relief. However, afterwards, we might very well say that we did not think that this was right and if anyone tried it again, we would intervene. I suggest that that is exactly what the FSA should do under government Amendment No. 40. Provisions should be put in place to enable people to use a safe harbour, provided that they are complying with the City code, but without prejudice to the next round, when neither they nor anyone else would be able to do so.

My Lords, I do not propose to detain noble Lords. Suffice it to say that the contributions made by my noble friend Lord Kingsland and the noble and learned Lord, Lord Donaldson, reflect very much what I wish to say.

Perhaps I may make two points. First, I thank the Minister for bringing forward Amendment No. 40. It demonstrates that the Minister is trying to respond to the points that have been made. That said, the amendment has a serious weakness in terms of meeting the anxieties expressed in that it does not make clear who will determine whether the City code has been complied with. Unless it is the panel, clearly we are no further forward. I hope that the Minister will reflect on the points that were made by my noble friend and give an undertaking that he is prepared to change the wording to make it clear that compliance with the City code will be a matter determined by the panel in this context.

The second point that I should like to put to the Minister, in the politest possible way, is that the Government have been at great pains to tell everyone how much they respect the Takeover Panel, how good it is and what an important institution it is. As I came into the Chamber, I was handed a page of briefing from the Takeover Panel stating that:

"Unless the Bill is amended, there will be significant damage to the quality of takeover regulation in the UK. This in turn will damage the reputation of the UK financial markets for integrity and efficiency".

That is a very strong statement, coming from a body which the Government say that they respect and which, unlike members of the Government, has years of experience in this area. I do not think that any government can afford to ignore statements of this kind in this rather cavalier way. Therefore, I hope that the Minister will listen to these points.

Subsection (2) of Amendment No. 40 gives the game away. Perhaps I have missed something—I know that it is the practice throughout the Bill—but when we were in government we did not introduce clauses referring to government departments; they referred to Ministers. Subsection (2) states,

"But the Treasury's approval is required before any such provision may be included".

Had I been responsible for the Bill, the reference would have been to the Chancellor of the Exchequer. We really are seeing the game being given away and that this is being run by officials in the Treasury rather than Ministers. There is an extraordinary appearance of Banquo's ghost here. We have been assured throughout proceedings on the Bill that the principle at stake is that there should be one responsible authority. Suddenly, we find in the proposed amendment that the Treasury is the hidden hand to which the authority will have to go for approval.

I say in the friendliest possible way to the Government: please listen to the points that have been made. My noble friend has proposed a solution. It is important that our markets are seen to have integrity and to be efficient. That is in the interests of shareholders—that means every pensioner in this country with a private pension. For a Bill that purports to be concerned about ensuring market efficiency and integrity, it is extraordinary that we have arrived at this stage with these kinds of statements being made by people with no axe to grind other than the good name of the City of London.

My Lords, concern has been apparent throughout our debates on this topic at various stages that the powers of the Takeover Panel and the reputation that it has built up over more than 30 years should be preserved in a new environment. We value it for the great benefits that it has achieved and we do not want them to be adversely affected by anything in the Bill.

With respect, one of the difficulties that the Opposition have had in putting forward amendments is that one of the great benefits of the Takeover Panel is that it is not a statutory body. It is a self-regulatory body, devised and deriving its composition from a number of City institutions and, as I said, it has given great value. But any amendments in this or any other Bill referring to the Takeover Panel involve the panel in a statutory role and statutory functions. A responsible legislative Chamber must accept that when such a body is, as it were, inserted into legislation, that is done without any controls over its composition, formation, procedure and so forth.

The Opposition have rightly been concerned about the detailed composition, function, objectives and concerns of the Financial Services Authority. I have no doubt that they are concerned about those matters in relation to the Takeover Panel, but Parliament is not concerned with it. Therefore, there is something of a dilemma in slotting in the Takeover Panel and giving it certain powers under the Bill, without having any say in how it works or how it is composed.

The reason I mention this is that there has been a measure of agreement about wanting to preserve the Takeover Panel's role during the offer period. In so doing, both the Government and the Opposition have been faced with the question of how to slot the panel in, how to devise a way in which the panel is not lost to life, is not coming to an end after 30 years but has a continuing and valid role. That can possibly be achieved by legislation, but we must make sure that we get it right. This is not the only way of getting it right. It could be done by means of agreement, practice or concordat between the Financial Services Authority, which is a statutory body, and the Takeover Panel.

The noble Lord, Lord Newby, said that we were concerned with two matters: the first is the safe harbour provision that we want to devise, so that if people comply with the provision in the code they will not be guilty of market abuse; the second is the gatekeeper provision. In regard to the safe harbour provision, there has been a measure of support, although not necessarily enthusiastic, for the Government's Amendment No. 40. The main difference of approach seems to lie in who is to have the final say—not who is to have any say, but the final say—as to what constitutes market abuse. The Bill contains definitions of market abuse, and over the years the Financial Services Authority has developed practice and precedents in regard to market abuse. However, we have no say over the composition and procedures of the Takeover Panel. Surely the final determination must he that of the statutory body; namely, the Financial Services Authority.

If the authority has a desire to preserve an understanding of the role of the Takeover Panel, surely it will do the kind of things that were indicated by my noble friend the Minister at the beginning of this debate; namely, to be constantly in touch, to take advice, and because the Takeover Panel has a great deal of experience of bids it will certainly start life in its relationship with the new Financial Services Authority as providing a powerful viewpoint which the FSA would fully understand it would do well to accept. But there is a difference in saying that it is the opinion of the Takeover Panel—this is the opinion of the Opposition in Amendment No. 63—that is all-pervasive and prevailing. It seems to me that that is not suitable. To put it shortly, the opinion of the panel is valuable and highly relevant, but it should not be conclusive. The conclusive view should be that of the Financial Services Authority.

On the gatekeeper provision, noble Lords opposite are right to express concern and regret that there is no government amendment dealing with the matter. I expressed concern in Committee that one does not want a position whereby the authority is in any way fettering its discretion, which could subject it to judicial review. I make no apology for repeating that the FSA is a statutory authority and the Takeover Panel, while it has many advantages, is not. It is inappropriate to insert into the Bill the word "request", which appears in the Opposition amendment, so that the authority can deal with matters only at the request of the panel, because the FSA is accountable and responsible at the end of the day.

Given the view expressed by everyone in this House about the value of the Takeover Panel, I have no fears about the FSA wading in during the course of a bid when the panel with its 30 years' experience is already there. We are to have a new regime and it is important to devise a convention, concordat or agreement—I do not know the appropriate word—to ensure that the excellent practice, the value of which we have all seen, continues and that there is deference by the authority, as it were, to the panel with all its experience. But we must not write this into the Bill when we have no control over the composition and procedures of the Takeover Panel, or anything else to do with that body. Let us ensure that the authority that is set up under the Bill devises codes of practice or concordats with the Takeover Panel.

My Lords, in our debates on this particular subject we tend to lose sight of the achievements of the Takeover Panel. The noble Lord, Lord Borrie, and other noble Lords have referred to the achievements of the panel. Its strengths which are now attacked by the government amendment are twofold. The first, which I describe with some reluctance since I qualified as a lawyer, is that the panel proceeds without the advocacy of lawyers. Secondly, the panel has a code of conduct which, unlike statutory regulation that people seek to get round, everyone feels honour bound to try to observe. As a result, under the chairmanship of the noble and learned Lord, Lord Shawcross, and successive chairmen the Take-over Panel has been made up of experienced businessmen who come to decisions which have been challenged in the courts on only two occasions. As the noble and learned Lord, Lord Donaldson, said, on those occasions the Law Lords dealt with the matter briefly, effectively and sensibly. Otherwise, the Takeover Panel has resolved a great number of issues.

The government amendment would destroy the very virtues which have made the Takeover Panel so effective. It would give rise to the involvement of lawyers, injunctions and a whole variety of matters which have been avoided in the past. My noble friend's amendment enables the panel, as far as possible, to proceed effectively in the way that it has done in the past. The panel comprises distinguished and experienced City men and women who know what is going on and can ensure that there is fairness and avoid litigation and all the costs that that involves. I hope noble Lords accept my noble friend's amendment and recognise the weaknesses in the government amendment which invites the trouble that so far we have managed to avoid.

My Lords, I merely wish to add one reminder to your Lordships in considering the present situation. A takeover battle is not like a game of chess; it is a game of tennis. One cannot have the umpire on the centre court ringing up for a second opinion. It is necessary to have an authority during a takeover battle. No one seeks to deny the FSA the final word, in the way that the noble and learned Lord, Lord Donaldson, said could happen. But if the FSA is to be given the final word in a takeover battle when the panel is already involved the result is bound to be chaos and the thing will not work.

My Lords, I rise briefly to support Amendment No. 42. It appeared that the Minister sought to argue that, on the basis of the new clause, the final decision would not rest with the authority. It would. It is only during the course of an offer that its activities are constrained. I said at Report stage it was a pity that noble Lords had not received a fuller explanation of the thinking of the Government and the authority on this matter at an earlier stage so that noble Lords could avoid having to deal with it at the last minute. When I said that the matter had been under discussion for a long time the noble Lord told me that the panel had raised its concerns only recently. I am advised by the panel that it first made known its concerns to the Treasury and the FSA as long ago as March 1998. It is better to have before us the working paper as to the nature of the discussions between the Treasury, the authority and panel, but it is still in an unformulated state.

The noble Lord, Lord Borrie, again emphasised that the final decision on this issue should rest with the authority, not a non-statutory body like the panel. That is exactly what new Clause 42 does.

My Lords, I apologise for interrupting the noble Lord. If I did say that I did not mean that the authority should have the final decision. I meant that the matter should not be dealt with on the face of the Bill as the noble Lord suggested, for the reasons that I sought to elaborate, but that, instead, the result he sought could be achieved by agreement between the statutory and non-statutory bodies.

My Lords, I am grateful to the noble Lord for that explanation of his argument. It would be helpful if there was an agreement between the parties that the authority would not exercise its powers during the course of an offer. That would not remove its final responsibility. However, no undertaking has been received from the authority, nor is there an assurance from the Government at this stage, that such a self-denying ordinance is in prospect. Therefore, I hope that the House accepts the very powerful case made by the noble and learned Lord, Lord Donaldson, that on practical grounds we should follow the course suggested in Amendment No. 42.

My Lords, procedurally we are debating Amendment No. 41 as an amendment to Amendment No. 40. Therefore, on behalf of the Government Front Bench I shall reply to Amendment No. 41 as an amendment to Amendment No. 40. It will then be open to the noble Lord to decide what to do about that amendment and, in due course, Amendment No. 42. Perhaps I may first put to rest the mind of the noble Lord, Lord Forsyth. The noble Lord believes that there is something sinister about the reference to the Treasury. If he looks back at the legislation for which he was responsible he will discover that it was always called "the Treasury". The Treasury is defined in the Interpretation Act as "the Lords Commissioners of the Treasury". The Lords Commissioners include the Prime Minister and the Chancellor but not any Treasury officials. I am sure that if necessary the noble Lord, Lord Renton, can convince his noble friend of that.

My first duty is to refer to Amendment No. 41 as an amendment to Amendment No. 40. I shall in due course refer to Amendment No. 42 which we have been told is to be pressed to a Division. Finally, I seek to persuade your Lordships that Amendment No. 40, with or without Amendment No. 41, is worthy of the support of the House.

Amendment No. 41 would provide the additional words,

"one or more specified rules or notes in" [the code].

I do not believe that that adds anything. The new clause already allows the FSA to include the provision that behaviour conforming to the City code does not amount to market abuse in specified circumstances. That will allow the FSA to state that behaviour of a kind specified in rule X and/or rule Y does not constitute market abuse. I believe that that covers the point. I do not feel strongly about it except that I am not sure of the status of notes in the code and whether they are part of it or are simply good practice. In that case the amendment would be objectionable. As I have said, I do not feel very strongly about it.

I feel extremely strongly about Amendment No. 42. That would not give the FSA any discretion at all. It would provide that it could not take any action during a bid situation, using any of the powers under any part of the Act—not just market abuse powers, but powers, for example, to take action against authorised persons because of fitness and "properness" issues except with the consent of the panel. That goes much further than anything we have had before and much further than anything that noble Lords have produced in amendments. It provides a statutory carve-out for a non-statutory body. That cannot be acceptable.

As regards Amendment No. 40, there have been some very useful and valuable contributions to the debate. I refer to that of the noble and learned Lord, Lord Donaldson. He asked for a safety valve. Our amendment provides the kind of safety valve that he described. As he said, it would not prejudice the next round. The issue of whether there had been a breach of the City code in the context of the safe harbour, which the amendment provides, will ultimately be a matter for the tribunal and the courts. We would expect the issue to arise rarely, but when it does, as is the case when exchange rules are breached, it will be for the tribunal to decide.

My Lords, I supported Amendment No. 40. Although support for Amendment No. 42 has been attributed to me, I believe that all that is necessary could be achieved under Amendment No. 40.

My Lords, I am most grateful to the noble and learned Lord. His name has been taken in vain by a number of speakers on the Benches opposite in the false assumption that he was supporting them.

As regards the basic issue of gatekeepers and safe harbours, I believe that what the noble Lord, Lord Newby, wants, and I am sure that what we want, is a safe harbour and not a gatekeeper. I believe that we agree on that. The problem with Amendment No. 63, to which the noble Lord put his name, is that it lets the gatekeeper into the safe harbour through a back route. Perhaps I am going too far ahead in the Marshalled List. The point is that our Amendment No. 40, for which I am delighted to have the support of the noble and learned Lord, Lord Donaldson, preserves the distinction. I entirely understand this dislike of the noble Lord, Lord Newby, for the gatekeeper role, and I share it. Inserting words of the kind suggested into subsection (4), as suggested in Amendment No. 41, would give the panel a quasi-gatekeeper role. The FSA would be unable to act unless it consulted the panel. In a case where it disagreed, it would be the panel's view which prevailed. That could be the case whether or not a bid was in process.

The only other substantive point made by noble Lords is the argument that somehow the role of the FSA in Amendment No. 40 could bring a takeover bid to a halt or enable it to be halted for undesirable reasons. I believe that that has now been fully answered by the analogy with the courts which the noble and learned Lord, Lord Donaldson, gave. An injunction would be against abuse and not against the continuaton of the takeover. The fears which have been expressed by the Takeover Panel are entirely unjustified. There is nothing stopping the panel taking instant decisions. If judicial review proceedings are brought, I cannot see what difference that can make to the process of the bid. The issue is only whether or not market abuse has occurred. That would not call a halt to the bid. There is no conceivable reason why it should.

I repeat the point that I was asked to make earlier on, whether "in conformity with the City code" in our amendment means "as applied by the panel". The answer is "yes" in the sense that the City code is the code which is drafted and applied by the panel. There can be no other answer. If I am wrong and it can be shown that I am wrong, my honourable and right honourable friends in another place will look at that issue again. I cannot see how in commonsense language that is not the case.

My objection in principle to Amendment No. 42, which is the worst of all the amendments before us, is to the suggestion that it is entirely open to a non-statutory body, the Takeover Panel, to determine on a case-by-case basis, without any responsibility towards tribunals or the courts, what is or what is not market abuse. The market abuse procedures which The market abuse procedures which have been accepted by this House as being the right way to extend the powers of financial services regulations would be shot through if it were possible for a non-statutory, non-accountable body to determine how it should be interpreted on a case-by-case basis. Since the fears expressed by noble Lords opposite and by the Takeover Panel have not been substantiated, I ask your Lordships to accept Amendment No. 40 and I ask the noble Lord, Lord Saatchi, to withdraw Amendment No. 41.

My Lords, I thank the Minister for his reply. As regards Amendment No. 42, the Minister has made his position absolutely clear. When the moment comes to deal with it, the Opposition will move the amendment and test the opinion of the House. In the circumstances we shall withdraw Amendment No. 41.

As regards Amendment No. 40, it is essential that the Minster adds at the end of the expression "with the City Code" the words "as applied by the Takeover Panel" to make it absolutely clear that, in any particular set of circumstances, it is the interpretation of the code by the panel that is covered by the safe harbour. Any other approach would mean that, in future, nobody involved in a takeover bid would have any confidence in the guidance given by the Takeover Panel.

Therefore, if we are to support the amendment, what we are seeking is nothing less than an express undertaking by the Minister to your Lordships that in another place the expression,

"as applied by the Takeover Panel"

will be added after the expression, "with the City Code". If he is not prepared to give that undertaking, we shall oppose Amendment No. 40. I beg leave to withdraw Amendment No. 41.