National Security and Investment Bill

Debate between Baroness Bowles of Berkhamsted and Lord Hodgson of Astley Abbotts

Committee stage
Tuesday 16th March 2021 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, as my noble friend Lady Noakes said, Amendment 67 deals with Clause 18 on the voluntary notification procedure. I entirely support what she has said and her amendment. Like her amendment, Amendment 67 is to deal with no man’s land, but it adds a further wrinkle to no man’s land beyond that which she covered in her remarks. I am grateful for the support from the noble Lords, Lord Clement-Jones and Lord Bilimoria, and I have been reliant on the expertise of the Law Society for the detailed drafting.

As I say, this amendment is concerned with voluntary notification procedures. The objective behind the establishment of voluntary notification procedures seems entirely praiseworthy in that it can speed up the investment or divestment process for those involved by seeking in advance a decision by the Government on whether the proposed action will be subject to a call-in notice. If the Secretary of State decides to issue a call-in notice, the clock starts running on the 30-day period for initial assessment.

So far so good, but the Bill as drafted is not clear —as my noble friend made clear—on the time the Secretary of State has in which to decide, following a voluntary notice, whether he or she should issue a call- in notice. The only guide we have is under Clause 18(5):

“As soon as reasonably practicable after receiving the voluntary notice, the Secretary of State must decide”


and so on. This does not give any clear idea of how elongated this process may be. In particular, the use of the word “practicable” is rather strange—practicable for whom and in what circumstances? The solution to this is to redraft the clause so that unless the Secretary of State responds to the voluntary notification, it is deemed to have been accepted. That triggers the 30 working day period, so gives an end date by which the company or the investor will achieve clarity.

Amendment 67 also aims to correct a procedural anomaly in the current drafting, which touches on a point that was the subject of a discussion between myself and my noble friend Lord Lansley on the first day in Committee. I think this point goes beyond where my noble friend’s amendment went. It is as follows: the Secretary of State has this 30 working day review period to decide whether to issue a call-in notice or notify the parties that no further action will be taken, but the drafting of Clause 18(9) appears to muddy that clarity when it says that the review period

“does not affect the operation of the time limits in subsections (2) and (4)”

of Clause 2. This was the point raised by my noble friend on our first day. This would appear to mean that the Secretary of State could fail to make a decision within the 30 working days but would still have up to six months from becoming aware of the trigger or five years from the date of the trigger to serve a call-in notice. The same difficulty applies to Clause 18(8)(b), which allows the Secretary of State to inform the parties after considering a voluntary notification that no further action will be taken. Again, it seems overridden by the provisions of Clause 2(2), with the six months or five-year period allowing for further reflection by the Secretary of State.

Amendment 67 aims to cut through this Gordian knot by requiring the Secretary of State to make a decision on the voluntary notification by the end of the 30-working day period, and the absence of such a decision would be taken as approval. Objectively, that is to give clarity and certainty to investors, as we are trying to do throughout the Bill. Without an amendment such as this, the whole purpose and the advantages of the voluntary notification procedure could be undermined.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I have added my name to the amendment in the name of the noble Baroness, Lady Noakes, and I support everything that she said. I also support what I might call the companion Amendment 67 from the noble Lord, Lord Hodgson, which has been signed by my noble friend Lord Clement-Jones. I also agree with what was said there.

I favour mechanisms to give certainty, and the way the Bill operates at the moment means that, absent a call-in or other response, a business is left in no man’s land—as the noble Baroness, Lady Noakes, called it. Indeed, the noble Lord, Lord Hodgson, pointed out that even if you escape from no man’s land, there is a piece of elastic that pings you back in again for up to five years.

I realise that with a new system the Government may not know how well it will operate, but many noble Lords have repeatedly expressed concern, and I am coming from the standpoint that it is totally unreasonable to push all the uncertainty on to industry.

We have operated without these measures for a long time—maybe for too long—but to switch to draconian uncertainty overnight does not seem fair. There needs to be a point at which no response is an all clear, even though that itself is unsatisfactory compared with the positive receipt of an all clear notice in your hand.

I have nothing else to add, but I support the amendments. The Government need to take notice and to make this whole process more workable for industry.

Financial Services Bill

Debate between Baroness Bowles of Berkhamsted and Lord Hodgson of Astley Abbotts

Committee stage
Monday 8th March 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, in moving this amendment, I shall make comments that reflect in part on EU relations and therefore on the other two amendments in this group.

As the explanatory statement says, this is a probing amendment in order to discuss equivalence determinations and processes and the role of reciprocity. The amendment states:

“The Treasury may not make an equivalence decision unless it has determined that a third country has equivalent legal and supervisory standards, and it may not make a determination based only on agreement to make reciprocal determinations.”


Broadly speaking, the first part of the amendment restates the usual equivalence requirement, and in the second part I am hoping that the Minister can explain how equivalence through trade agreements or reciprocal equivalence agreements will work. Will those mechanisms be allowed to dilute the standard set through the usual requirement?

We have heard a lot about trying to get equivalence with the EU. My position has always been that it was a remote possibility without rule taking, or dynamic alignment as it has become called. It also seems to me that the way in which the UK wants to operate, with the regulator making rules that can be flexible, makes it more difficult, or even impossible, for the EU, and maybe some other jurisdictions, to agree equivalence. That is because it ends up not being about rules—because in the UK they will be able to flex and vary—but about supervisory equivalence, or, as the noble Viscount, Lord Trenchard, called it, the outcomes. That is more subjective, a matter of opinion and confidence in supervisors rather than an objective analysis of rules.

This reasoning also lies behind what some noble Lords may see as my obsession with getting more information out of supervisors and for regular independent reviews. How else are we, let alone another jurisdiction, going to know what really goes on? Even less demanding jurisdictions than the EU, such as Australia, once they have set up independent scrutiny of their own regulators, may begin to wonder what they know about ours.

Our regulators will say that they have good and friendly relationships with other regulators and that they are respected and so on—all the presentations that they have repeatedly given to committees about why there would be equivalence with the EU in the end. They have been wrong so far, and I am not holding my breath. The statutory instruments currently underpinning legislation will be progressively taken away. I am sure that the EU will read these debates where the Minister has repeatedly stated how FSMA will enable rules to change quickly and be made bespoke and that is why Parliament cannot be let in too much. One hopes that means that rules will change to close gaps and adapt to new types of business, but there is nothing anywhere that says that. It can easily be interpreted as an intention to ease here and there, just like the tailor if we eat a little too much.

I am not trying to be awkward. I have sat in discussions with the European Commission at a time when my committee was concerned that the EU was being too rigid on equivalence. I have had to explain that equivalence was sometimes—in fact, quite often—of mutual benefit. That instinct to have things fixed and controlled between member states ran through every piece of legislation in one never-ending grind, as elaborated correctly by the noble Viscount, Lord Trenchard, on the previous amendment, although we may come from opposite positions. Such an instinct is stronger in financial services than in any other sector because of the philosophical commitment to the euro, whether or not that is relevant. Yet, somehow, it is still hoped that the EU can work out how to deal with this squidgy balloon that defines UK financial services rules. All I am saying is that we have to recognise that if we want the squidgy balloon way and the outcomes way, there are consequences when it comes to equivalence decisions.

That is looking at it from the outside. The other side of it is the inside. What are our rules and supervisory standards that other countries will have to be equivalent to? How is that judgment to be made? Will it be a rule book by rule book comparison or will it really be mutual recognition of supervisors, and if so, based on what? How will that assessment be done? Will HMT agree reciprocal equivalence with anyone when it sees an opportunity for export of financial services and assumes that not much will be incoming back to the UK, or will UK standards be lowered to match those of incoming equivalent businesses from the third country? Will UK firms be allowed to drop standards when operating overseas? To come back to my amendment, will the Government allow weaker standards, through trade agreements and reciprocal equivalence agreements, and how will consumers and financial stability be protected?

The example of software being allowed for capital is a convenient one, although there are probably bigger things. I kept that out of EU legislation but the UK could not hold the line on that this time round. The US has also allowed it. Where does that put banking equivalence for us in relation to the US and, should it ever be on offer, the EU? What top-up supervision or other requirements will go on?

It will be clear that I am less obsessed by getting reports on the EU situation as required by Amendments 100 and 105—although I will happily read them and wonder what is new. I am more obsessed with what standard is really being required by the UK of other jurisdictions to permit equivalence by any route and, in turn, how that will reflect back into our own supervisory standards. I beg to move.

[Lord Hodgson of Astley Abbotts (Con) [V]]

My Lords, I have Amendment 105 in this group, which is also a probing amendment, and seeks to insert a new clause in the Bill about regulatory co-operation with the EU. In her Amendment 90 the noble Baroness, Lady Bowles, called for actions. Amendment 105, as the explanatory statement makes clear, is a reporting mechanism to report on progress towards or completion of an MoU with the EU on regular co-operation measures, which were envisaged under the trade and co-operation agreement between the UK and EU as regards financial services. The amendment flows from my chairmanship of the Secondary Legislation Scrutiny Committee of your Lordships’ House.

Last autumn, the committee considered a number of statutory instruments, which have granted equivalence to oversight and regulatory arrangements in the EU in the area of financial services. Mostly they were laid by the Treasury but some were laid by another departments. It was not clear to our committee whether the SIs were all part of a potential agreement with the EU or whether they were unilateral individual decisions. We wrote to John Glen, the Economic Secretary to the Treasury, as follows:

“Equivalence in relation to the regulation of financial services is an important aspect of our future relationship with the EU. In several of the instruments that we have considered, the UK appears to have granted equivalence indefinitely, while the EU has not yet completed its assessment of the UK’s equivalence (for example in relation to the regulatory regime for auditors) or has granted only time-limited equivalence (for example limited to 18 months in the case of the supervisory arrangements for central counterparties).”


Against this background, we asked for further and better particulars on three points:

“A list of the equivalence decisions made by the UK Government in the different areas of financial services regulation. Whether the EU has reciprocated and granted equivalence to the UK and its regulatory arrangements in these areas. Whether equivalence by the UK and EU has been granted indefinitely or is time limited.”


The reply on 7 January, which I referred to in my speech at Second Reading, was not a model of clarity and precision. Phrases like

“a package of equivalence decisions”

and “the majority of decisions” do not help critical analysis. The correspondence between the noble Lord, Lord Butler, and my noble friend Lord Agnew at Second Reading, which followed this and circulated among all who participated in that debate, seemed to follow the same generalist approach.

However, John Glen’s letter did make one thing clear, that

“there are no decisions made by the EU that have not been reciprocated by the UK.”

As such, to date, it has been a one-way street. That is not necessarily a bad thing, but Parliament and the country are entitled to, and should, know about the development of our relationship with this most significant and geographically proximate market in a sector of particular importance to the United Kingdom—hence my tabling this amendment.

Corporate Insolvency and Governance Bill

Debate between Baroness Bowles of Berkhamsted and Lord Hodgson of Astley Abbotts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 16th June 2020 Lords Chamber

[Lord Hodgson of Astley Abbotts]

My Lords, I have Amendment 129 in this group. It seeks to equalise the different levels of protection afforded to firms in trouble under this legislation. It has been brought to my attention by a firm of solicitors that specialises in insolvency. The two critical dates in the legislation are 27 April, after which general protection is available; and 1 March, just under two months earlier, after which protection is afforded, but only if a statutory demand for payment has been made.

However, a statutory demand is not the only way that a company can be caused to fail. It is possible to go for a default judgment in a county court or a liability order in the magistrates’ court and proceed directly to a winding-up. Firms that are subject to either of these other two procedures do not benefit from protection from 1 March, but from 27 April only.

Firms are able to object and to fight these proceedings but, from 23 March, the country was in lockdown. Understandably, courts have found it more difficult to inform defendants about cases brought against them and, in many cases, smaller companies—where the proprietor is running the business almost on their own —may have been involved in self-isolation. They are therefore unable to access proper legal advice to protect their position. My amendment seeks merely to extend protection for these cases, particularly those affecting small companies, from 27 April to 23 March—the date on which lockdown began and the inequality of legal arms may have commenced.

[Baroness Bowles of Berkhamsted [V]]

My Lords, I can be brief because my amendment in this group contains a separated half of the GB-Northern Ireland pair of amendments relating to small businesses that I spoke about in the previous group, so I do not need to explain those again, and in the interests of time I will forgo speaking on anything else.

Financial Services (Implementation of Legislation) Bill [HL]

Debate between Baroness Bowles of Berkhamsted and Lord Hodgson of Astley Abbotts

Report stage (Hansard): House of Lords
Tuesday 29th January 2019 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

I shall speak briefly in support of the Government and the clause as drafted, primarily because of the points just made by the noble Lord, Lord Sharkey. When I went to the Oxford English Dictionary to check, I got the results he has just described, but it seems to me that the Government’s choice of word is better than the one now being advanced by the noble Lords, Lord Sharkey and Lord Davies. I urge my noble friend to be of good courage and stick with it.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I thank the Minister for a good set of amendments that respond across the piece to concerns that were raised in Committee. I shall probe a little further on what can and cannot be done for the purpose of clarification.

Clause 1(1) states that this is about converting,

“the provisions, or any of the provisions, of any specified EU financial services legislation”.

So the option is still there not to convert it or to convert only parts of it. At an earlier stage, I suggested that that could be adapted. I noticed that when the Minister spoke, he used the word “files” as if the files were all transposed at once, but we must recognise that some things may not be transposed. I believe that is the intention. Here, I should give my usual reminder to the House of my interests as set out in the register, in particular as a director of the London Stock Exchange. In the first set of EU legislation—that which is completed but not yet active—you could still omit some or all of it and do an EU-type adaptation, but you could not adapt it if you chose to convert it. It has got to be relatively straightforward.

For the not yet completed, there is greater flexibility. I have a few little tests of my own to see whether this would be allowed. First, what if you wanted to keep a current provision instead of having a new one? That is quite simple: you probably just leave it out and do not convert it, which falls within what is allowed. If you want to reflect more closely an international standard—let us say that the EU has embellished it in some way—could you do that? I think you probably could because you are still going back to the originating international standard, but it would be interesting to hear what the Minister has to say about that. What if you want to reflect more closely UK market data because it has been calibrated on EU data, by then absent us? I expect most of that happens in technical standards, but it would be interesting to have the Minister’s view on whether the Government could make such a change. I think it would be allowable.

What about aligning with alternative provisions made in other major international markets? That would be departing from alignment with the EU into alignment with somewhere else. Let us say that you wanted to align tick sizes with Hong Kong or the US, rather than staying with the EU regime. Would that be allowed? I think that is quite a marginal issue. The Minister does not have to use that particular example, but it would be interesting to know where that would lie in the tests. If you want to avoid disrupting the functioning of UK markets—the sort of comment you often hear—you are probably left with the option of not converting that element.

My final test is, what happens about proportionality for SMEs and SME markets? I am not sure how that would work out: if the legislation has not included proportionality, is it reasonable and within scope to put some proportionality in? That measure is probably relatively popular from a UK perspective, so it would be nice to know whether that could be covered.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

My Lords, I thank the Minister for listening to everything said in Committee. There really is little else to say other than that he has taken on board three of my amendments. I am very pleased to see them there. I accept that he has cut down the timescale in the pre-legislative report, if I can call it that, to one month from three months because it might be necessary to do things more rapidly.

If I can pick out a theme from the several speeches I made before, it is that Parliament should not be surprised by what the Government intend to do and do. This suite of amendments, including the more frequent reporting suggested by the noble Lord, Lord Hodgson, makes it very clear: we are told before and afterwards. In fact, we might be told before twice by the two reports—the generic one, if I might put it that way, and the precise one. We will also know where things are so that the diligent individual, possibly when dealing with things in the Moses Room in Grand Committee, will not have to search around wondering where things have or have not gone.

I thank the Minister. He has served me and us very well in this.

[Lord Hodgson of Astley Abbotts]

My Lords, I add my thanks to my noble friend and his officials for Amendment 5, which in large measure answers the points I tried to raise in Committee. I am extremely grateful to him and to the Government.

An epochal event such as Brexit will obviously require a certain degree of statutory flexibility. That is why I support the principle of the Bill, but that does not mean that the powers under it should be exercised below the radar. I am therefore extremely grateful to my noble friend for having set the reporting periods, when he made it clear that it is not just a question of reporting: it is a question of why it is being used, as well as that it has been used. That is important to maintain confidence.