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Banking Bill

I am grateful to the noble Baroness for moving the amendment but I assure her that normal service on this side of the Committee is being resumed and therefore I cannot accept it. However, there is a congruence of view between us that this is a very difficult area and we need to think about the issues very carefully. In domestic law, the transfer of foreign property will be recognised as effective as it is a transfer authorised by primary legislation. But, as we discussed in the debate on extending the special resolution regime to foreign banks, the critical question is whether the transfer of foreign property will be recognised as valid under foreign legal regimes. If foreign courts will not recognise the transfer, it may not be practically effective as, for example, an overseas service provider could cease to provide services and the transferee would have no means to compel their provision because no claim would be found to exist under the foreign legal system in question. Clause 39 makes provision to ensure that transfers of foreign property are recognised as effective to the greatest possible extent, where this is not the case simply by virtue of the property transfer instrument. I understand the nature of the amendment and the concerns that the noble Baroness expressed in arguing for it. However, it provides that the Bank of England must ensure that a transferee is not adversely affected if a transfer of foreign property is not effective. I, of course, agree with her that steps must be taken to ensure that the transfer of foreign property is effective in all cases where we can achieve that. However, she was absolutely right to indicate that I might have reservations to exposing the Bank of England to the liability of ensuring that no transferee suffers any disadvantage in such circumstances. The liability that this would impose is likely to be uncertain and may be unquantifiable in any given case. Such uncertainty would give rise to complex and costly litigation. Of course, the Bank will take all practicable steps to ensure that a transfer of foreign property is effective. Clause 39 goes a long way to ensuring that. It provides that an obligation may be imposed on the transferor to take steps to ensure the effectiveness of the transfer under a foreign legal regime. These obligations are enforceable as if created by contract between the transferor and the transferee. Because the obligation is enforceable as a contract, any person who is unwilling to comply with it must consider whether the transferee would be able to bring a claim for substantial damages should non-compliance prejudice the resolution and give rise to economic loss. Other contractual remedies would also be potentially available to compel compliance with the obligation, such as an interim injunction and an order for specific performance. These incentives enhance the likelihood of a successful operation. It is the Government’s view that Clause 39 strikes the right balance, so I hope the noble Baroness feels able to withdraw her amendment. I recognise that some of her amendments have been probing. She has indicated that this is a very difficult area, and we have certainly given substantial consideration to the clause and why it is drafted as it is. She will appreciate that the Government cannot accept an amendment that would put the Bank into a very difficult position of potentially unquantifiable liabilities, which might involve very substantial costs. Given that uncertainty, I ask the noble Baroness to realise that the Government have not been at all blasé about this issue—very far from it. We recognise how difficult this is with regard to foreign property, and we have worked hard regarding this clause; but we could not have the provision diluted to the extent that her amendment would undoubtedly achieve, with deleterious effects on the operation. That is why I ask her to consider withdrawing her amendment.