CITY AND SUBURBAN
Rough justice in a City with more laws than order
CHRISTOPHER FILDES
The City is now trying competitive forms of justice, and the forms of justice are trying the City. The trials show that there is room for improvement.
We can see the Mark One standard model, with judge and jury, as applied to the business of Lloyd's of London. Then there is the inquisitorial model, with the Department of Trade and Industry's Chosen inspectors putting the bankers and brokers of County and National Westmins- ter to the question. After the inspectors come the Bank of England, with its powers to rule whether bankers are fit and proper for their jobs, and The Securities Associa- tion (TSA), with its own powers of disci- pline in the stock markets. The powers and the rule books of TSA derive from those of the Securities and Investments Board, the City's regulator in chief — but the SIB is now in the process of pigeonholing its rule-book (if so vast a pigeon can be Imagined) and starting again from first Principles. Half a dozen different and overlapping Acts of Parliament stand be- hind these models. More laws than order.
The Mark One model fell down on the first test, which is that justice delayed is Justice denied. It hinged on facts which first came to light in 1982. The case went on for weeks, but by order of the judge could not be reported. Finally a number of Charges were dropped, and on the others, both men were found not guilty. One of them, Ian Postgate, said afterwards: 'It's been a long time. It's been seven years — longer, I think, than anyone should have to bear.'
, The next test for this model will be Guinness' — the prosecutions which fol- low. Guinness's bid for Distillers four years ago. They will finally come to trial next Year, and are likely to take months. The Present plan, on which the judge will rule next month, is to try the defendants in two batches. If so, the first trials will probably not be reported, for fear of prejudicing the second. Already some important prelimin- ary hearings have gone unreported, at no Wish of the defence's. Individual defen- dants now face seven-figure bills.
There was a DTI inquiry into the Guin- ness affair, but we do not know what it found, for its report will not be published until some time after the trials are over. The DTI is the slowest of publishers, its normal gestation period is longer than an elephant's. The Companies Act provides that these inquiries may be ordered on th, suspicion of misconduct or the withholding of information from shareholders. Reports which grow dusty in Whitehall pending trays are an odd way to keep shareholders informed.
County was an exception. The inspectors called in December, their report was out by July. It justifies beyond any doubt the decision to order an inquiry, for it makes plain that there was serious misconduct, which the National Westminster's own inquiry failed to disclose to shareholders or anybody else. Heads have now rolled.
That spectacle has triggered off defence mechanisms in the City. The report's critics take speed as evidence of haste. They can find bits where they know better — an alibi or two which the inspectors have accepted but the local Hercule Poirots doubt. They complain that the inspectors judge by standards which they do not define. They say that those who are judged do not have a sufficient chance to see the evidence against them.
The point missed in all this is that the inspectors' powers end when they sign their report. Their conclusions are not binding on anyone. They cannot punish. That may be for the courts, or, within the City, for its own authorities, with their delegated powers deriving from various laws. The Bank of England's actions show that in at least one case it has reached a different conclusion from the inspectors. The Bank can now pronounce whether a banker is 'fit and proper' — not morally, but in terms of his capacity to do his job. Its findings are subject to appeal, first within the Bank itself, and then to a tribunal appointed by the Lord Chancellor and the Chancellor of the Exchequer. The critics still think this rough justice. The Bank could reply that its statutory duty is to keep the banking system safe and sound, that bankers are in a position of trust and should be judged accordingly, and that those who do not like it should take up some less rigorous way of life, like estate agency. That seems right, but the powers are new, and their use will be watched.
Newer still is the style of the Securities and Investment Board, under its high- minded chairman David Walker. He now proposes to lay down ten principles of fair and honest dealing. From these will follow a set of plain-language rules which TSA and the other regulatory bodies will have to adopt. After that they can write their own rules for their own areas of business. Mr Walker's point is that people at the top of the City cannot necessarily be expected to know a fat rule-book inside out, but they ought to know and enforce what is fair and honest. If they do not, they might not be fit and proper, and would be treated accor- dingly — and publicly. Mr Walker could be said to favour embarrassment, especially when it is well deserved.
What is to be made of all this tangle of law and regulation? First, that the criminal law is still ineffective in bringing justice to the City. For all the reforms and efforts of recent years, it appears painfully slow, clumsy, secretive, confusing and in some ways unfair. The whole City hums of scandals in which many millions of pounds have been spirited away but no one has been brought to book. Lord Roskill's committee recommended that complex fraud trials should dispense with a jury and instead be heard before expert assessors. Should a man risk being sent to prison on the verdict of accountants? Only, perhaps, at his own option. Defendants should have the right to choose between trial before Lord Roskill's assessors and trial by jury.
Next, that the DTI inquiry in its present form will not do. It serves two contradic- tory purposes. If it is meant to elicit evidence for possible subsequent prosecu- tions, then it should, subject to proper safeguards, be a branch of police powers. If it is meant to disclose information to which shareholders are entitled, then it cannot, within a fixed time, be published.
Next, that justice within the City should be swift and, as far as possible, public. David Walker's attempt to police the City, not by mimicking Whitehall's draughtsmen or outdoing its bureuacracy, but by starting from principles which decent people recog- nise is the right approach. Over County, we have seen transparently decent people make fatal mistakes because they have asked the wrong question, the rule-book question. No one thinks the City above the law, but it needs order too.
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