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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Fleurose, R (on the application of) v Securities & Futures Authority Ltd & Anor [2001] EWHC Admin 292 (26th April, 2001)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2001/292.html
Cite as: [2001] ACD 71, [2001] EWHC 292 (Admin), [2001] 2 All ER (Comm) 481, [2001] IRLR 764, [2001] EWHC Admin 292

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QUEEN v. SECURITIES AND FUTURES AUTHORITY LIMITED. DISCIPLINARY APPEAL TRIBUNAL OF SECURITIES AND FUTURES AUTHORITY LIMITED. EX PARTE BERTRAND FLEUROSE [2001] EWHC Admin 292 (26th April, 2001)

Case No:CO/988/2000.

Neutral Citation Number: [2001] EWHC Admin 292

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT.

Royal Courts of Justice

Strand, London, WC2A 2LL

Thursday 26th April 2001.

B e f o r e :

THE HON MR JUSTICE MORISON


THE QUEEN



- v -



THE SECURITIES AND FUTURES AUTHORITY LIMITED.

THE DISCIPLINARY APPEAL TRIBUNAL OF THE SECURITIES AND FUTURES AUTHORITY LIMITED.

EX PARTE

BERTRAND FLEUROSE.

First Respondent.

Second Respondent.

Applicant.

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Mr Anthony Speaight Q.C. leading Mr John Passmore of counsel, (instructed through the Bar Pro Bono U) , appeared on the Applicant's behalf.

Mr Richard Gordon Q.C. of counsel (instructed by Allen & Overy appeared on the First and Second Respondent's behalf.

- - - - - - - - - - - - - - - - - - - - -

(Transcript of the Handed Down Judgment of

Smith Bernal Reporting Limited, 190 Fleet Street

London EC4A 2AG

Tel No: 020 7421 4040, Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

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Judgment

As Approved by the Court

Crown Copyright ©

MR JUSTICE MORISON:

1. This is an application for judicial review of a decision of the Disciplinary Appeal Tribunal established by the Securities and Futures Authority [SFA], which dismissed Mr Fleurose' [the applicant's] appeal against the decision of the SFA Disciplinary Tribunal. The Disciplinary Tribunal had found the applicant guilty of improper conduct as a trader in securities during his employment with JP Morgan Securities Limited [JPM]. He was suspended from acting as `a registered person' for two years and ordered to pay £175,000 towards the costs of the SFA. Both the SFA and the Disciplinary Appeal Tribunal are Respondents.

2. There are two principal grounds for this application: first, that the disciplinary proceedings offended the provisions of the European Convention of Human Rights, and, second, that the decision of the Appeal Tribunal was legally flawed. The first point is, clearly, of some importance, not just to the financial services industry, but also to other disciplinary regimes. Whilst of importance to the parties, the second ground has less, if any, wider significance.

3. I start this judgment with a tribute to both leading counsel, whose arguments have greatly assisted the court. If I may say so, Mr Fleurose, has been given legal representation of the highest order by Mr Speaight QC.

The relevant background facts

4. The applicant, was a Senior Cash Arbitrage Trader employed at the time by JP Morgan Securities Limited [JPM]. It is alleged that on 28 November 1997, with another, his immediate boss, he manipulated the FTSE 100 Index so as to ensure that JPM did not have to make a payment under a binary option. Under the option JPM were obliged to make a payment to the counter-party if both the FTSE 100 Index and the S & P 500 Index were higher at the end of the month than at the beginning. The S & P Index was significantly higher than it had been at its November opening, but by the end of November 28, the last trading day of that month, the FTSE 100 was closer to the `strike level' of 4842.3; that is, the level above which payment would have to be made by JPM. At 4.10 pm, the FTSE 100 stood at 4856.56 points, and at 4.29 pm, 4869.856. The FTSE 100 closes at 4.30 pm and, during the last six seconds of trading, the Index dropped by 38.08 points to below the strike level. The binary option was `out of the money' and JPM relieved of an obligation to pay approximately £475,500.

5. The applicant operated what was called a Trader Front End machine which was linked into the London Stock Exchange Electronic Trading System, which had been introduced into the London stock market for the first time on October 20 1997. The operator could, for example, use the machine to give sell orders at stated prices and a `trade' occurs at the moment when there is a match between the offer and bid price of a given quantity of a given stock. In the eight minutes before the market closed, the applicant launched offers to sell 35000 shares in each of the five companies which head the list of stocks in the FTSE 100, and these offers were entered into the machine in waves. As a result, sales were effected to the value of £11,247,525. Sales in the last six seconds resulted from sell orders which had been entered at prices well below the then market levels. In calculating the Index level, the stocks making up the Index are ranked and weighted by reference to their market capitalisation, and, thus, the higher the rank of the stock the greater the impact upon the Index of any change in those stock values.

6. The reason for the sudden fall in the Index just before close of business was immediately investigated by the London Stock Exchange [LSE], which concluded that it had stemmed from substantial sales by JPM in the cash market during the last ten minutes. JPM carried out their own investigation and acknowledged that the trading activities of its Equity Derivatives Group, of which Mr Fleurose was a member, had breached the provisions of paragraph 2.10 of the Rules of the LSE, which prohibits a member firm, such as JPM, from doing an act or engaging in a course of conduct the sole intention of which was to move the index value. As a result of this breach, JPM were fined £350,000 by the LSE. The applicant was not, at the material time, a member of the LSE, and, therefore, not within the LSE's disciplinary reach.

7.. The regulatory authority, [the first Respondent, the SFA] to whose jurisdiction both the applicant and the manager were subject, commenced disciplinary proceedings against each of them. The cases were heard separately because there was, at that time, no power to conjoin them. The case against the manager was heard by a Disciplinary Tribunal over a period of 13 days between 16 March and 7 April 1999. The applicant gave evidence at that hearing, and, in due course, the Tribunal found that the two charges of misconduct had been proved, and the manager was also found no longer to be a fit and proper person to be registered by the SFA. The Tribunal concluded that the manager's sole intention in ordering these sales to be effected by the applicant was to drive the Index down.

8. Between 12 April and 4 May 1999, the charges against the applicant, which were in similar terms to those against his manager, were tried and he was found guilty of the two charges of misconduct; but the Tribunal refused to declare that he was unfit to retain his registration; and he was suspended and ordered to make a contribution towards the SFA's costs. The charges brought against him were in this form:

"THE SECURITIES AND FUTURES AUTHORITY LIMITED ("SFA") pursuant to Rules 7-60 and 7-61 of SFA's Rules, hereby institutes disciplinary proceedings against Mr Bertrand Fleurose on the grounds that:

A. He has committed the following acts of misconduct:

1) In breach of Principle 1 of the FSA's Statements of Principle, Mr Fleurose failed to observe high standards of integrity and fair dealing in his involvement in the trading activities of the Equity Derivatives Group of J P Morgan Securities Limited on 28th November 1997.

2) In breach of Principle 3 of the FSA's Statements of Principle, Mr Fleurose failed to observe high standards of market conduct in trading for J P Morgan Securities Limited on the London Stock Exchange on 28th November 1997.

B. He has ceased to be fit and proper to be registered by SFA."

There followed 11 pages of a document headed "Summary of Facts" giving extensive details of the case and evidence relied upon.

9. The essence of the case against him was that although he acted on the orders of his manager, he knew the true purpose of what he was doing, and, under both his employment contract and the rules of the SFA it was his responsibility to refuse to carry out instructions which he knew to be unlawful and to refer the issue to the compliance officer.

"His willing co-operation in effecting transactions solely designed to depress the Index and his failure to question his orders or to make any reference to the Compliance Department constituted the misconduct alleged against him."

10. The applicant accepted that it would have been improper for him to effect trades whose sole purpose was to manipulate the Index. His case was that he had no knowledge or suspicion that his manager was manipulating the market and thought that the deals he executed were legitimate deals to unwind a hedge in connection with the binary option. Thus, it was said, he had no knowledge or intent to act unlawfully; he was merely executing his superior's instructions which he had no reason to believe were unlawful.

11. The Tribunal, presided over by a QC sitting with a market man and an independent person, concluded that the applicant had participated in the sales

"in the knowledge that they were intended to depress the market below the strike level of the binary option".

12. In support of their conclusions, the Tribunal relied, amongst other matters, on a statement which the applicant had made very soon after the material events during the course of the LSE investigation. If what he was alleged to have said was said, then his case that he did not know the true purpose of his deals that afternoon became less than credible. Second, they relied on events which had taken place earlier in the afternoon which, as the SFA contended, showed that the applicant knew, at an early stage, of the plan to manipulate the index. Third, they relied upon the evidence of a witness who described how she observed the traders, especially the applicant, to be happy and celebrating at the close. Her evidence was contradicted by the applicant but the Tribunal preferred hers to his and noted that the applicant had taken a close interest in the effect that the sales were having on the index.

"If, as he says, he was simply unwinding a hedge, there would be no reason to follow these sales so closely."

and they rejected his explanation that it was merely "natural curiosity", as unconvincing.

"We are satisfied that, with the knowledge he had acquired earlier in the day, especially at the time of his second telephone conversation with SBC Warburg, Mr Fleurose understood [his manager's] objectives, which were to depress the FTSE to below the strike level of the binary option, if market conditions made this possible. Mr Fleurose was clearly a willing participant. He made no attempt to dissuade [his manager] from pursuing this course; rather, he assisted with enthusiasm. The inevitable consequence was that we found Charges 1 and 2 proved against Mr Fleurose."

13. The Tribunal rejected the third charge that the applicant was no longer a fit and proper person to be registered on the basis that

"...it would have been very difficult for Mr Fleurose to question the instructions he received, especially under pressures of time. It is quite clear that, but for [his manager], the events complained of would not have occurred."

14. For present purposes, it is relevant to note that it was not the applicant's case that he knew that he was being asked to do something which was wrong, and, for one reason or another, either was not in a position to refuse to do what he was told, or to seek guidance from the compliance officer. Second, it was not suggested that the applicant did not know that manipulating the market to depress it below the strike level was improper.

15. The Disciplinary Tribunal's judgments on the charges and sentence dated 29 June and 12 July 1999 were the subject of appeals by both the applicant and the SFA. The applicant appealed his convictions on the two charges against him, and the SFA appealed the decision that the applicant was not unfit to be a registered person. The appeals were heard separately by the Disciplinary Appeal Tribunal. The Applicant's appeal was dismissed on 16 December 1999, and the SFA's appeal was dismissed on 13 March 2000.

The SFA

16. The structure of the SFA is fully and conveniently set out in the witness statement of Mr Nicholas Durlacher, the SFA's then Chairman. The Financial Services Act 1986 [the 1986 Act] created a two tier system of regulation. The Securities and Investment Board Limited [SIB] was the principal body responsible for regulation of the financial services industry. It changed its name in 1997 to the Financial Services Authority [FSA]. The SIB/FSA were responsible for authorising and recognising the second tier authorities, typically, self regulating organisations [SROs] of which the SFA is one. The SROs had front line responsibility for particular sectors of the market. The SFA was created in 1991 as a result of the merger of two other SROs. It has brought into effect various rules which apply to its members by contract and which include rules covering the admission and expulsion of members and their conduct of investment business.

17. No person is allowed by law to carry on investment business in the UK without being either an `authorised person' or an `exempted person'. A member of an SRO is an `authorised person' by virtue of his membership. The SFA exercises its regulatory powers over its members by enforcing rules which conform to the statutory requirements laid down in Schedule 2 to the 1986 Act. It is a requirement of the Act that the rules:

must be such as to secure that its members are fit and proper persons to carry on investment business;

so far as they relate to the admission and expulsion of members are fair and reasonable and provide adequate provision for appeals;

the carrying on of investment business must be such as afford an adequate level of protection for the investing public

18. The SRO must have adequate arrangements in place for effective monitoring and enforcement of compliance with its rules and with the Statement of Principles. That Statement was issued by the SIB on 15 March 1990 under section 47A of the 1986 Act and the Principles

"are intended to form a universal statement of the standard expected".

These Principles were adopted by the SFA. Two of them, in particular, are relevant to this case: Principle 1 "Integrity" which provides that

"A firm should observe high standards of integrity and fair dealing"

and Principle 3 "Market Practice" which provides that

"A firm should observe high standards of market conduct. It should also, to the extent endorsed for the purpose of this Principle, comply with any code or standard as in force from time to time and as it applies to the firm either according to its terms or by rulings made under it."

19. Under SFA rules, the Principles apply directly to registered individuals as well as to "firms". The applicant became bound by them by completing an Application Form for Individual Registration. The Form, which must be fully completed, asks searching questions about the applicant under the heading "Good Reputation and Character". There are various grounds for being an exempted person, including proof of experience and the holding of an appropriate diploma. At the end of the form is a declaration which reads:

"I declare that the information supplied is complete and correct and that I have read and understood SFA's guidance notes on fitness and propriety ...I further declare and agree that in consideration for my admission to the Register(s) I shall, within the scope of my authority and duties within a member firm of SFA, commit no act or omission which places the firm in breach of any rule of SFA for the time being in force and I acknowledge and agree that I shall be fully bound by and subject to the rules of SFA for the time being in force, and as amended from time to time".

20. Thus, it can be seen that no person may lawfully carry on investment business within the UK without being a registered person; and by becoming registered for this purpose every individual is bound by the rules of the SFA, which is the regulatory authority for this sector of the financial services industry. It is a criminal offence for a person to carry on business without registration; it is a disciplinary offence for a registered person to conduct such business in breach of the rules. The manifest purpose of the regulatory regime is to protect the investing public from traders who have either evaded the regulatory system or have failed to carry on their activities in accordance with the rules designed to give this protection.

21. The 1986 Act is being replaced by the Financial Services and Markets Act 2000 [the 2000 Act]. This Act has no direct application to the matters in issue, although both parties have drawn attention to parts of it and what was said during its progress through Parliament. The question of the ambit of rights under the Convention and the Bill's compatibility with it was considered through a process which included a committee taking evidence and listening to submissions from distinguished lawyers and Judges. Amongst them are included Lord Hobhouse, Lord Steyn, Lord Lester and Sir Sydney Kentridge QC. I shall mention the relevance of the 2000 Act at the end of the section on Convention Arguments.

A.The Convention Arguments

22. The applicant's first submission under the Convention is that according to the jurisprudence of the Strasbourg Court, disciplinary proceedings may involve a `criminal charge' within Article 6, and that, principally by reason of the unlimited fines and other penalties that might be imposed, the disciplinary proceedings in question should be classified as determining both `civil rights and obligations' and also `any criminal charge' under Article 6(1). Thus, the applicant was entitled to the protections afforded by Article 6(2) [presumption of innocence] and 6(3). Second, even if the proceedings were not properly to be classified as involving the determination of a `criminal charge', they are so close to criminal proceedings in their nature that the protections afforded by paragraphs (2) and (3) ought to be afforded the applicant under Article 6(1). For the same reason, the applicant is entitled to the protection afforded by Article 7 of the Convention. [I shall call this the `classification argument']

23. Since the arguments under the Convention centred upon Articles 6 and 7, I set out their provisions:

"Article 6.

Right to a fair trial.

1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.

2. Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.

3. Everyone charged with a criminal offence has the following minimum rights:

(a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him;

(b) to have adequate time and facilities for the preparation of his defence;

(c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require;

(d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him;

(e) to have the free assistance of an interpreter if he cannot understand or speak the language used in court."

The applicant's counsel drew attention to the French text but I derived no assistance from it.

Article 7

1. No-one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time when the criminal offence was committed.

2. This Article shall not prejudice the trial and punishment of any person for any act or omission which, at the time when it was committed, was criminal according to the general principles of law recognised by civilised nations.

24. The particular respects in which it is said that the applicant's Convention rights were breached are:

(1) The applicant's privilege against self-incrimination was breached by the use against him of evidence which had been compelled from him. In this respect, the applicant relied upon the use which was made at his disciplinary `trial' of facts which he divulged during the LSE investigation. At one of those interviews, the applicant had admitted that he had seen a colleague selling some futures at a relevant time, and this suggested that he could not have believed that he was simply unwinding a hedge. It also undermined his evidence at `the trial' that he knew nothing of the colleague's sale of futures, and, also, his credibility. Although there is no specific rule which obliged the applicant to answer questions by an LSE investigator, the applicant relied upon Principle 10 which provides that:

"A firm should deal with its regulator in an open and cooperative manner and keep the regulator properly informed of anything concerning the firm which might reasonably be expected to be disclosed to it." [For firm read person].

[The self incrimination argument]

(2) In breach of Article 6(1) and 6(3)(c), the applicant was not afforded, and had no, legal representation before the Disciplinary Appeal Tribunal, although he had been represented by a QC before the Disciplinary Tribunal. [Inequality of Arms argument].

(3) In breach of Article 6(1), 6(3)(a) and Article 7, the charges preferred against the applicant were excessively vague. Breach of the two Principles was much too vague to sustain a charge of a disciplinary offence with severe consequences. [Vagueness of Charges Argument].

25. In response, Mr Gordon QC submitted that:

(1) The disciplinary proceedings brought against the applicant involved the determination of his civil rights and obligations but did not determine a criminal charge and he was not charged with any criminal offence so as to make Article 6(2), 6(3) or Article 7 applicable; but that in any event, no Convention right had been breached.

(2) The applicant was not subject to any compulsion to answer the LSE investigators; and it is significant that no complaint is made about the use of the applicant's evidence given at the Manager's `trial' or the introduction of evidence following his SFA interviews. No argument was raised before the Disciplinary Tribunal to ask that the material from the Stock Exchange inquiry should be excluded from evidence. But even if there were some compulsive powers these were at the lower end of the scale. It is inherent in a regulatory regime that persons should be required to demonstrate their continued suitability to conduct business and their continuing compliance with regulatory requirements. As it was put in the skeleton argument:

"The purpose of maintaining standards of conduct within the regulated community would be frustrated if, having obtained information for the purpose of monitoring compliance with regulatory rules and requirements, the regulatory body was unable to use such information to discipline instances of non-compliance and exclude from the industry persons who no longer satisfy the requirements to be fit and proper."

(3) Although the applicant did not have legal representation on his appeal, Lord Bridge, who presided over the appeal, took steps himself to make sure that

"he is enabled to present whatever points he wants to present as forcefully as they may be presented. If he has a good point to make in his appeal I shall do my best to help him and develop it; if he has not, well then no amount of advocate skill would help him anyway."

In any event, the applicant now has the opportunity before this Court to argue any points which were or might have been argued before the Appeal Tribunal and the applicant has not been prejudiced by any lack of representation or inequality of arms.

(4) In relation to `vagueness of charges' the applicant knew that he would be acting improperly if he had manipulated the market as alleged. It is essential that general standards of conduct are set so that rogue traders are unable to evade their responsibilities through technical `construction' arguments and such general rules are a feature of many systems of professional regulation which are designed to ensure high standards of professional behaviour. In any event, in an area of activity which is dynamic, the regulators need to have rules which can operate in a flexible manner so as to accommodate `new' areas of misbehaviour, as they occur.

The classification argument

26. On behalf of the applicant, Mr Speaight submitted that the SFA and the Disciplinary Appeal Tribunal are bodies susceptible to control by the Courts through the judicial review process, although neither is a statutory body as such. He submitted that both bodies exercise substantial powers derived from statute and were thus amenable to challenges in this manner. So much of this argument was not challenged. I can simply say that I agree with both counsel on this issue and am satisfied that I have jurisdiction to deal with the applicant's notice of application under Order 53.

27. Second, Mr Speaight submitted that the Human Rights Act has retrospective effect by virtue of sections 22(4) and section 7(1)(b). It seems to me that this submission is based on a misreading of the Act. After the Act came into force in October 2000, its provisions applied whenever the act in question took place; that is, both before and after the Act came into effect. The element of retrospectivity on which Mr Speaight relies can only exist after the Act came into force. There is no retrospectivity before that date because the retrospective provision itself had no effect until after that date. The acts complained of in this case all occurred, and the proceedings were issued before October 2000, and the Act does not, therefore, apply. However, for good and sensible reasons both parties wanted the decision to reflect the arguments which had been raised. It is clearly important that the SFA and any new regulatory authority under the 2000 Act know where they stand in relation to the Convention. And even if the Convention had not formally been introduced into English law at the relevant date, individuals who could establish a breach of Convention rights would, in any event, have had access to the Strasbourg Court. By adopting this sensible course, time and money will be saved.

28. It was common ground that Article 6.1 applied to the disciplinary proceedings against the applicant. For the SFA, Mr Gordon QC submitted that the SFA disciplinary process involved a determination of the applicant's "civil rights and obligations" within the meaning given to those words by the Strasbourg Court. Mr Speaight, however, whilst accepting and asserting that Article 6.1 applied, submitted that when properly analysed, in accordance with the jurisprudence of the Strasbourg Court, the disciplinary process could properly be characterised as "criminal".

29. Having regard to the jurisprudence of the Strasbourg Court, are the disciplinary proceedings to be classed as criminal under Article 6?

30. The characteristics of the disciplinary procedure are these. A person is only capable of being disciplined if he or she has become a registered person. The process applies only to those who have `chosen' to be governed by the rules, although all those who wish to trade in securities are effectively obliged to exercise that choice. The disciplinary process involves a `charge' being formulated, what is effectively a process akin to a prosecution with a case being presented against the person charged, or defendant, and a verdict or judgment made as to the guilt of the person. If found to be in breach of the rules of conduct the defendant may face an unlimited fine, disqualification from carrying on business as a trader [or suspension, as here] and an order to pay the whole or part of the costs of the disciplinary proceedings [as here]. The purpose of any punishment imposed is both punitive and deterrent: `pour encourager les autres'. The process, thus, has features which are akin to criminal proceedings .

31. On the other hand, the disciplinary process stems from an individual's particular activities and his or her willingness to become susceptible to the disciplinary system; it does not apply to all members of society; it only applies to `volunteers'. Although in the loosest sense there is `a charge', a `trial' and a determination of the defendant's guilt, there is no distinction in principle between this type of disciplinary process and, say, the disciplinary procedures of other professionals under their own rules. The fines imposed are civil debts recoverable only by civil process, unlike the collection of criminal fines which is pursuant to statute and includes the court's coercive jurisdiction to imprison a defaulter. There is no right to a trial by jury; no risk of imprisonment and no State involvement, such as by the police or the Crown Prosecution Service. By English Law standards, the process would be firmly categorised as civil rather than criminal. Unless Strasbourg jurisprudence points towards a different result, I would not conclude that a person such as the applicant was a person charged with a criminal offence: [see, further, the Privy Council decision, on appeal from the High Court of Judiciary, Scotland, in the Macintosh case, at paragraph 14]. But the meaning of the words "criminal charge" in the Convention is not a matter of domestic law but is a matter of Strasbourg jurisprudence.

32. Accordingly, it is necessary to consider the Strasbourg case law. I do so recognising that the Court is a constitutional court; its decisions often represent the distillation of various shades of opinions amongst the Court's members; and the doctrine of precedent, as we know it, has no part to play. By reason of its nature and function, the Court develops its jurisprudence, and consistency between different decisions may be less discernible than with decisions of other courts in common law countries where the doctrine of precedent applies. For this reason, it is, I think, especially important that the decisions which are relevant should be looked at in strict chronological order.

33. The Court has addressed the issue of whether legal proceedings are "criminal" or not in a number of cases. Such definition is required because, for example, article 6.2 confers rights on those charged with criminal offences and article 7 only applies to criminal offences. The leading case is Engel v The Netherlands (No 1) [1976] 1 EHRR 647. This case concerned offences against military discipline dealt with by the military authorities and the Supreme Military Court. The Court said this, between paragraphs 80-82:

"All Contracting States make a distinction of long-standing, albeit in different forms and degrees, between disciplinary proceedings and criminal proceedings. For the individuals affected the former usually offer substantial advantages in comparison with the latter, for example as concerns the sentences passed. Disciplinary sentences, in general less severe, do not appear in the person's criminal record and entail more limited consequences. It may nevertheless be otherwise; moreover criminal proceedings are ordinarily accompanied by fuller guarantees.

.............

The Convention without any doubt allows the States, in the performance of their function as guardians of the public interest, to maintain or establish a distinction between criminal law and disciplinary law, but only subject to certain conditions. The Convention leaves the States free to designate as a criminal offence an act or omission not constituting the normal exercise of one of the rights that it protects. This is made especially clear by Article 7. Such a choice, which has the effect of rendering applicable Articles 6 & 7, in principle escapes supervision by the court. The converse choice, for its part, is subject to stricter rules. If the Contracting States were able at their discretion to classify an offence as disciplinary instead of criminal, or to prosecute the author of a `mixed' offence on the disciplinary rather than on the criminal plane, the operation of the fundamental clauses of Articles 6 & 7 would be subordinated to their sovereign will. A latitude extending thus far might lead to results incompatible with the purpose and object of the Convention. The court therefore has jurisdiction, under Article 6 even without reference to Articles 17 & 18, to satisfy itself that the disciplinary does not improperly encroach upon the criminal.

In short, the `autonomy' of the concept of `criminal' operates, as it were, one way only.

Hence, the court must specify, limiting itself to the sphere of military service, how it will determine whether a given `charge' vested by the State in question - as in the present case - with a disciplinary character nonetheless counts as `criminal' within the meaning of Article 6.

In this connection, it is first necessary to know whether the provision(s) defining the offence charged belong, according to the legal system of the respondent State, to criminal law, disciplinary law or both concurrently. This however, provides no more than a starting point. The indications so afforded have only a formal and relative value and must be examined in the light of the common denominator of the respective legislation of the various Contracting States.

The very nature of the offence is a factor of greater import. When a serviceman finds himself accused of an act or omission allegedly contravening a legal rule governing the operation of the armed forces, the State may in principle employ against him disciplinary law rather than criminal law. In this respect, the court expresses its agreement with the Government.

However, supervision by the court does not stop there. Such supervision would generally prove to be illusory if it did not also take into consideration the degree of severity of the penalty that the person concerned risks incurring. In a society subscribing to the rule of law, there belong to the `criminal' sphere deprivations of liberty liable to be imposed as a punishment, except those which by their nature, duration or manner of execution cannot be appreciably detrimental. The seriousness of what is at stake, the traditions of the Contracting States, and the importance attached by the Convention to respect for the physical liberty of the person all require that this should be so.

It is on the basis of these criteria that the court will ascertain whether some or all of the applicants were the subject of a `criminal charge' within the meaning of Article 6(1).

34. Whilst this is the leading case which tells the court the criteria to be applied in categorising disciplinary matters as criminal or not, it is pertinent to point out that all the applicants in that case were subject to some kind of deprivation of liberty ranging from four days light arrest, through two days strict arrest, to three or four months committal to a disciplinary unit. The Court did not accept as criminal those who were only subject to arrest. The criteria may be summarised thus:

(1) has the Contracting State classified the case as subject to disciplinary law or criminal law?

(2) what is the nature of the offence charged?

(3) what is the nature and severity of the penalty that was or might have been imposed?

35. The next case is Le Compte, Van Leuven & De Meyere v Belgium [1981] 4 EHRR 1 at paragraphs 41 and 42, where the Court recognised ("as the Government rightly emphasised with reference to the Engel judgment") "disciplinary proceedings as such cannot be characterised as `criminal'; nevertheless, this may not hold good for certain specific cases." But the Court went on to hold that Article 6 applied as the disciplinary proceedings [of medical men] interfered with the applicants' private rights to practice their profession and thus interfered with their civil rights within the meaning of Article 6.1.

36. In Albert & Le Compte v Belgium [1983] 5 EHHR 533, the Court returned to the question of interference with civil rights and emphasised that there was nothing objectionable to disciplinary issues being determined by bodies other than courts.

"Nonetheless, in such circumstances the Convention calls at least for one of the two following systems: either the jurisdictional organs themselves comply with the requirements of Article 6(1) or they do not so comply but are subject to subsequent control by a judicial body that has full jurisdiction and does provide the guarantee of Article 6.1".

At paragraph 30 the Court said this:

"...the court does not believe that the two aspects, civil and criminal, of Article 6(1) are necessarily mutually exclusive. Nonetheless, the Court does not consider it necessary to decide whether, in the specific circumstances, there was a `criminal charge'. In point of fact, paragraph 1 of Article 6, violation of which was alleged by the two applicants, applies in civil matters as well as in the criminal sphere. Dr Albert relied in addition on paragraph 2 and on sub-paragraphs (a), (b) and (d) of paragraph 3 , but, in the opinion of the court, the principles enshrined therein are, for present purposes, already embodied in paragraph 1; the court will therefore take these principles into account in the context of paragraph 1..."

And at paragraph 39, the Court said:

"In the opinion of the court, the principles set out in paragraph 2 and in the provisions of paragraph 3 invoked by Dr Albert (that is to say, only sub-paragraphs (a) (b) and (d)) are applicable, mutatis mutandis, to disciplinary proceedings subject to paragraph 1 in the same way as in the case of a person charged with a criminal offence."

37. As I read this case, it appears that the Court accepted that the principle of a fair hearing in disciplinary cases embraced the principles that the `accused' must be informed promptly and fully of the charge against him; that he should have adequate time and facilities to prepare his defence and a proper opportunity to give and call evidence, and question those witnesses called against him. These are perhaps the embodiment of the English notion of the `rules of natural justice' in relation to disciplinary proceedings of the sort with which this case is concerned. But I think it is going too far to suggest that the Court regarded all parts of 6(3) as interchangeable with fair hearings of cases involving the determination of a person's civil rights and obligations. On the face of the decision, the court did not go that far; on the contrary it was circumspect by the use of the word "only" to confine the extent of interchangeability to the specified subparagraphs.

38. Until 1988, it had been the law and practice in the Netherlands for natural persons who were parties to civil proceedings not to be permitted to give evidence in their own cause. Non-natural persons were subject to the same rule in so far as their `representative' was concerned. As from 1 April 1988, the law of civil procedure was substantially amended. Essentially, whilst parties were now entitled to give evidence there were some differences between their position as witnesses and the position of those who were witnesses but not parties, and this gave rise to a complaint that the provisions of Article 6(1) had been breached: Dombo Beheer BV v The Netherlands [1993] 18 EHRR 213 at page 239. The Claimant company's witness was not allowed to give evidence whereas the only other person present during the crucial meeting on the defendant's side was allowed to do so. At paragraphs 32 and 33 the Court said:

"The requirements inherent in the concept of a `fair hearing' are not necessarily the same in cases concerning the civil rights and obligations as they are in cases concerning the determination of a criminal charge. Thus, although these provisions have a certain relevance outside the strict confines of criminal law, the Contracting States have greater latitude when dealing with civil rights and obligations than they have when dealing with criminal cases.

Nevertheless, certain principles concerning the notion of a `fair hearing' in cases concerning civil rights and obligations emerge from the Court's case law. Most significantly for the present case, it is clear that the requirement of `equality of arms', in the sense of a `fair balance' between the parties, applies in principle to such cases as well as to criminal cases.

The Court agrees with the Commission that as regards litigation involving opposing private interests, `equality of arms' implies that each party must be afforded a reasonable opportunity to present his case - including his evidence - under conditions that do not place him at a substantial disadvantage vis-à- vis his opponent.

It is left to the national authorities to ensure in each individual case that the requirements of a `fair hearing' are met."

[There is a footnote reference to Albert & Le Compte after the words "...strict confines of criminal law"]

39. In Bendenoun v France [1994] 18 EHRR 54, the Court was concerned with two separate sets of proceedings. The first were plainly criminal and related to the applicant's prosecution for evasion of taxes (corporation tax, VAT and income tax). The second set of proceedings related to tax assessment and collection. He appealed against assessments and ultimately challenged them in the Administrative Court and, when unsuccessful, appealed to the Conseil d'Etat, complaining amongst other things that he had not been given sight of the whole of the relevant files upon which the challenged assessments had been made. He alleged that the authorities had picked the plums from the file and ignored the duff which, if available, could show that the assessments were unjustified. The Conseil d'Etat rejected his appeals and he applied to the Court in Strasbourg. The assessments, which included a surcharge, were based in part upon the authorities' unwillingness to accept that the applicant had acted in good faith. The Court observed that in domestic law the surcharges were classified as "tax penalties" rather than "criminal penalties" and that the same classification applied to the conduct of the applicant about which complaint was made. The French tax system drew a distinction between "deception", which was a tax offence, and "evasion" which was a criminal offence. However it noted four factors which all suggested that the tax proceedings should be regarded as `criminal' rather than `civil':

"In the first place, the offences with which [the applicant] was charged came under Article 1729(2) of the General Tax Code. That provision covers all citizens in their capacity as tax payers, and not a given group with a particular status. It lays down certain requirements, to which it attaches penalties in the event of non-compliance.

Secondly, the tax surcharges are intended not as pecuniary compensation for damage but essentially as a punishment to deter re-offending.

Thirdly, they are imposed under a general rule, whose purpose is both deterrent and punitive.

Lastly, in the instant case the surcharges were very substantial ... and if he failed to pay, he was liable to be committed to prison by the criminal courts.

Having weighed the various aspects of the case, the Court notes the predominance of those which have a criminal connotation. None of them is decisive on its own, but taken together and cumulatively they make the "charge" in issue a "criminal" one within the meaning of Article 6(1) which was therefore applicable."

40. In Wickramsinghe v United Kingdom [1998] EHRLR 338, the applicant's complaint was rejected by the Commission as inadmissible. The applicant had been disciplined in accordance with the procedure laid down by the General Medical Council. He complained, amongst other things, that his rights under Article 6(2) and 6(3)(a)(b) & (d) had been infringed, having regard to the seriousness of the charge [indecency towards a patient] and the nature of the sanctions. The Commission applied the three stage test laid down in Engel. It noted that the offence with which the doctor was charged was classified under English Law as disciplinary and not criminal:

"The "offence" is thus classified as disciplinary within the domestic system.

As to the nature of the offence, the Commission observes that professional disciplinary matters are essentially matters which controls the relationship between the individual and the professional association to which he or she belongs, and whose rules he or she agreed to accept. They do not involve the State setting up a rule of general applicability by which it expresses disapproval of, and imposes sanctions for, particular behaviour, as is generally the case of criminal charges. .... It is true, as the applicant points out, that the facts underlying the proceedings against the applicant, namely allegations of sexual indecency, could also have been the subject of criminal charges before the criminal jurisdiction. However, it is frequently the case that the factual allegations in professional disciplinary proceedings could also be pursued in ordinary criminal proceedings: in the present context, the possibility of parallel criminal proceedings does not make the nature of the offence inherently criminal.

Finally, the Commission must have regard to the degree of severity of the penalty risked. .... Each of these sanctions [namely erasure from the register, imposing restrictions on the right to practise or suspension from practise] is essentially disciplinary and is directed to protecting the public and the reputation of the medical profession. The fact that "erasure" is likely to have far-reaching consequences for the individual concerned does not render the penalty criminal.

It follows that the proceedings against the applicant did not determine a "criminal charge"."

41. The Commission also concluded:

"However even where an adjudicatory body determining disputes over civil rights and obligations does not comply with Article 6(1) in some respect, no violation of the Convention will be found if the proceedings before that body are subject to subsequent control by a judicial body that has full jurisdiction and does provide the guarantees of Article 6(1)."

It considered that the supervisory jurisdiction of the Privy Council satisfied the requirement of independent judicial supervision.

42. The Commission had to consider the admissibility of a complaint of a breach of article 6(1) brought by a company and two individuals who had been `prosecuted' by IMRO, an SRO under the 1986 Act: ABP Ltd & ABP & EAB v United Kingdom 30552/96. The complaint was rejected as inadmissible. Amongst the points considered by the Commission was the applicability of Article 6(1) to a disciplinary case such as this. It concluded that it involved a determination of civil rights and obligations within the meaning of Article 6(1). It further considered that the procedures adopted "afforded many of the safeguards required by Article 6(1) and

....that it is in the nature of a self-regulating profession that questions concerning internal discipline, including fitness to practise, should be determined in the first instance by the profession itself, even where the Convention requires subsequent judicial control because the determination of civil rights may also be at stake."

I read this decision as affirming that disciplinary proceedings may, because they can result in a loss of livelihood or ability to trade, involve the determination of civil rights and obligations. For this reason the court must exercise a supervisory jurisdiction to ensure that the Article 6(1) right to a fair hearing has been observed. It re-affirms the desirability of professional or quasi professional people being subject to their own disciplinary procedures, subject to control by the courts, through, in this jurisdiction, judicial review.

43. Under the Insurance Companies Act 1982 the Secretary of State had power to issue a `notice of objection' under section 60(1) against an individual which had the effect of making the applicant's prospective employment as chief executive of an insurance company untenable. The Commission accepted as admissible the individual's complaint under article 6(1): X v United Kingdom [1998, 19 January] 25 EHRR CD88

"The undisputed effect of the decision of the Secretary of State was to deprive him of the opportunity of accepting a specific post which had been offered to him on terms which had been agreed. In the view of the Commission the applicant's civil rights were affected by the decision, irrespective of whether the decision had wider ramifications for the employment prospects of the applicant in the insurance industry and irrespective whether, in the result, he would have declined the particular post in question."

44. In Gautrin & Others v France [1998] 28 EHHR 196 the applicants were all members of an organisation called SOS Médicins and displayed the organisation's logo on their vehicles, and on their prescriptions. Complaints were lodged against them, and, in due course, the regional Council held the applicants to be in breach of the stipulated code of conduct, and 99 members were suspended from practise for a short period and 6 received a reprimand. On appeal the sentences were varied in the applicants' favour. The applicants complained that the hearings had not been held in public and that the disciplinary tribunal was biased. Both complaints were upheld. The Court held that the right to practise medicine as a private practitioner gave rise to (disputes) over `civil rights' within the meaning of Article 6(1).

45. In November 1998 the Court again rejected a complaint by a citizen of the UK as inadmissible: Irving Brown v UK Application Number 38644/97. Mr Brown was a solicitor against whom the Law Society preferred three charges of misconduct. After a `trial' before the Solicitors Complaints Tribunal, the charges were found proved and Mr Brown was fined a total of £10,000. His principal complaint to the Court was that he had been fined more than was provided for by law, in the sense that the maximum fine that could have been imposed at the time of the offence (rather than at the date of his `trial') was £3,000. Thus, he relied upon Article 7. The Court said:

"Whilst the Court accepts that the disciplinary proceedings involved the determination of civil rights and obligations, in order for the applicant to avail himself of the protection of Article 7 the proceedings have to amount to the determination of a criminal charge. The Court recalls that, in deciding whether an offence is to be regarded as criminal within the autonomous meaning of the Convention, the Court must adopt a three-fold test set out in the Engel case and have regard to the classification in domestic law, the nature of the offence itself and the nature and severity of the sentence which can be imposed ....

In the instant case, the Court notes that the charges against the applicant were classified under domestic law as disciplinary offences, being examined in a tribunal without any involvement by the police or prosecuting authorities. The Court notes that the charges faced by the applicant related to matters of professional behaviour and organisation, emphasis being given to the standards of conduct befitting a solicitor. The Court finds that the offences are of a disciplinary nature, applying only to persons of a specific, professional group rather than the general public .....

The Court has considered whether, notwithstanding the non-criminal character of the prescribed misconduct, the nature and degree of severity of the penalty that the person concerned risked incurring - the third criterion - may bring the matter into the "criminal sphere".

Having reviewed the amounts of the fine, and the potential sanction of committal for contempt for non-payment, which could only occur after further consideration by the domestic courts "whose procedures would be attended by judicial guarantees" ....the Court said:

"The Court has had regard to the purpose of the fine. A fine which is punitive and deterrent rather than compensatory, may suggest that the matter is "criminal" in nature if the penalty is sufficiently substantial ... While the size of the fine in the present case is such that it must be regarded as having a punitive effect, the Court observes that the fine was imposed in respect of three serous disciplinary offences and that the level of the fine equalled the amount for which the applicant sold the practice after his brief involvement in it. Nor was there any investigation into the means of the applicant prior to the imposition of the penalty, which is a pre-requisite of any criminal fine in domestic proceedings. There was no involvement of the police or prosecuting authorities in these proceedings.

In these circumstances, having regard in particular to the essential disciplinary context of the charges, the Court finds that the severity of the penalty was not, of itself, such as to render the charges "criminal" in nature.

Consequently the complaint does not fall within the scope of Article 7 and must be rejected ..."

46. I was also referred to a number of domestic law cases which deal with this issue. The first is a judgment of the Court of Appeal at the beginning of February 2000: Official Receiver v Stern [2000] 1 WLR 2230, commencing at 2245. Proceedings were commenced by the DTI against Mr Stern seeking his disqualification as a director. He had been required by statute to furnish answers to questions asked of him under the Insolvency Act. Would use of that material render the disqualification proceedings a breach of Article 6(1). The Court of Appeal, affirming the decision of the trial judge, concluded that there was no breach. The relevant passages of the Court's judgment are:

"Mr Beloff [for the Directors] then advanced three main criticisms of Scott VC's judgment. First he submitted that the Vice Chancellor ... came perilously close to saying that the issue of self-incrimination could never be relevant to the hearing of a civil case. Mr Beloff submitted that there is a sort of hierarchy of types of proceedings, with civil cases which have a penal element somewhere in the middle of the hierarchy."

Having reviewed certain authorities, including the Albert & Le Compte case, the court said:

So disciplinary proceedings against a professional man or woman although certainly not classified as criminal, may still bring into play some of the requirements of a fair trial spelt out in Article 6(2) and 6(3), including the presumption of innocence ...

......

So there is force in Mr Donaldson's submission that disqualification does not prevent a trader from earning his living, but it does prevent him from doing so with the privilege of limited liability unless he obtains permission to do this from the court.

.......

The issue of fair trial is one that must be considered in the round, having regard to all relevant factors. The relevant factors include but are not limited to: (i) that disqualification proceedings are not criminal proceedings, and are primarily for the protection of the public but do nevertheless often involve serious allegations and almost always carry a degree of stigma for anyone who is disqualified; (ii) that there are degrees of coercion involved in different investigative procedures available in corporate insolvency and these differences may be reflected in different degrees of prejudice involved in the admission, in disqualification proceedings, of statements obtained by such procedures; and (iii) that in this field as in most other fields, it is generally best for issues of fairness or unfairness to be decided by the trial judge, either at a pre-trial review or in the course of the trial."

47. Mr Speaight draws attention to the difference in effect between a disqualification, where there may be no loss of livelihood with a suspension of registration which does or may have that effect. But it is significant, I think, that the Court has declared inadmissible complaints relating to such proceedings. Disqualification proceedings determined civil rights within the meaning of Article 6(1). "The fact that those proceedings were to be treated as regulatory civil proceedings and not criminal proceedings did not remove from the applicants a right to a fair hearing": WGSS & MSLS v United Kingdom [2000] BCC 719.

48. An individual appealed against the making of a Sex Offender order against him under the Crime and Disorder Act. In holding that the proceedings were not, as a matter of domestic law, to be regarded as "criminal" Lord Bingham, then Lord Chief Justice, said in B v Chief Constable of Avon & Somerset Constabulary [5 April 2000, CO/5064/99]:

These are all important and legitimate considerations but they do not persuade me that, as a matter of English domestic law, this is to be regarded as a criminal proceeding. Under that law, a criminal proceedings is one in which prosecutor accuses a defendant of committing a specific crime, on conviction of which the defendant will be susceptible to punishment. Here the application is made by a chief officer of police, but he is not acting as a prosecutor. The defendant is not accused of committing any specific crime. If the outcome of the application is adverse to the defendant he does not become susceptible to punishment."

......

Here the proceedings are in my judgment classified as civil in domestic law. No offence is charged and the making of an order does not depend on proof of any offence. No penalty may be imposed. I am aware of no case in which the European Court has held a proceedings to be criminal even though an adverse outcome for the defendant cannot result in any penalty."

49. I do not regard this case as being of relevance to the issues in hand, and the same may be said for the decision of the Divisional Court in the McCann case [22 November 2000 CO/3055/2000].

50. It seems to me that the principles enunciated by the Court give the answer to the question at issue. In Convention jurisprudence the disciplinary proceedings are to be classified as civil rather than criminal. They are categorised under domestic law as civil. The nature of the proceedings leads to the same conclusion in Convention law, having regard to the matters referred to in paragraphs 30 and 31 above. I do not think that the penalty which can be imposed, namely an unlimited fine, leads to a different conclusion when carrying out the balancing exercise. In the field of financial regulation, the size of a fine can, I think, fairly remain open. There is no doubt that some financial improprieties may cause millions of pounds of damage to innocent third parties or the defaulter may have stood to gain or actually gained millions of pounds. By imposing an upper limit, there is an obvious danger that the fine will be too small in some rare cases. Or if the fine were set at a level which could cater for the most serious offence its size would have no more relevance to the applicant's case than an unspecified maximum. In my view it would be illogical to say that the size of the fine determined the classification. The essential feature of a financial penalty imposed through the SFA disciplinary process is that it is recoverable only as a civil debt, without the possibility of recourse to the sanction of imprisonment for default or for contempt of court. This distinguishes the case from Brown where there was ultimately a risk of imprisonment for contempt of court, and from Bendenoun. The purpose of the fine is plainly both punitive and a deterrent; but that does not tip the scales in favour of a `criminal' categorisation. By this classification the applicant is not denied a right to a fair hearing, nor to this Court's supervisory jurisdiction.

51. Looking at the matter `in the round' it is my judgment that applying the three stage test these disciplinary proceedings, whilst possessing some features akin to criminal proceedings, are not to be classified as involving a criminal charge. But it does not automatically follow that none of the Article 6(2) and 6(3) rights is inapplicable. As can be seen from Albert & Le Compte v Belgium the essence of a fair hearing required by Article 6(1) may embrace certain of the stipulations; for example paragraphs (a), (b) and (d) of Article 6(2). Essentially, these disciplinary proceedings relate to what might be called the private rights and obligations owed by and to the applicant arising from his personal decision to become a trader in a regulated environment. But for that decision, the applicant would not have been susceptible to SFA discipline. Having subjected himself to their disciplinary regime, he has what might be described as the normal private rights which such a person enjoys and which are accorded to him by the common law, and which are ultimately subject to the supervision of the courts; in this sort of case, the Administrative Court. Those rights, in a case such as this, include some of those which are accorded to a person charged with a criminal offence, such as (a) (b) and (d) of Article 6(3). In my view, also, a person who is being disciplined should not have to establish his innocence. But the standard of proof will vary according to the circumstances and little, if any, practical difference is likely to be detectable in practice between civil and criminal discipline.

52. The core distinction in the classification process between what might, for shorthand, be called civil and criminal in Convention Law seems to me to rest on the fact that it is a necessary condition for the existence of a `criminal charge' that what is being alleged is a breach of a person's obligations to the State arising from being a citizen, through laws which have universal application or whose application is not dependent upon an individual's choice. Whereas, disciplinary cases involving a breach of obligations imposed on a class or group of individuals through their voluntary participation, do not fulfil the condition. But after the distinction is drawn, there may be some disciplinary procedures whose characteristics are so akin to criminal proceedings that the concept of fairness requires more or less the same protections in both. But it is simplistic and wrong to say that because there is an overlap between the two, it is not necessary to make the classification. Those who drafted the Convention have taken pains to confer rights differentially according to a classification process.

Self incrimination and compelled evidence.

53. But do the rights to a fair hearing in a disciplinary context such as this include the right not to have used against the person being disciplined the answers to questions which he was required, under threat of disciplinary sanction, to answer?

54. The first observation to make is that the right to silence, the privilege against self-incrimination and the use of compelled evidence are `rights' which are not expressly mentioned in Articles 6 or 7. But in Murray v UK [1996] 22 EHRR 29, at page 60 the Court said:

"Although not specifically mentioned in Article 6 of the Convention, there can be no doubt that the right to remain silent under police questioning and the privilege against self-incrimination are generally recognised international standards which lie at the heart of the notion of a fair procedure under Article 6. By providing the accused with protection against improper compulsion by the authorities these immunities contribute to avoiding miscarriages of justice and to securing the aim of Article 6."

55. In Saunders v UK [1996] 23 EHRR 313, (and the later case involving other Guinness defendants IJL & Others v United Kingdom [2000] TLR 710), the Court went further and said:

"The right not to incriminate oneself, in particular, presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused. In this sense the right is closely linked to the presumption of innocence contained in Article 6(2) of the Convention."

It is to be noted that Article 6(2), in terms applies only to those cases where a person is charged with a criminal offence.

56. In Official Receiver v Stern [2000] 1WLR 2230, the Court of Appeal concluded that the trial Judge was right to reject a submission that use in Directors' Disqualification cases of material obtained from a defendant under statutory compulsion [section 235 of the Insolvency Act] must necessarily involve a breach of Article 6(1). The principal purpose of section 235 is to furnish the designated officer with such information as he might reasonably require about the affairs of the company in compulsory liquidation. It is not clear to me whether the Court dealt with an argument to the effect that protection against self-incrimination applied only to proceedings properly classified as criminal; and thus did not afford protection to Mr Stern, although that point was made by the Court of Appeal in an earlier case: R v Secretary of State v McCormick [1998]BCC 379:

"There is no question of the use of any compelled evidence in disqualification proceedings involving any infringement of the right not to incriminate oneself unless the issue in such proceedings involves a criminal charge." per Morritt LJ

Lord Justice Morritt, having weighed the factors for and against, concluded that the Secretary of State was not bound to treat such proceedings as if they involved a criminal charge rather than the determination of civil rights and obligations.

57. The Strasbourg Court has subsequently rejected as inadmissible a complaint relating to Directors' Disqualification proceedings. Part of the complaint related to the use against the former director of information obtained from him pursuant to compulsory powers. The Court, in giving judgment, noted a number of substantial differences between the present case and Saunders.

"In particular, the proceedings in the case of Saunders were indeed criminal proceedings, whereas the present case concerns regulatory, civil proceedings. Further, in Saunders the applicant vigorously attacked the use of the contested statements in the criminal proceedings; as there was no contested hearing in the present case, and given domestic case law on the point, the applicants made no challenge to the fairness of using the statements given to the liquidator. Finally, the Court recalls that, in the Saunders case, the compulsorily obtained statements formed a `significant part' of the prosecution case .... In the present case, there is no indication in the documents that it played a predominant role. In any event, by the substantive hearing in the case, the parties had come to an agreed statement of the facts of the case."

Prior to this passage, the Court had held that as the proceedings were properly to be classified as civil rather than criminal Article 6(3) did not apply and Article 6(2) was also non-applicable. The passage just cited could suggest, therefore, that even with a civil rather than a criminal case, as here, the right to a fair hearing might involve excluding `compelled evidence'. But I bear in mind that the judgment is in short form and might properly be regarded as `interlocutory' in nature.

58. The right not to incriminate oneself, more properly described, I think, as a privilege against self-incrimination is not an absolute one: see the judgments of the Privy Council on appeal from the High Court of Justiciary in the case of Procurator Fiscal Dunfermline & Another v Brown 5 December 2000. Lord Steyn said:

"In my view the right in question is plainly not absolute. From this premise it follows that an interference with the right may be justified if the particular legislative provision was enacted in pursuance of a legitimate aim and if the scope of the legislative provision is necessary and proportionate to the achievement of the aim."

In that case the Privy Council were dealing with a statutory requirement imposed on vehicle owners to identify the driver of it.

59. I can express my conclusions on this part of the case shortly:

(1) As far as I am aware there is no decision of the Strasbourg Court which holds that the right to a fair trial in a civil matter includes the right to silence or the right not to incriminate oneself. Indeed, there are good reasons why the law should accept a degree of compulsion in civil matters: for example, the requirement that a substantive defence must be filed, with admissions and denials with the sanction of a judgment in default. If, as I have held, these disciplinary proceedings are to be categorised as civil rather than criminal, on this ground alone the applicant fails in his complaint that the `prosecution' used against him what he said under compulsion to the Stock Exchange investigators.

(2) Even if there were a right to silence or a right not to have compelled evidence used against oneself in this context, the right is not absolute and I am of the view that such use as was made of the responses in interviews was entirely appropriate and proportionate. Of their very nature, regulatory processes in the financial field can only work if a full investigation can be carried out. There are, by definition, no laws which compel co-operation with the regulatory authorities: only the powers that come through the threat of disciplinary sanction. In pursuance of the need to protect the investing public, it is justifiable to require traders to co-operate with proper investigations. Indeed, the investigatory process itself is dependent upon answers given, and if answers could be refused on grounds of self-incrimination, or if given, those answers could not be used in a disciplinary case, then the regulatory authority would be hampered in its function of protecting the public and, effectively forced to continue to accept as a registered person someone who it knew was unfit to be so. That cannot be the rule. For the individual, the loss of the right to silence in the context of discipline is a small price to pay for the privilege of being able to trade, and is simply part of the obligations undertaken on registration.

(3) In any event, I do not consider that the applicant can truly be said to have been `compelled' to answer the questions asked by the Stock Exchange. He is not subject to their rules and Principle 10 only applies to SFA rules. This is so, even if, as I accept, from a practical point of view the applicant knew he had to answer questions properly asked of him. It would be extending the principle of `compelled evidence' and its exclusion, to include within it evidence that was not truly compelled but which the person concerned mistakenly believed was compelled.

(4) Furthermore, the evidence formed only a smallish part of the case against the applicant. Mr Speaight relies upon passages in the judgment of the Appeal Tribunal relating to the SFA's appeal. If one looks at the decision of the original Disciplinary Tribunal and the way that the Appeal Tribunal dismissed the applicant's appeal, it is clear that there was ample evidence other than the revelation about another trader selling futures, sufficient to prove the case.

(5) The Tribunal best able to judge the propriety of admitting this evidence was the Disciplinary Tribunal in the first instance. No objection was taken to this evidence at the time and no objection was taken to its use before the Appeal Tribunal. In my view, under normal principles, the supervisory court should not normally consider evidential points which could or should have been made at the time, but which were not.

Inequality of Arms

60. If Article 6(3) does not apply, because these proceedings are best categorised as civil rather than criminal, then an automatic right to legal representation has not been expressly conferred by the Convention. However, there are cases which show that such a right may exist in cases involving a person's civil rights and obligations. Before turning to the case law, I would make three general points:

(1) Unlike most mainland European countries, England does not prevent an unrepresented individual's access to the higher courts. Unrepresented litigants form a significant feature of the English judicial landscape, and as legal aid becomes less available, a more prominent one.

(2) Most judges have had considerable experience of adjudicating in cases where only one side has legal representation On an anecdotal basis, it is my experience that many such litigants are competent and well capable of presenting arguments, albeit not often in the most sophisticated or economical way. There are a number of reported cases where such litigants have prevailed against the other party, who has been professionally represented; of which Seager v Copydex [1967] 1 WLR 923 is just one example. Whilst some aspects of the trial process, such as cross-examination, need judicial encouragement and guidance, in other parts less judicial help is necessary.

(3) Appeal processes are increasingly moving towards the written tradition of our European neighbours and away from oral advocacy. A well read tribunal when dealing with an appeal which requires a review of a decision, together with supporting evidence, will be particularly well placed to assist an unrepresented party.

61. In Faulkner v UK [1999] EHRLR 519 the applicant wished to commence proceedings for false imprisonment and malicious prosecution arising from events in Guernsey, where there was no legal aid system. The Commission concluded that he had been denied an effective right of access to the courts because he had no access to legal representation. The Commission noted that the Convention might sometimes compel States to provide for the assistance of a lawyer when such assistance proved indispensable for effective access to court either because legal representation was rendered compulsory or by reason of the complexity of the case. This case sufficiently embodies the principles applied in Strasbourg.

62. I know of no case where the Court or Commission have held a breach of Convention rights in relation to access to representation otherwise than in the court. In other words, I know of no ruling that access to a lawyer is an essential ingredient of fairness in relation to a disciplinary tribunal, let alone an appellate disciplinary tribunal. The position is that the applicant had access to expert legal assistance at the `trial' stage; and he has had access to expert legal assistance when seeking to persuade the supervising court that he has ben treated unfairly in the appeal process. In my view, he has no Convention right to free legal assistance at the appeal stage of the disciplinary procedure. The presiding judge was well able to ensure that the applicant's appeal was fully considered. The applicant had every right and opportunity to present cogent written and oral submissions, which he exercised. The appeal tribunal carried out an extensive review of the evidence and the case presented against the applicant so as to ascertain whether the conviction was `sound'. The facts were not unduly complex and were certainly well within the applicant's grasp. This was not one of those complex cases where the State might be required to provide legal assistance so as to guarantee access to the court. So that, even if a court were construed to include a disciplinary appeal tribunal there would have been no breach. I doubt very much whether the Convention rights to access to the courts can simply be transposed to access to disciplinary tribunals which are outwith the court system, albeit under the ultimate supervisory jurisdiction of the courts.

Vagueness of charges

63. I am prepared to accept as a basic principle of fairness in a disciplinary context that the person should know what charge or case he has to meet; and that he should only be found guilty of misconduct if at the time he committed the alleged offence he knew or ought reasonably to have known that what he did was an offence. For this purpose, the Convention adds nothing to what must be a basic understanding of natural justice [or the rules of natural justice].

64. In this case, the applicant accepted before the Disciplinary Tribunal, where he was represented, that if it could be shown that he knew that the purpose of the transactions he carried out were to manipulate the index rather than to unwind a hedge, then he was guilty as charged. I can just understand a case along the lines that `manipulating the index' is simply another way of saying that there is a free market driven by supply and demand and using enough `muscle' to force, or influence, the market up or down is not a crime. Had the index fallen, as it did, through the same sales techniques but which were designed simply to unwind the hedge, there would have been no crime. Making the market go up or down to suit a person's overall position, should not depend, for its lawfulness, on the motive of the traders. But that argument, or any similar argument, was simply not run by the applicant; probably for good reason. One could also have understood an argument based upon superior orders and lack of availability at the relevant time of access to a compliance officer. But, again, that argument was not run; also no doubt for good reason. If either argument had been advanced then the applicant would have had to accept that he knew precisely why he made the trades he did and that they were designed to manipulate the market to below the strike level of the binary option. But accepting that point would have undermined the defence case which was being run. Whilst I think that the applicant tried to suggest at the Appeal hearing that he did not know that what he did was wrong, this was a new case and one that had not been considered by any of the witnesses of fact who gave evidence before the Disciplinary Tribunal.

65. In these circumstances, there is, in my judgment, no merit and no mileage in this court for an argument along the lines that at the time he did what he did the applicant did not know that what he was doing was wrong. He did know, as he accepted whilst represented.

66. As to the lack of specificity of the charges themselves, it is true that the two Principles are drafted in the most general of terms. This is not dissimilar to charges of professional misconduct as a barrister or solicitor. By using language which is general, the disciplinary authorities may be exposed to the `I did not realise that what I did was wrong' defence. On the other hand, charges of professional misconduct very often leave no room for such a defence when the facts are set out. In this case, the applicant cannot say, and his legal representatives did not say, that the charges as framed with their extensive particulars, left the applicant in any doubt what he was charged with. I reject Mr Speaight's attempt to suggest that there is any room for doubt as to what had to be proved. The `prosecution' had to satisfy the Disciplinary Tribunal that the applicant had carried out a series of trades at the end of the day which he knew were purely designed to shift the index below the strike point. If that is what was proved then, as was accepted, he was guilty of the offences as charged, although the fact that it was not his idea in the first place and he was `ordered' to do the trades by his superior were matters for mitigation, as, in fact, they were.

The 2000 Act

67. I have no doubt that this Act will be the foundation for many disputes in the courts. It would be unhelpful, and not within my capacity or remit, to say much about it. I simply make the following points:

(1) Section 64(2) requires the Financial Services Authority which issues statements of principle also to

"issue a code of practice for the purpose of helping to determine whether or not a person's conduct complies with the statement of principle."

And subsection (3) identifies what the code may contain, so as to give effect to the requirement. Mr Speaight relied upon this in his argument on `vagueness of charges'. For reasons I have given I do not think that this new Act helps his case. It seems clear that Parliament has decided to force the disciplinary authority to avoid the risk of `I did not know that what I was doing was wrong' argument. It says nothing about the principles which I have sought to apply. Section 66 empowers the Authority to take disciplinary action if it appears to them that a person has been guilty of misconduct in that he has failed to comply with a statement of principle or been knowingly concerned in a contravention of a requirement imposed upon him.

(2) Section 118 creates an offence of market abuse which includes insider dealing and distorting the market. The parties in this case do not agree whether the applicant's behaviour would or would not have constituted market abuse under this Act. If a person has committed an act of market abuse and the Authority is satisfied that that is the position then the Authority may impose upon the person a penalty of such amount as it considers appropriate, but in such circumstances, the person may refer the matter to the Tribunal established under the Act. Where such a reference has been made then the person concerned may become entitled to free or subsidised legal assistance under a scheme funded by the Authority but established by the Lord Chancellor. These provisions were relied upon by the applicant in relation to the equality of arms argument. But it is important to note that market abuse is an `offence' created by statute which applies to all persons who trade in a way which is regarded by section 118 of the Act as reprehensible. The legal assistance scheme is not available to persons subjected to a disciplinary regime through their business as traders. Thus, Mr Gordon says that Parliament has clearly accepted the distinction between `criminal' and civil for categorisation purposes, which he urged me to accept, and which I have accepted in paragraphs 47 - 49 above. If I were forced to take a view on the question, I would be inclined to say that what the applicant did would not fall within the description of market abuse since section 118 is aimed at activities by members of the public rather than persons subjected to internal disciplinary regimes who are regular users of the market; but as I have not heard full argument on the point, my view is both tentative and obiter.

B. The Common Law submissions

68. This part of the case is concerned with what might be called conventional judicial review challenges to the decision of the Disciplinary Appeal Tribunal. In the first place, the applicant contends that the Appeal Tribunal misdirected itself in law as to its powers. Secondly, it is said that neither the Appeal Tribunal nor the Disciplinary Tribunal properly addressed their minds to what might be called the mental element required to be established before the charges were proved. There were a number of other points made in the Form 86A.

Misdirection

69. The SFA rules prescribe the grounds upon which an appeal may be made to the Appeal Tribunal. Rule 7.34 provides:

"(3) The grounds of appeal may be any one or more of the following -

(a) the Disciplinary Tribunal misdirected itself;

(b) the Disciplinary Tribunal's decision was -

(i) one which no reasonable Disciplinary Tribunal could have reached;

(ii) unsupported by the evidence or was against the weight of the evidence; or

(iii) based on an error of law, or a misinterpretation of the rules of the SFA;

.........."

70. In their decision the Appeal Tribunal, under the heading "The principles to be applied in determining the appeal" said:

"8.1 The grounds set out in [the applicant's] Notice of Appeal include that afforded by Rule 7-34(3)(a) that the Tribunal misdirected itself, but no argument has been or could be addressed to us in support of this ground. The Disciplinary Tribunal directed itself perfectly correctly on the burden and standard of proof. They made no procedural error. No issue of law or interpretation of the rules fell to be decided. The issue before the Tribunal was purely one of fact.

8.2 Accordingly, in order to succeed, [the applicant] must establish one of the grounds of appeal under Rule 7-34(3)(b)(i) or (ii) that the Disciplinary Tribunal's decision was one which no reasonable Disciplinary Tribunal could have reached, was unsupported by the evidence or was against the weight of the evidence.

8.3 In any case, the difficulties facing an appellant who seeks to establish one of those grounds are formidable. To succeed the appellant must satisfy the appeal tribunal that the decision was perverse, wrong-headed or clearly erroneous, that some finding of fact essential to the decision had no evidence at all to support it or that the evidence as a whole pointed so clearly to one conclusion that this was the only conclusion the Tribunal could properly reach. In a sense these grounds shade into each other. It would at least be surprising if a Judgment which described the case against thee Appellant as overwhelming could be overturned on any of these grounds.

8.4 But the difficulties facing [the applicant] in the particular circumstances of this case are still more formidable. It is principle well established by authority and regularly applied in the courts, that a court of first instance deciding a disputed question of fact, having seen and heard the witnesses give their evidence, enjoys a great advantage over an appellate court, who can only read the dry transcript, and that, accordingly, the appellate court should only reverse such a decision if there are clear and cogent reasons for doing so. The principle is especially applicable to a case where the decision depends upon the credibility of witnesses. It is a principle which accords with common sense and which we should clearly apply. In applying the principle, we must recognise, moreover, that the Disciplinary Tribunal, having heard oral evidence and argument for 21 days, on 5 of which [the applicant] was himself giving evidence before them, must have acquired a greater familiarity with the circumstances in which the relevant events took place than we could expect to acquire and were in a much better position than we to appreciate the significance of the many fine points of detail canvassed in the course of the evidence."

71. Mr Speaight submitted that it was an error to say that the grounds "shade into each other". An appeal on the grounds that a decision is "against the weight of the evidence" is quite different from an appeal on the public law grounds of irrationality. Thus, he submitted, the Appeal Tribunal had erected a barrier to a successful appeal which was higher than the rules required.

72. I agree with Mr Speaight to this limited extent. I think it would have been better if the word "only" in the second sentence of paragraph 8.3 had been omitted. But that said, I am not at all persuaded that there has been a misdirection. There is always a danger, when dealing with issues of this sort, of dancing on the head of a pin, to no great effect. Mr Speaight relies on Jowitt's "Dictionary of English Law" which defines the phrase "against the weight of the evidence" as meaning "such superiority in the evidence for one side over that for the other as calls for a verdict for the first". But what does this mean, other than that the weight of the evidence as it is recorded by the fact finding tribunal ineluctably leads to a conclusion that the wrong party won? "Calls for" or "ineluctably leads to" or "there can only be one answer" are all saying the same thing. If the evidence ineluctably calls for a different verdict, even after giving the decision maker full credit for the advantage of seeing and hearing the evidence, what is the practical difference between that conclusion and the conclusion that the decision was wrong-headed or perverse. There may be a very slight difference philosophically but none in reality. The one plainly does shade into the other.

73. But, in any event, the Appeal Tribunal carried out its duty and revisited and reviewed the evidence, exactly as it was required to do under the rules which governed its procedure. I can find no error of law in its approach.

The mental element

74. As to the second point, this is simply a further attempt to run a different case from that which was run before the original tribunal. There was no concentration of attention on the mental element of the charges because there was no dispute that if the applicant knew that he was manipulating the Index he knew he was acting unlawfully. If his evidence that he was unwinding a hedge was rejected, as it was, then he was guilty of knowing wrongdoing, since he was improperly manipulating the market. The point is put thus by the Appeal Tribunal:

"5. It was accepted on [the applicant's behalf] that trades effected with the sole purpose of manipulating the level of the Index were, as he realised, wholly improper. It was, moreover, no part of the case advanced on his behalf, as it might have been, that, in the circumstances in which he was required by [his manager] to effect sales ... between 4.20 and 4.30, though suspecting that [his manager] was attempting to manipulate the market, it has not been practical for him, to question his orders or refer to the Compliance Department. If that had been the basis of the defence, the proceedings before the Disciplinary Tribunal would have taken a wholly different course and might have led to a different conclusion. But the defence advanced was quite different. It was that he had no knowledge or suspicion of [his manager's] intention, but believed at all times that what he was required to do was part of the perfectly legitimate activity of unwinding a hedge in connection with the binary option. Mr Michael Ashe QC, counsel for [the applicant], summarised the defence in his skeleton argument addressed to the Disciplinary Tribunal at the close of the hearing in the following terms:-

As we have said, this case is about intent and knowledge. [The applicant] strongly denies any impropriety. His case is that he did not have the intention or motive of depressing the FTSE 100 Index, and that at all times he was acting on the instructions of his superior .. and that, at all times, he believed he was participating in the unwinding of a hedge."

75. I can say that I have looked at all the other points raised in Mr Speaight's skeleton argument and none of them has any weight. On the basis of the facts found it is clear that offences had been properly established.

Conclusion

76. It follows that none of the Convention points nor the Common Law points has persuaded me to grant this application, which will, accordingly, be dismissed.

******

With reference to R.S.C. Order 68 Rule 1 and the Practice direction of the Master of The Rolls

dated 9th July 1990 ([1990] 1 W.L.R. 1126)

I certify that the attached text records my judgment and direct that no further note or transcript need be made

*******************

MR JUSTICE MORISON: For the reasons given in a written judgment, copies of which are available, I dismiss the application which has been made in this case. I have said it in my judgment, but I will say it again now publicly, Mr Speight QC, who has done the case, has, if I might say so without causing nausea, done his submissions with the utmost skill. The fact that he was doing so free is a real privilege to the Bar Pro Bono Unit. It should be proud of what has occurred. Thank you.

MR GORDON: May I say at one that we do not make any claim for the costs.

MR JUSTICE MORISON: I am pleased about that.

MR SPEIGHT: My Lord, I have an application for permission to appeal.

MR JUSTICE MORISON: I am minded to grant the application for permission on the convention points. Would you wish to seek to persuade me further?

MR SPEIGHT: No.

MR GORDON: It is entirely a matter for your Lordship.

MR JUSTICE MORISON: There is obviously an important point here, as I have indicated. If Mr Fleurose wishes to take it further I think he should be permitted to do so. I therefore grant permission to appeal but only in relation to the convention arguments which are the important arguments. That means he will not be permitted to argue in the Appeal Court that there was some kind of misdirection in law by the Appellate Tribunal of the disciplinary process.

Neither of you have had much opportunity to look at the judgment. I dare say there are 101 errors and omissions. I may be the world's most expensive typist but I am certainly not the world's best. If you would like to send in your list of corrections.

MR GORDON: We found a few and will send them in. May I mention the most important omission which is on the title page, as it were: my name is there but not that of Mr Dominic Chambers who was my junior.

MR JUSTICE MORISON: Forgive me for that impertinence.

MR GORDON: I mention that in advance of the glitches.

MR JUSTICE MORISON: If there is any journalist here who is about to publish this could you please note on the front piece that Mr Richard Gordon QC was leading Mr Dominic Chambers of counsel, otherwise there will have to be a correction in whatever newspaper it appears in.


© 2001 Crown Copyright


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