Law Panel firms revolt over EU takeover plans

The Financial Law Panel, set up about three years ago by the Bank of England and the Corporation of London in response to the swaps problems at London's Hammersmith and Fulham council, is facing a revolt by some members over its conciliatory attitude to the proposed European Union directive on takeovers.

One law firm is said to be so angry over what it regards as the Panel's over-sympathetic response to the plans for harmonisation of takeovers across Europe that it is planning to withdraw its funding.

The threat comes days after a House of Lords Select Committee concluded that the European Commission proposals for harmonisation were ill-conceived and should be opposed by Britain. The Lords have taken the same hostile view of the proposals as the Takeover Panel, the non-statutory body that referees City bids.

The Department of Trade and Industry has already made clear that it agrees with the Takeover Panel that the European plans would lead to a greater risk of tactical litigation by companies involved in bids.

The Commission proposals for harmonising takeover rules seek to extend the UK system across Europe. But by bringing the voluntary regime of the Takeover Panel into a statutory framework, they appear to create openings for legal review - and therefore threaten the speed and flexibility of the current system.

The Financial Law Panel submitted a paper to the House of Lords committee in which it said it did not think the directive would have much practical effect. It said it had had conversations with various people about its views, but denied it had received withdrawal threats.

City solicitors believe it involved itself in this matter because its chairman, Lord Donaldson, was interested as a result of being the judge in the Datafin case, which set down that the courts would not generally interfere in bids while they are being conducted.

The Financial Law Panel is technically a subsidiary of the Bank of England. It is funded by about 150 subscribers, drawn from banks, insurance companies, law firms and accountancy practices, which each pay an annual subscription of pounds 4,000 in return for receiving all the body's publications and help with resolving problems that occur in the various markets. It does not deal with individual disputes.