EMAG Address to EU Parliament Petitions Committee
25th June 2008
Tom Lake: EMAG Board Member and Co-Petitioner

Mr President, Members of the Executive and Committee,

We thank you for your continued attention to our petition.

The letter from the President of the Parliament to the British Prime Minister, Gordon Brown, sent last December, was rebuffed by the British Chancellor of the Exchequer with the rationale that a UK government response must await the publication of the report of the UK Parliamentary Ombudsman (PO), Ann Abraham – a report which his own ministry had three times delayed. Nevertheless, the publication of that report is near; the Ombudsman has indicated that she will lay her report before the UK Parliament in the week starting 14th July.

Without knowledge of the content of that report we are confident that it will be supportive of our case and of your special EQUI committee's report, with multiple findings of maladministration and recommendations for compensation.

We hope that you will take another opportunity to look into this matter with the report in front of you.

What reception might her report receive? The identification of government maladministration and the recommendation of compensation by the PO have recently, and repeatedly, been strongly resisted by the British Government. Indeed, adequate compensation in the recent occupational pensions case investigated by the PO was only secured after a high-profile public campaign, litigation and much pressure in Parliament for more than 18 months.

As a result of that occupational pensions investigation, the legal relations between Government Ministers and the Parliamentary Ombudsman have very recently been restated by the English Appeal Court (6th February), which ruled that Ministers are not bound by the conclusions of the Ombudsman. It clarified that the PO is free to make her case to Parliament, that Ministers are not bound to accept her conclusions, but that the decisions of Ministers in respect of those conclusions are subject to judicial review on the grounds of unreasonableness.

It was always the case that Ministers were not bound by the PO's recommendations for action or compensation. Now we understand that Ministers are not bound by the conclusions of the Ombudsman on maladministration, despite her broad powers to compell witnesses and acquire evidence and despite her sole function being to identify government maladministration. The position seems to be that claimants, who go to the PO seeking a form of free alternative dispute resolution, will be forced to the Courts to challenge the decisions of Ministers or will have to abandon their claim unless they have broad Parliamentary support.

That is the context into which the PO's report, four years in the making, and undoubtedly thousands of pages in length, will be put before the British parliament and public.

Our case has been strengthened by recent developments. The UK financial regulator, most recently the Financial Services Authority (FSA), has been shown to have been responsible, and indeed has admitted catastrophic failure, in a further crisis of UK financial regulation, the run on the Northern Rock bank last autumn.

In its report on Northern Rock the Treasury Select Committee of the House of Commons said,

“The FSA did not supervise Northern Rock properly. It did not allocate sufficient resources or time to monitoring a bank whose business was so clearly an outlier; its procedures were inadequate to supervise a bank whose business grew so rapidly. “

These are familiar allegations to this committee. Despite the technical change to risk-based regulation, the fundamental weaknesses of the regulator's approach have remained unchanged.

Your EQUI special committee recommended a role for the Commission in reviewing means and adequacy of national regulators. Those are exactly the weaknesses identified by the House of Commons Treasury Select Committee in the Northern Rock case.

On the broader recommendations of your special committee, we see only slow progress to date: We welcome the establishment of a Consumer Protection Committee by CEIOPS, however late. We also understand that the recommendations of your committee's report on consumer protection are being considered by Parliament as part of the Solvency II process. But we know of no progress on cooperation between national regulators on Equitable Life.

Your bold investigation has already yielded important results for Europe as a whole. We recognise these advances and encourage you to continue your interest as battle is once again joined in the UK, for the essential injustice remains unaddressed after seven years.

Indeed, we believe hat of the million and a half victims of this crisis, some thirty thousand may have already dies without compensation and perhaps a hundred are dying every week.

This committee still has a vital role to play in successful resolution of the Equitable Life crisis.

Tom Lake
Director of EMAG Ltd
and co-petitioner