FSA chairman warns against embracing ‘litigious society’

Financial Times: FSA chairman warns against embracing ‘litigious society’

“…Sir Philip Watts, the ousted chairman of Royal Dutch/Shell, said he planned to challenge the FSA’s findings on the company’s oil reserves.”

By Robert Orr

Published: September 22 2004

Callum McCarthy, chairman of the Financial Services Authority, last night warned companies against embracing a US-style “litigious society” by being too ready to challenge the regulator’s decisions in the courts.

The warning comes a week into the high-profile appeal by insurer Legal & General over a £1.1m FSA fine for alleged mortgage endowment mis-selling and a few days after Sir Philip Watts, the ousted chairman of Royal Dutch/Shell, said he planned to challenge the FSA’s findings on the company’s oil reserves.

Speaking at the Mansion House in the City, Mr McCarthy said: “The great majority of our enforcement cases have, until now, been resolved through the regulatory decisions committee [and] I hope that we can maintain confidence in the RDC . . . without a dramatic increase in the number of cases referred to the [Financial Services and Markets] Tribunal.

“It is in all our interests – not simply the FSA’s – that this should happen. The UK has traditionally enjoyed over North America the advantage of being a less litigious society. There is much to be lost if that advantage is eroded.”

Companies have the right to appeal to the Financial Services and Market Tribunal against enforcement action taken by the FSA. However, the tribunal’s establishment in December 2001 has led to a sharp increase in the number of appeals lodged.

This year there have been 24 references to the tribunal, chaired by an independent judge, exceeding the total of 23 for the whole of last year. Of the 59 cases referred to the tribunal since 2002, nine have been disposed of through a hearing, 27 by other means, such as mediation, and 23 are pending.

Mr McCarthy said: “It is correct there should be recourse to a body independent of the FSA. Access to an open, independent and impartial judicial process is a fundamental right and we welcome the role played by the tribunal. We should all recognise that if this occurs it inevitably leads to delay and additional costs.”

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