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Verdict in Shell case has wider ramifications

Financial Times: FSA’s legal victory leaves questions unanswered

Verdict in Shell case has wider ramifications.: “In avoiding being derailed by a legal challenge from Sir Philip Watts, former chairman of Royal Dutch Shell, the Financial Services Authority yesterday scored a notable victory.”: “The FSA said it was still pursuing further enquiries relating to him.

Wednesday 14 Sept 2005

By Alison Smith

Published: September 14 2005

In avoiding being derailed by a legal challenge from Sir Philip Watts, former chairman of Royal Dutch Shell, the Financial Services Authority yesterday scored a notable victory.

Yet because his application fell at the first hurdle, more significant obstacles may still trip up the regulator in its efforts to combine fast action against companies with pursuit of individuals.

Sir Philip had argued that the FSA treated him prejudicially by failing to involve him in the procedures behind its decision to fine the Anglo-Dutch oil group £17m for mis-stating its oil and gas reserves. Even though the notices issued by the FSA did not single him out, he argued that anyone reading them would understand they were criticising individuals seen as responsible for the conduct at the heart of the watchdog’s complaint.

The Financial Services and Markets Tribunal expressed sympathy for Sir Philip’s predicament, but rejected his line of argument.

Instead it said third party rights in the procedure were available only to those who were identified in the notices, not to those who might be identified as a result of other information available. This saves the FSA from having to give third-party rights to entire boards of directors or tranches of senior management in a way that would prevent both the regulator and the company concerned from drawing a speedy line under past offences.

But the FSA’s win does not clear all barriers in the regulator’s path. Even though this ruling setting a limit to third-party rights must surely restrict the number of individuals able to bring a challenge, the tribunal explicitly left wide open for future decisions whether it is fair for the FSA to take action against a company and then later against individuals for the same conduct.

As for the fallout from the Shell fine, Sir Philip yesterday made clear that he still believed the FSA’s findings against Shell were flawed and that he would be vindicated if there were proceedings against him. The FSA said it was still pursuing further enquiries relating to him. There is too much at stake for each side for this to reach early resolution.

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