Lloyd’s name takes compensation fight to EU Court of First Instance

By Peter Chapman

Date: 16/10/03

THE European Commission is being sued over its alleged failure to ensure that the UK legal system refers appropriate cases brought by British citizens to the European Court of Justice (ECJ) in Luxembourg.

The case is the latest intriguing twist in the Commission's long-running investigation into whether the British government exercised proper control over the running of the Lloyd's of London insurance market, in line with EU rules.

European Voice has learned that the ECJ's second chamber, the Court of First Instance (CFI), has accepted a case brought by John Pascoe, the bankrupt Lloyd's investor who triggered the Commission's own investigation.

He alleges that the Commission failed in its duty to ensure that UK courts referred his original complaints over Lloyd's to Luxembourg.

The House of Lords, the UK's highest court of appeal, effectively exhausted Pascoe's efforts to seek justice in his country by refusing to refer the case to Luxembourg, even though Pascoe contended that the UK government had manifestly failed to meet the requirements of EU insurance laws.

If he wins his case, Pascoe believes the CFI may order the Commission or the UK government to pay compensation for the losses he, and other investors or "names", faced when they were made to pay their share of massive asbestos-related losses in the market. Pascoe has claimed that names would never have sunk their money into the market had a proper audit, in line with the European rules, been carried out.

Jonathan Todd, the spokesman for Internal Market Commissioner Frits Bolkestein, said he was unaware of the Court of First Instance case.

But he confirmed that the EU executive is currently investigating the UK legal system to decide, in light of its Lloyd's probe, whether UK citizens are being denied access to the European Court.

The government wrote to the Commission in March saying the House of Lords' rules were being changed to make sure plaintiffs are always given a reason whenever it denies them leave to appeal to the ECJ. But if the Commission decides the UK has a case to answer, the EU executive itself may sue.

"We are currently in the process of analyzing whether the Commission considers that they are fully in compliance," he said, adding that the ECJ has already ruled against Sweden in a similar case.

Pascoe welcomed this. "It is proof that our claim to the European Court of First Instance is valid," he said.

The legal twist follows the Commission's decision, yesterday (15 October), to drop its investigations into Lloyd's.

The decision, forecast by this newspaper in August, followed an intense probe into the workings of the complex insurance market.

Bolkestein said the UK had put in place a new regime in 2001 that meets the terms of the EU's insurance rules.

In a statement, vetted by the Commission's legal department, the Dutchman gave strong hints that the previous regime was not in compliance with the rules.

"I believe the Commission's infringement proceedings have had a strong influence in the development of a new legal framework in the UK for the regulation and supervision of Lloyd's that is in line with the requirements of the EU insurance directives."

Officials say the Commission is not allowed to issue rulings on past failings - and doing so would leave it wide open to a legal challenge from the UK.

But his vague words fell short of the clear answer demanded by Pascoe and his allies.

He said nothing short of a clearly worded condemnation of the UK's previous regime, or internal Commission documents saying the same, would be good enough to convince a UK court to re-examine his claims for compensation. "This is effectively a ruling in our favour, but we can't use it," said Pascoe.

In the meantime, the European Parliament has issued Bolkestein with a 15 November ultimatum to explain why he decided not to take the UK to task.

If he fails to satisfy deputies, the Parliament may trigger a formal inquiry into the case.