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"Equitable Life" European Committee of Inquiry

Publication of Ann Abraham's report - 16 July 2008

DIANA CALLS FOR JUSTICE AT LAST FOR ALL EQUITABLE POLICYHOLDERS

Commenting on the UK Parliamentary Ombudsman's findings on the Equitable Life financial crisis published today, Diana WALLIS MEP, who drafted the European Parliament's report in a parallel inquiry into Equitable Life, said:

"I congratulate Ms. Abraham on her detailed work, and for including all EU policyholders of Equitable Life in her findings.

"Ms. Abraham's findings of serial regulatory failure, maladministration and injustice should trigger more than an apology. This is a damning indictment of UK financial regulation throughout the nineties. In the case of Equitable Life, such regulation fell well below domestic and EU standards.

"Her conclusions, similar to the ones drawn in my report adopted by the European Parliament last year, make the case for a comprehensive, transparent and simple compensation scheme irresistible. I also hope that both reports combined will deliver a huge jolt to our institutions about our regulatory and lawmaking processes.

"I now call on the UK Government to take a clear position on the European Parliament's findings."

Notes:

Ann Abraham has now been formally invited to make a statement before the Petitions Committee in the course of its meeting on October 6 & 7, 2008.

11 December 2007

LACK OF UK RESPONSE TO EQUITABLE LIFE REPORT TOTALLY UNACCEPTABLE

Speaking in response to the UK Parliamentary Ombudsman's further postponing of the publication of her report into Equitable Life, and the British government's continued refusal to respond to the European Parliament's resolution on the issue, Diana Wallis MEP, the European Parliament's rapporteur into the Equitable Life crisis, said:

"The European Parliament carried out an 18-month inquiry and backed the resulting report with an overwhelming majority.

"It is both immoral and illegal for the government to leave so many Equitable Life policyholders without a remedy. I cannot accept the fact that the European Parliament faces the prospect of waiting more than a year between its report on the crisis at Equitable Life, and any formal response by the government most concerned by it.

"The European Commission provided a clear and detailed response to us earlier this autumn, but so far there is not even an acknowledgment from the British government.

"Such a stance is all the more surprising following the prompt rescuing of Northern Rock. I will make sure the Petitions Committee of the European Parliament, to whom several Equitable policyholders came for redress in the first place, takes this matter up once again."

Notes to Editors:

The UK Parliamentary and Health Ombudsman wrote to MPs last week, postponing the publication of her report until the summer of 2008 at the earliest.

The President of the European Parliament, Hans-Gert Pöttering, wrote to Gordon Brown on 5 December 2007 asking the Prime Minister to "ensure that the authority of the Parliament and of its right of inquiry (...) are not prejudiced by the lasting lack of formal response by the British Government".

19 June

The European Parliament's report into what went wrong at the troubled mutual Equitable Life, drafted by UK Liberal Democrat MEP Diana Wallis, has been debated and approved by the European Parliament today in Strasbourg (602 votes in favour, 13 against, 64 abstentions).

The report is the result of months of interviews and investigations by the Parliament's Committee of Inquiry set up in January 2006.

Diana Wallis said in Strasbourg today:

"For the victims of the Equitable Life failure, the report delivers an analysis of the UK's flawed process of implementing EU law which, combined with the imminent report of the UK Parliamentary Ombudsman, should act as a pincer movement and deliver compensation to the victims. Past UK governments, Labour and Conservative, must carry a portion of the blame for this fiasco.

"But this report also identifies a crisis on a truly European scale.

"For the sake of all the citizens affected, we need to be absolutely crystal clear about who is responsible for what when it comes to seeking redress.

"We need stronger and more visible procedures and there must always be the fall-back of affordable legal process across borders. Guaranteeing such rights is essential for the internal market to function properly. In other words: no mobility without liability.

"This report is also a huge jolt to the EU institutions and I hope that the Commission acts properly on its findings. If our recommendations are taken on board, this will enhance the future lawmaking process. What we need is a proactive Commission combined with a watchful Parliament.

Read the report adopted by the European Parliament

See how individual MEPs voted

6 June: Publication of Report as adopted by the Committee of Inquiry

Read the EQUI Report in full

8 May: Report by adopted by Inquiry Committee

UK Liberal Democrat MEP Diana Wallis's report of the probe into the UK authorities' role in what went wrong at the troubled mutual Equitable Life has been approved by a large majority in the European Parliament's Committee of Inquiry, today, 8th May.

Diana Wallis said:

"For the victims of the Equitable Life failure, the report delivers an analysis of the UK's flawed process of implementing EU law which, combined with the imminent report of the UK Parliamentary Ombudsman, should arm the victims with powerful findings.

"For European Parliamentarians this process has provided a once in a generation opportunity to focus on the law-making and implementation process of one particular directive, the third life directive. If our recommendations are taken on board, this will enhance the future lawmaking process.

"We have to get tough about access to cross-border redress. Whilst our preference maybe for ADR systems, they have to be strong and more visible and there must always be the fall-back to cost-effective legal process across borders. It is essential that such rights be guaranteed in an internal market. In other words, no mobility or access to the internal market for business without concurrent rules on liability.

"Blame is attributed to the UK government for failure to transpose and implement the 3rd Life Directive coherently and for their generally hands-off or light touch regulatory system. The report also contains numerous forward-looking recommendations on better EU lawmaking and better access to cross-border redress for consumers and citizens."

Diana Wallis's report will now go to the full Plenary of the Parliament in Strasbourg in June.

--

notes: the report was adopted with 13 votes in favour, none against and four abstentions.

11 April: Committee meeting: Debate on Draft Report

Today, after a detailed discussion on the draft report presented by Diana Wallis, the Committee decided to fix the deadline for amendments at noon on 16 April.

The draft report and the draft recommendation, with any amendments, will be put to a vote from 15h on 8 May during the Inquiry's last meeting.

30 March Publication of draft Wallis Report

Earlier in 2006, UK Liberal Democrat MEP Diana Wallis was appointed by the Parliament to write the report, which is a probe into what went wrong at the troubled mutual Equitable Life. This is the first such Committee of Inquiry in 10 years and it has heard evidence from a wide range of experts, policy holders, government representatives and others. The Inquiry has travelled to London and Dublin, held eleven public hearings and considered hundreds of pieces of evidence, both written and oral.

Diana Wallis MEP said:

"The report is critical of the UK government's light touch approach to regulation and its piecemeal implementation. The European Commission could also have done more to enforce proper implementation.

"It is clear that redress systems are a mess - people were pushed about from one place to another. They had a totally unsatisfactory response. This is not what people should expect from Europe's internal market. We have to do better if people want to have the confidence to save.

notes:

Click here to see the draft Wallis Report

*The Wallis report, is scheduled to be voted on, together with any amendments tabled by members, at a future meeting of the Committee of Inquiry on 3rd May.

*Recommendation 9 (p.352) states that: "the committee firmly believes that the UK Government is under an obligation to assume responsibility. The Committee therefore strongly recommends that the UK Government devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders both within the UK and abroad."

25 January: Evidence session

The Inquiry took evidence from the European Commission's legal service, and from three directorates general (Internal Market, Industry and Environment), focusing in particular on transposition and application of Community law.

Speaking after the meeting, Diana Wallis MEP (UK, Lib Dem), Committee Rapporteur said:

"I welcome the Commission's insistence on the inclusion of correlation tables in all its proposals for directives. It is therefore deplorable that the Council of Ministers, and in particular the UK Government, still systematically delete these clauses before legislation is passed.

This is about transparency and making sure that European citizens can exercise their rights properly. As the Equitable Life case shows, complex legislation is often transposed in a piecemeal fashion through dozens if not hundreds of amendments to different national texts. To expect the Commission to find the 'needle in the haystack' without some kind of guidance is unrealistic and unnecessarily burdensome."

23 November: Evidence Session

The Committee heard Charles Thompson (CEO of Equitable Life), Simon Bain and internal market Commissioner McCreevy.

18 October: Ombudsman Delay Unfortunate

Commenting on the UK Parliamentary Ombudsman's decision to further postpone the deadline for publication of her second report into Equitable Life, Diana Wallis MEP, Rapporteur to the European Parliament's Equitable Life Inquiry, said:

"I am surprised that such extensive and potentially critical information has until now been withheld by the Government. This so-called 'misunderstanding' is unfortunate to say the least. The European Parliament's Committee of Inquiry will consider the implications of this delay at its next meeting in November and will continue to carry out its mandate, regardless of this development."

Notes:

The Ombudsman's update: http://www.ombudsman.org.uk/news/hot_topics.html#e

The Ombudsman was expected to release her report this Autumn. The date for publication is now set at May 2007 at the earliest.

16 October : Delegation to London

The Committee had several meetings and a press conference in the European Parliament's offices, the Treasury and the Ombudsman's offices.

6 October: Delegation

The Committee sent a delegation to Dublin to interview policyholders, regulators and ombudsmen.

4 October: Evidence Session

The Committee heard Mr Bjerre-Nielsen (CEIOPS), Ms Liz Kwantes (ELMHG) and Mr Leslie Seymour.

13 September: Evidence Session

The Committee heard Thomas Steffen (German regulator) and Kurt Schneiter (Swiss regulator). Although Switzerland is not a member of the EU and has not had to implement EU legislation in the area, it was enlightening to hear the comments from an "outsider" country that has a very developed financial services industry.

11 July: Evidence Session

The Committee heard evidence from Richard Lloyd (ex- Equitable sales force) and Stuart Bayliss (Annuity Direct), and then proceeded to an exchange of views on ongoing work.

4 July: Interim Report adopted

Regulators' ping-pong of Equitable Life victims "unacceptable"

The European Parliament adopted an interim report by the Temporary Committee of Inquiry into the Equitable Life affair.

Rapporteur, Diana Wallis MEP, said:

"The starting point for this report has been a disastrous personal event for thousands of EU citizens: the loss of their pension investments. The challenge now for us as the European Parliament is to exercise our supervisory powers over EU legislation. We have perhaps a once-in-a-generation chance to look in detail at the implementation process of EU law, taking one particular directive as an example".

She continued:

"One of the main themes of the debate was the way the various national regulators have played ping pong with the victims. In this inquiry we have heard from victims sent from pillar to post. Their stories have been heartrending. They have made me angry - angry that they have been let down by their experience of our internal market for financial services. For them it has not produced extra choice, but rather the loss of life savings with no redress mechanisms available.".

She revealed that in an information note provided by the European Commission to the Committee of Inquiry, the Commission said:

"The directive can only work smoothly if there is good cooperation between home and host state authorities. It is not a satisfactory situation, where aggrieved policyholders are referred by the host state authority to the home state authority and are then sent back by the home to the host authority, thus to find themselves unable to have their case examined by either. The Commission plans to seek further discussions with Member States."

Diana Wallis responded, "I should jolly well hope so! If this inquiry does nothing else, I hope that we can put this injustice right!"

22 June: Fourth Evidence Session

The Committee questioned officials from the Treasury, the Financial Services Authority, the Government Actuary's Department and the Irish regulator; and finally took evidence from policyholder and accountant Mr Slater.

The regulators took the position that there had been absolutely no violation of EU law and that generally speaking, the society was the author of its own misfortunes (quoting the Penrose report). Mr Slater provided detailed evidence to the Committee that the regulators had knowledge of certain facts prior to 1998. Many questions, often very detailed, were asked, and some further answers will be provided in written form by the regulators. The Committee unanimously adopted Diana Wallis' interim report, which does not seek to draw any conclusions but which asks the European Parliament for an extra three months for the Inquiry to complete its work (which would bring the deadline to 18 April 2006).

Third Hearing (May)

The Committee heard evidence from the Trapped Annuitants Association, DAGEV (the German Equitable policyholders), and Martin McElwee (author of a pamphlet on the FSA). The discussion was fruitful, with the European Commission intervening on several occasions, and promising to send an explanation on the "philosophy behind the Life insurance directives". There was broad agreement, and even the Commission conceded that, concerning the system of passporting under the Life Directives, in particular concerning the German policyholders, something went very wrong, with many policyholders being "bounced" from one regulator to another.

Press Release of 29 May

Ahead of today's meeting of the Committee of Inquiry into the collapse of the Equitable Life Assurance Society, Diana WALLIS (Lib Dem, UK) the rapporteur said:

"Today's evidence should be particularly revealing in that we will hear from policyholders from different Member States who have either been prevented from leaving the troubled mutual, or have simply found themselves with no avenues for redress."

"This inquiry raises not only the particular concerns of the European citizens who are directly affected, but also much wider questions as regards the adequate functioning of the internal market for insurance products, the proper implementation of Community law and the adequacy of redress mechanisms available to citizens, in particular in cross-border situations where the regulator concerned is under home-country control."

The Committee will take evidence from two large groups of victims of the company's demise: firstly the Trapped Annuitants association, representing 55,000 annuity holders, and secondly the German policyholders association. The Committee will also hear Martin McElwee, author of a controversial pamphlet criticising the creation of an all-powerful Financial Services Authority in the UK. This will set the scene for the regulator itself to attend the meeting next month, accompanied by the UK treasury, two key players in the affair.

Previous evidence has put into doubt the "light touch" regulation of life insurance as operated in the UK, and has revealed a worrying lack of redress for policyholders, particularly in Member States other than the UK. These were largely left in the dark and were originally denied access to non-judicial forms of redress. Others who had access to such mechanisms took so long to get a proper response that they were then barred from pursuing any legal claims through the courts.

Who's on the Committee?

In addition to Diana Wallis (author or "rapporteur"), and the Irish chair Mairead McGuinness, the Committee counts 20 other members from nine different countries.

b

Diana Wallis (Rapporteur (author) of the Inquiry) and Mairead McGuinness (Chair, Ireland)

Timetable

  • March 2006: adoption by Committee of Diana Wallis' Working Document
  • 21-22 June 2006: adoption by Committee of Interim Report
  • 4-5-6 July 2006: adoption of interim report by Plenary
  • September-December: more sessions of the Inquiry in Brussels and possibly London
  • November-December: expected date for publication of UK Parliamentary Ombudsman's second report on Equitable Life
  • 18 January 2007: formal deadline for final report
  • 18 April 2007: deadline for final report if extended by 3 months by the Plenary
  • 18 July 2007: deadline for final report if extended by a further 3 months by the Plenary

Relevant texts concerning the timetable:

-According to the Inquiry's mandate, "the Committee of Inquiry shall present an interim report to Parliament within 4 months of starting its work, with a view to presenting its final report to Parliament within 12 months of the adoption of this decision [18 January 2006]";

-An agreement between the Union's main institutions in 1995 makes it clear that: "by means of a reasoned decision the European Parliament may twice extend the twelve-month period by three months. Such a decision shall be published in the Official Journal of the European Communities."

Background

More than 1 million policyholders - including over 15.000 non-UK residents - suffered losses exceeding 5 billion Euros, by way of reductions to their retirement savings, due to the demise of the UK insurance company Equitable Life. British citizens have petitioned the European Parliament on this and their petitions are still being dealt with. In addition, on the initiative of Diana Wallis earlier this year, the European Parliament has obtained the authorization to set up a Committee of Inquiry to examine the facts and to ensure that European law is upheld.

Whilst the failure of Equitable Life has already been subject to several investigations in the UK, there are EU issues that need confronting. Did the UK properly implement EU law so that there was effective regulation? Was the loss caused to citizens across the EU attributable to that failure and is there or indeed should there be redress mechanisms available in this situation?

"I am delighted that the Committee of Inquiry is now formally underway and we can start our real work," said Diana Wallis MEP. "This is the first such Committee of Inquiry in 10 years which demonstrates the importance of the issues raised by the failure of Equitable Life across Europe, not just in the UK."

"All options are open in terms of the proposals the Committee might make, however, we should not raise the hopes of individual victims that this exercise will lead directly to them obtaining compensation."

"I emphasise that this is a Europe-wide inquiry and we will be looking at areas untouched by other investigations made to date, namely the implementation of EU law, comparing the adequacy of UK regulation against that in other EU countries and importantly assessing the availability and effectiveness of redress systems available across borders to victims in these circumstances."

Second Hearing

Documents and Links