The European Parliament plenary has resoundingly backed the calls made by its Committee of Inquiry into Equitable Life for the UK government to compensate victims of the company’s near-collapse and for wide-ranging changes to be made in the drafting and implementation of EU financial services legislation.
On 19 June 2007, the European Parliament approved its Committee of Inquiry into Equitable Life’s findings by a huge majority (602 votes to 13, with 64 abstentions).
The case’s some 1.5 million victims across several EU countries has brought to light a number of broader, long-term concerns relating to the EU single market in services, the Committee said, with the inquiry’s findings “going far beyond the grievances raised in the two petitions to the Parliament from victims of Equitable Life’s difficulties, which prompted the investigation”.
The Parliament’s report argues that, given the British government’s “failure to comply” with EU insurance law (notably the UK regulators’ failure to ensure that Equitable had sufficient reserves to pay its policyholders), the government should assume responsibility and “devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders within the UK, Ireland, Germany and elsewhere”.
Keen to build consumer confidence in a healthy European pensions and insurance market, especially given demographic trends in Europe, the report makes a raft of proposals on the nature and form of EU financial services legislation, the rights of consumers who buy financial services products in EU countries other than their own, and the role of the Parliament and Commission in monitoring the implementation of legislation in member states.
Referring to the consumer rights of policyholders outside the UK who found themselves unable even to apply for compensation when the authorities in different countries tried to shift the responsibility to each other, Rapporteur Diana Wallis said: “I think we all understand and appreciate the importance of financial services companies – and indeed other companies – being able to trade and do business across the European Union…if we are going to do this – and it is clear that we are – we have to be absolutely crystal clear who is responsible for what.”
The Committee further stated that the UK’s technique of implementing EU insurance legislation in a piecemeal fashion (through a number of different legal acts) “lacks clarity” and that “UK regulators and authorities did not adequately respect the ultimate purpose of the Directive” and that “the implementation process as a whole was flawed”.
Internal Market Commissioner Charlie McCreevy said that the inquiry's work was "a job well done", adding: "I am personally pleased that the committee of inquiry went beyond the specifics of the Equitable Life case and took a broader look at how transposition and implementation checks are done more generally. All parties received a fair hearing. We have learned important lessons and take this on board for the future."
The near-full endorsement of the committee’s report by the full Parliament was welcomed by its author, MEP Diana Wallis (ALDE, UK), who said: "I believe this report will assist the victims in a pincer movement with the UK Parliamentary Ombudsman, perhaps finally to deliver compensation. More importantly, I hope it will deliver a huge jolt to our institutions about our lawmaking processes and the European system of justice."
MEP Mairead McGuinness (EPP-ED), who chaired the Committee, stressed the value of the inquiry in bringing Parliament's work closer to the citizens. She also stressed: "The UK was flawed in its implementation of the Third Life Directive. Yes, it ticked the boxes, but its day-to-day application was deficient and inadequate...if the cross-border dimension of consumer protection is not properly taken into account, can we blame consumers in the EU for not shopping more across borders?"
Greens/EFA shadow rapporteur Heide Rühle said: "The EP's inquiry has made clear that the UK failed to ensure Equitable Life met its obligations under EU law and that flaws in the UK regulatory system meant it failed to react in time to prevent or limit the losses suffered by Equitable Life's customers. The UK government must take responsibility for these failings...given the prohibitively high cost of individual challenges through national courts and the cross-border nature of financial services, we welcome the recommendation to introduce EU rules allowing customers of financial services to join together in bringing an action before courts - a 'class action'. The current system clearly punishes cross-border customers, leaving them at the mercy of a ping-pong game between the different national authorities."
More than a million policyholders of British life assurance company Equitable Life lost money when the company ran into financial difficulties, primarily due to mismanagement by Equitable.
Committees of inquiry, as provided for in the Maastricht Treaty, allow Parliament to investigate alleged contraventions or maladministration in the implementation of Community law. Parliament has set up only two previous inquiries under this procedure, both completed in 1997. The first investigated the Community transit system and the second the bovine spongiform encephalopathy (BSE) crisis.
EU official documents
- Parliament:EQUI: Temporary Committee of Inquiry into the Crisis of the Equitable Life Assurance Society
- Parliament:European Parliament to vote on findings of Equitable Life inquiry
- Parliament:Equitable Life: not just a British affair