EUROPE - The UK Government could face legal action by the European Commission if a committee of MEPs finds it did not correctly apply European legislation in the Equitable Life debacle.
Over a million UK policyholders and over 15,000 policyholders in other EU countries including Germany and Ireland suffered major losses to their pensions or investments, following alleged mismanagement at Equitable Life.
A European Parliament committee of inquiry is to look into the case, investigating the way in which the UK authorities applied the relevant Council directives, whether the EC properly monitored the transposition of Community law and assess allegations that UK regulators consistently failed to protect policyholders by rigorous supervision of accounting practices and of Equitable Life’s financial situation.
The committee will be composed of 22 MEPs, and although the exact make-up will reflect the political groupings in the European Parliament, a Parliament spokesman said it would not be surprising if it included a number of British MEPs.
The committee has the power to invite EC institutions or governments to send representatives to give evidence, and it can also ask national or EC authorities to provide documentary evidence.
“This type of committee can only be set up to look into cases of non-respect for EU laws,” the spokesman said. “There would be no immediate legal consequences, but it does change the atmosphere in which this develops. If they come to the conclusion that EU law was a breached, it will put pressure on the EC to refer it to the European Court of Justice, taking the UK to court for not properly applying EU legislation.”
The EC’s role is to ensure that laws are respected by member states, and the EC in turn is scrutinised by the European Parliament.
The spokesman said that it was unusual for such a committee to be set up for such a specific issue. A similar committee was set up in the wake of the BSE crisis.
The setting-up of the committee follows a certain amount of friction between the EC and the European Parliament over the Equitable Life affair.
“We have been trying to get the Commission to say if they believe the relevant rules were applied by the UK during the relevant time,” says the spokesman.
“The EC has repeatedly refused to make that retrospective judgement. They are happy that the UK is applying the rules correctly.”
He went on: “This acts as a further reminder that it is important for financial regulators in member states to take European legislation into account.”
The committee has twelve months to complete its work and submit a report to Parliament, but an interim report will be delivered after four months. The decision to set up the committee still has to be confirmed by the full Parliament this Wednesday.