Rights issues for the FSA

10 March 2010 12:00 pm

Regular readers of this column will be aware of the significance of the law of human rights with regard to the FSA’s
regulation of, and relationship with, IFAs. In particular, human rights issues arise in the context of challenging the lawfulness of the lack of a limitation long stop in the Financial Ombudsman Service rules and in challenging the legality of the proposal to disqualify all financial advisers who fail, by December 31, 2012, to reach the new benchmark qualification of QCA level four. It is worthwhile, therefore, exploring the general importance of human rights in our society today.

In his book, The New British Constitution, published last year, professor of government at Oxford University, Vernon Bogdanor, describes the Human Rights Act 1998 as the cornerstone of the British Constitution. Nevertheless, human rights have had a mixed press.

For most people, the concept of human rights means everyone is treated with respect and in accordance
with well recognised values inherent in civilised societies. For others, it means requiring those in authority to protect
the interests of criminals and terrorists.

Under different headings, human rights have been important to UK citizens for centuries. Everyone is familiar with the expressions the liberty of the subject and the rule of law. The ideals and principles behind those expressions overlap considerably with the modern concept of human rights.

After the Second World War, as Professor Bogdanor points out, there was a general feeling in Europe that the role and powers of the courts needed strengthening “to guard against new outbreaks of popular intolerance” and “to ensure that the Continent was never again disfigured by the horrors of fascism and national socialism”. The result was the European Convention on Human Rights, signed in Rome in 1950.

UK lawyers played a major role in the drafting of the convention. It is not surprising, therefore, that it reflects British values of freedom of the individual.

One of those lawyers was Sir David Maxwell-Fyfe who later became Home Secretary and then Lord Chancellor in the Conservative Government
that was elected in 1951. Professor Bogdanor notes that at that time, the convention had strong support from Conservative lawyers and the then
Conservative leader, Sir Winston Churchill, “who believed that it could help to unify Europe on the basis of the rule of law”.

The UK was one of the first countries to ratify the convention. In doing so, the UK as a state bound itself to comply with the convention and answer to the European Court of Human Rights in Strasbourg for any failures.

But for many years, Britain failed to incorporate the convention into general law so that its residents could seek the protection of its own courts when the Government or other public authorities acted in breach of the rights enshrined in the convention. It was a Labour Government that introduced the bill which in due course became the Human Rights Act 1998.

The general effect of the act is to give the force of law in the UK to most of the rights within the convention. The act achieved this by first of all requiring all courts in the country to interpret and give effect to all legislation in a way that is compatible with the convention rights, so far as it is possible to do so.

If one of the senior courts is satisfied that a particular statutory provision is incompatible with a convention right, it may make a declaration of that incompatibility. It is then up to the relevant Government minister to decide whether to promote new legislation to remove the incompatibility.

So far, the Government has either introduced legislation to remove an incompatibility or is consulting to do so.

Second, the act provides that it is unlawful for a public authority to act in a way that is incompatible with a convention right. If it does so, anyone who is a victim of the unlawful act is entitled to an appropriate remedy, which, in some circumstances, may include damages.

A public authority will not have acted unlawfully if it was required to do so by an act of Parliament.

The obvious question then is what is a public authority? The answer in the act itself is that a public authority includes a court or tribunal, and “any person certain of whose functions are functions of a public nature”. There can be little doubt the FSA is a “person certain of whose functions are functions of a public nature”. It follows therefore that the FSA is a public authority and is under a statutory duty always to act in a way that complies with the act.

That cannot be emphasised too strongly. In other words, the FSA must always respect the human rights of all those it deals with.

In the context of the horrific abuses of human beings perpetrated by the totalitarian regimes of Europe, both before the Second World War and since, it is natural that the convention and the act should enshrine the right to life, the right not to be tortured or to be subjected to inhuman or degrading treatment or punishment and the right not to be enslaved or held in servitude. Those rights are taken for granted by British people.

There is, however, an important general qualification. There are very few absolute rights. In the act, only the right not to be tortured is absolute.
Other rights are subject to a qualification, such as what is possible or reasonable, taking into account the similar rights of others.

The right to life is subject to the countervailing right of self-defence and the right to effect a lawful arrest. Thus, for example, if a person is attacked, he or she is entitled to act in self-defence, using no more force than is absolutely necessary, even if that results in the death of the assailant.

In the context of the actions of the FSA, there are two human rights in particular that are important to IFAs.

The first is that every person is entitled to the peaceful enjoyment of his possessions; no one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law. In other words, we are all entitled to keep and enjoy what we have, including our hardearned assets, such as our investments and the value of our businesses, and no one may take anything from us except in accordance with the law.

Thus, a disgruntled client cannot recover compensation from an adviser except by legal process such as complaining to the FOS.

But the second relevant article provides that no one should be discriminated against in relation to the rights and freedoms secured by the act. Therefore, it is wrong for the rights of advisers to be discriminated against by not applying the general law of limitation but applying a different rule that does not recognise the 15-year long stop.

None of the rights enshrined in the convention and protected in the UK is more than what a reasonable person would expect as part of the
legal fabric of a civilised society. They are of practical importance and should be respected and upheld by all.

Peter Hamilton is a barrister specialising in financial services at 4 Pump Court

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