FSA unconstrained by budget in hiring lawyers for appeal cases, legal industry says
Alex Davidson
The Financial Services Authority has the capacity to hire the best legal representation and does not seem to be constrained by budget, according to lawyers. They were hitting back against suggestions from some quarters of the industry that Legal & General had achieved a degree of success in its recent appeal against a £1.1m regulatory fine partly because it had the better barrister.
As proof of the FSA's quality hires, lawyers cited the regulator's use of Lord Grabiner QC for the tribunal hearing initiated by Sir Philip Watts, chairman of Shell. Lord Grabiner is seen as a match for David Pannick QC, human rights advocate, whom Watts had planned to employ.
"If the FSA was constrained by budget, I'd be surprised if it would retain Lord Grabiner as silks at the bar. There should be no difference in quality of representation in this hearing," Philip Rubens, partner at Finers Stephens Innocent, said.
Heavy artillery
Barristers of this calibre may be necessary to win what promises to be a difficult case with no easy answers, lawyers have said. The appeal followed the FSA's £17m fine of Shell last year for market abuse and breach of the Listing Rules based on claims that the company had overstated its oil reserves on Securities and Exchange Commission criteria.
Watts filed a reference notice with the tribunal in relation to the financial notice issued to Shell on 24 August 2004. He appealed against what he described in a letter to the FSA of 16 September 2004 as the FSA's failure to afford him his third party rights. Watts further wrote that he was "challenging the reason on which the final notice is based".
As a third party, Watts felt that he was not consulted about the decision, and that he should have been given the opportunity to make representations, according to lawyers. But the FSA has argued that Watts was not a third party because he was not specifically mentioned. Watts responded that, although he was not referred to by name, any discussion would have been referable to him.
Unnamed parties
"The issue is whether you can be a third party if not named," a lawyer concluded. The tribunal hearing was adjourned by mutual consent in December, and the FSA does not know when it will be resumed, according to a spokeswoman.
Last year, the FSA said that it was confident that the tribunal would find that it had respected the rights of Watts, and that the regulator's issue of its decision notice had not prejudiced his rights. At the same time, it appears that the FSA was rattled by pending appeals.
In his Mansion House speech of 21 September last year, shortly after Watts' appeal, Callum McCarthy, the FSA's chairman, noted that if parties that are subject to enforcement action appealed to the Financial Services and Markets Tribunal, it would lead to delay and to additional costs. This would mean that the FSA had to devote more resources to enforcement. McCarthy said that much would be lost if the UK abandoned its advantage over the US of being a less litigious society.