England and Wales: the financial ombudsman and English law

Today the Court of Appeal delivered an important decision concerning the operation of the Financial Ombudsman Scheme (FOS). In Heather Moor & Edgecomb Ltd, R (on the application of) v Financial Ombudsman Service & Anor [2008] EWCA Civ 642 the court considered, inter alia, the operation of Section 228(2) of the Financial Services and Markets Act (2000). Section 228(2) provides that "[a] complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case".  One of the arguments made was that Section 228 required the Ombudsman to determine complaints in accordance with English law.  The Court of Appeal rejected this argument; Stanley Burnton LJ observed (para. [36]):

If I confine myself to the wording of section 228 and the other relevant provisions of the 2000 Act, in my judgment they do not require the Ombudsman to determine a complaint in accordance with the common law. If section 228 had simply provided that a complaint is to be determined by the ombudsman, it would have been implicit that it was to be determined in accordance with the law apart from that section. But Parliament did not so provide. The words "by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case" in section 228 are inappropriate and unnecessary if what Parliament intended was a determination in accordance with the law apart from section 228".

Of interest, too, is what Rix LJ said with regard to the operation of the FOS (at para. [87]-[88]):

...it is possible to see in the "fair and reasonable" jurisdiction of the ombudsman the source not merely of an alternative dispute resolution service but of an important new source of law. That "fair and reasonable" jurisdiction may be flexible and (subject to judicial review) for the ombudsman and not for the courts to discern: nevertheless, these are concepts long familiar to English law, and, given the legal and industry background to which the scheme rules bid the ombudsman to have regard, it is hard to think that the parties to complaints submitted to the ombudsman's jurisdiction will find themselves in unrecognised country".