The Financial Services Ombudsman

Bill Prasifka, the new Financial Services Ombudsman has started well, if we can properly understand recent newspaper reports. He seems to have issued some form of Press Release but it’s not on his website yet.

The reports credit him with underlining that he is limited in the amount of compensation he may award against the anonymous “regulated” financial services bodies (banks) he polices. (He does’nt really; he reacts to complaints).

Consequently, Bill awarded the maximum, €250,000, to a farming couple who lost much more than that.

The limit is set in regulation, as follows:

“The amount of 250,000 euro is prescribed by Council as the maximum amount of compensation payable in respect of all other complaints for the purposes of Section 57CI(5) and Section 57CI(4)(d) of the Central Bank Act 1942 (as amended by Section 16 of the Central Bank and Financial Services Authority Act of Ireland Act 2004).”

This is comedy. Bill is himself policed by a Council; they write the regulations. The Minister for Finance appoints them.

Who are they? I do not know, but we learned recently from the Irish Times HERE that stuff like this was actually being written by the banks.

See our earlier post on the Financial Services Ombudsman HERE at paragraphs 12 to 15

Contests

If the BP oil disaster in the Gulf of Mexico happened in Irish waters who would be held responsible?

The question is intentionally ambiguous. It seems to refer to a functioning “administration” which would search out culprits and assign blame and punishment. It seems also to refer to the principles by which blame and perhaps punishment would be assigned.

The first aspect might lead to a rant and should be avoided; it is the second aspect to which I refer, and even that can prove contentious. Consequently, I am invoking consideration of the civil law only.

We know that BP is the lead partner in the drilling of the oil well. We know that the partnership hired an oil drilling platform, and crew, from Transocean. It also engaged Halliburton, as engineers, to pump cement slurry into part of the oil well structures to contain oil.

If damage is caused to a third person during a BP-like operation in Ireland, that person would look to the law of negligence and nuisance to found a claim for compensation. The burden of proving negligence would lie on the injured person. It can be anticipated that the BP partnership would plead that it hired competent independent contractors and that, in standard Irish legal principles, it is not liable for damage caused by any negligence of those contractors.
The Plaintiff would, understandably, reject this. Some obligations cannot be delegated, particularly if they are risky. Drilling an oil well under the sea is risky, particularly at a depth of a mile.

The Plaintiff would still have to prove negligence. If the cause of the accident is to remain unknown, the Plaintiff might be in trouble. (In the BP incident, this is the significance of the admission Barack Obama extracted from BP; proof of negligence need not now be addressed by claimants in civil negligence claims against the BP partnership.)

In Ireland, there would be no admission of liability by a Defendant like BP. Faced by the formidable problems in proving liability in negligence, an Irish Plaintiff would look to the law of nuisance for success. Nuisance is a tort of strict liability. A Plaintiff does not need to prove “fault” to win. He simply needs to prove the source of the damage and that the Defendant was the source.

A leaking oil well is a public nuisance. If the oil damages the property of others the Defendant drilling the well is strictly liable.

Proof of loss from such a source would, itself, require to be sophisticated. Proving loss of profit is not easily done, but would be easy in comparison to the obstacles Plaintiffs commonly have to face in Ireland to hold powerful interests to account.

The Way We Are Now

1. NAMA was set up by the Government expressly for the purposes of paying the “long-term economic value” for bank assets.

2. “Long-term economic value” (“LTEV”) was a notion supplied to the Government by the Commission of the European Union. This writer cannot say from where the Commission derived it, but it is possible the Commission is not “wedded” to the notion, unlike the Irish Government.

3. In the context of the establishment of NAMA, it was insinuated that LTEV was, and is, in excess of current market value. Strictly, nobody can say what current market value of bank assets are; there has been no functioning market for them for some time and the Government has imposed a secrecy blanket on possible sources of information on the point.

4. Nonetheless, some assets have been assigned current market value; this happened in Irish High Court proceedings. Those values showed a 70%- 80% fall in the value of property-based bank assets.

5. The tranfer of bank assets to NAMA, therefore, was expressly in defiance of the actual value of those assets. The price to be paid was a political decision made before NAMA was established.

6. It is a lie, consequently, to say that the banks misled NAMA. It is the people of Ireland who have been misled.

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