C-222/02: Paul v Germany Some observations from a regulator Michelle Ewing General Counsel’s Division, FSA 6 January 2005

Significance of the reference UK intervention Implications for FSA and FSMA Immunity - Schedule 1, paragraph 19 Balanced package of regulatory protection Statutory objectives and risk-based approach Consideration by ECJ post Three Rivers Position of others

Reasons for the decision (1) Directives contain no express rule granting rights to depositors (2) Harmonisation is limited and coordination of national rules on liability is not necessary (3) Several Member States exclude liability for defective supervision for policy reasons (4) DGD guarantees minimal protection including in cases of defective supervision

Scope of the decision DGD/ICD prescribe compensation How integral is this to the overall finding? Implications for insurance claims Should someone not entitled to compensation be in a better position and recover full losses? Protection in UK

Why this is the right outcome FOS, FSCS, complaints, bad faith, HRA, JR, prosecution = balance + flexibility Implications of liability Create incentive to take defensive decisions favouring those most likely to sue Overregulation FSA becomes insurer of last resort Huge costs for firms (& consumers)