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Vol. 9 No. 21 : 5 June 2003
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By Peter Chapman
SIR Nigel Sheinwald, the UK's ambassador to the EU, has been accused of "demeaning Britain" after he tried to stop MEPs from triggering an embarrassing probe into the way the Lloyd's of London insurance market escaped tough European Union rules for two decades.
The war of words comes as the European Parliament plenary prepares to vote on a report by UK Tory Roy Perry which calls for a full probe - if the European Commission fails to deliver a verdict on alleged past breaches of EU insurance law dating back to the 1970s. The Parliament is expected to vote on the issue in early September.
But Sheinwald wrote to Parliament chiefs, including President Pat Cox and Secretary-General Julian Priestley, warning that the assembly would breach Article 193 of the EC Treaty if it pushed ahead with a formal inquiry into failings which angry investors say led to hundreds of bankruptcies and many suicides. It would also breach its own procedures and a 1995 'tripartite' agreement between the Parliament, Council of Ministers and European Commission.
"I would hope that you would agree that it is for the courts to determine substantive issues of community law and the liabilities that flow from them," urged Sheinwald - who will soon leave Brussels to become a special advisor to Tony Blair on foreign affairs.
Moreover, he said the ongoing legal case would make it "difficult to see how those involved could properly cooperate with such an investigation".
Perry dubbed the note "an incredible letter", adding that the UK should lift the veil of secrecy over its replies to the European Commission on Lloyd's matters instead of trying to thwart MEPs.
"I am amazed that Sir Nigel sent it. Instead of coming on heavy and demeaning Britain by threatening refusal to cooperate, [the UK government] should be open about it, if they think they have such a solid case."
He said the UK's top man in Brussels also ignores the fact that a final decision on an inquiry would rest with the assembly's Conference of Presidents (political group leaders), after taking full legal advise from in-house experts.
The Commission has been investigating whether the UK failed to ensure Lloyd's was properly audited, in line with a 1973 insurance directive.
Many investors in the market, known as 'names' were ruined by massive asbestos-related claims. They say they would not have invested in the market had an audit, required by the EU rules, revealed potential liabilities.
However, the names fear the Commission will totally ignore past failings by the UK provided a new regime concerning Lloyd's complies with EU law. They hope a Parliament inquiry would help to establish the UK's past failings - boosting the chance that the European Court of Justice may one day take up the case.
Lloyd's name John Pascoe, who sparked the Commission's initial probe into the issue, said that "the British government is simply trying to torpedo an inquiry in which it could be a defendant".
Moreover, the UK's argument would mean "anyone can block an inquiry simply by issuing a writ anywhere in the EU".
He insisted the points of EU law included in the writ had already been raised in the UK's highest courts - and could not be raised again. The latest writ could take two years to reach court.
© Copyright 2003 The Economist Newspaper Limited. All rights reserved.