Law Report: Ombudsman not reviewable: Regina v Insurance Ombudsman Bureau, Ex parte Aegon Life Assurance Ltd - Queen's Bench Divisional Court (Lord Justice Rose and Mr Justice McKinnon), 16 December 1993

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Decisions of the insurance ombudsman are not susceptible to judicial review since his powers are derived from voluntary contracts between the insurance ombudsman bureau and member insurance companies.

The Divisional Court dismissed the insurance company's application for judicial review of awards made by the insurance ombudsman against the company.

The bureau was established in 1981 by insurance companies to resolve complaints by customers. Membership is voluntary. The advantages of an ombudsman scheme include improved public relations, self regulation rather than legislation, cost effectiveness, good practice and consistency in decisions. Under the Financial Services Act 1986, the Life Assurance and Unit Trust Regulatory Organsation (Lautro) was set up as a self regulating organisation, regulating investment business. Companies may be members of both Lautro and the bureau. The bureau deals with 5,000 cases a year and Lautro with between 100 and 200.

The insurance company argued that the bureau was amenable to judicial review because it was part of a wider system of government control and that, but for its central role in self regulation, the Government would have imposed a statutory regime regulating insurance contracts. The bureau argued that it was not subject to judicial review because its powers were confered by consent through a member's contract with it.

Nigel Pleming QC and Richard Gordon (Freshfields) for the insurance company; David Pannick QC and Mark Shaw (Paisner) for the bureau.

LORD JUSTICE ROSE said that the following principles could be derived from R v Panel on Takeovers and Mergers, Ex p Datafin (1987) QB 815. Firstly, no single factor was determinative of jurisdiction: the source of power, the nature of the duty performed and the consequences of the body's decision had to be considered. Secondly, a body whose source of power was not solely the consent of those over whom it exercised that power, which performed public law duties and which was supported by public law sanctions could be susceptible to judicial review.

From R v Jockey Club, ex p Aga Khan (1993) 1 WLR 909, the following was derived. A monopolistic body which permitted no alternative market might not be subject to judicial review and would not be if it was not in its origin, history, constitution or membership a public body.

A body whose birth and constitution owed nothing to any exercise of governmental power might be subject to judicial review if it had been woven into the fabric of public regulation, or into a system of governmental control, or was integrated into a system of statutory regulation, or, but for its existence, a governmental body would assume control.

Judicial review should not be extended to a body whose powers derived from agreement of the parties and when effective private law remedies were available against the body.

The foundations of the bureau conspicuously lacked any trace of governmental underpinning. It was a free standing independent body whose jurisdiction was dependent on the contractual consent of its members. The 1986 Act did not directly or indirectly change the character of its foundations or the source of its power.

Since the Act, as before, the public did not have to use the ombudsman. They could instead sue insurers in the courts. Membership was not obligatory for insurers. The bureau's power over its members was solely derived from contract and it could not be said that it exercised governmental functions.

Even if it could be said that it had now been woven into a governmental system, the source of its power was still contractual, its decisions were of an arbitrative nature in private law and those decisions were not, save very remotely, supported by any public law sanction. The bureau was not a body susceptible to judicial review.