By another twist of fate, Mervyn King, the Governor of the Bank of England, happened to be showing a family friend around the Royal Courts of Justice when the liquidators dropped their bombshell, so he was able to witness in person the Bank's moment of triumph after one of the longest and most expensive cases in British legal history. For the friend, an overseas law student, it must have been quite an eye opener.
Mr King has consistently refused to settle with the liquidators of the Bank of Credit & Commerce International, running up more than £70m of legal costs in the process, and yesterday he was finally vindicated. This wasn't just the liquidators quietly backing off. It was total, unconditional surrender. The Bank will of course be suing for its costs and is almost certain to get them. Unfortunately for creditors of BCCI, this will come straight out of their pockets. Far from ending up £850m richer from this legal marathon, they'll be more than £100m poorer.
Nobody is taking any pleasure in their misfortune, least of all the Bank of England, which can reasonably be accused at least of negligence in its supervision of what even before it went under was widely known as the Bank of Corruption and Crime International. The liquidators, Deloitte, and their legal advisers, are a different matter. This was a case that should never have been brought. But don't take the Bank's word for it.
The judge himself, Mr Justice Tomlinson, yesterday volunteered the view that from the start, the allegations of dishonesty and impropriety against the Bank and its officials were "wholly without foundation". Serious questions now need to be asked of the liquidators' determination to pursue such a hopeless case. Unrepentant to the last, they yesterday cynically blamed both the length and costs of the case on the supposed unreasonableness of the Bank, and tried to make out that the Bank's refusal to negotiate a commercial settlement was in some way a dishonourable approach to the matter. Dear oh dear.
Despite the very best endeavours of the Deloitte legal team to portray the issue as one of extreme regulatory failure, in fact the case was never about negligence; instead, the allegation was misfeasance, this for the simple reason that the world over, it is impossible to sue regulators for negligence. Were that to be the case, the Bank would no doubt have settled years ago. Unfortunately for Deloitte, no government in its right mind would allow its regulators to be held liable for negligence, as this would expose taxpayers to a multitude of claims for regulatory mistakes.
Yet Deloitte took the view that a way around the Bank's legal immunities could be found by accusing the Bank and 22 of its officials of deliberate dishonesty. From the moment the case was conceived, this looked a ridiculous endeavour, and in truth the liquidators must have known it all along. Yet they forged ahead regardless, arrogantly confident in their belief that the Bank of England would settle if only for the purpose of preventing its dirty linen being washed in public.
Some of the evidence was indeed damning, but it was never up to proving that the Bank and its officials conspired to allow depositors to be ripped off. Why on earth would they do such a thing? The liquidators were unable to offer any convincing answer.
Deloitte's stupidity was in failing to see that the Bank could never settle on such a charge, even for the purpose of preventing a lengthy and humiliating court battle. It is bad enough for a central bank to admit to negligence, but to concede dishonesty to any degree would destroy its credibility and reputation in financial markets for all eternity.
This is the second hugely costly piece of litigation, pursued not in the expectation of a favourable judgement, but entirely for the purpose of a commercial settlement, to have collapsed in less than two months, the other one being Equitable Life's attempt to hold its former auditors, Ernst & Young, partially liable for members' losses.
In themselves, these two cases should act as warning enough to future litigants. Yet the judge intends to go further in exploring ways in which such litigation might be deterred. The only winners in these wholly pointless legal marathons are the lawyers. Anyone for pollock?
Another Pensions Secretary goes
To lose one Secretary of State for Work and Pensions might be counted a misfortune, but to get through three of them in a year is more than just carelessness; it's a bad joke. Small wonder that pensions policy is such a mess. No one is ever there long enough to do any more than make a bad situation even worse. The Blair Government's handling of the growing pensions crisis has been disastrous, from the Chancellor's raid on the tax privileges of pension funds to the recent climbdown on the retirement age for public sector workers. Yet the Prime Minister promises far reaching pensions reform as one of his key priorities for the remainder of his third term. It's been hard enough to take this ambition seriously, given the record, but for one of his most trusted political allies in the project to be hounded out of office under a cloud is a further blow to meaningful progress.
In fairness it might be said that John Hutton, the new man in the ejector seat, will just carry on where Mr Blunkett left off. The hard graft of policy formation is in any case being done by Lord Turner's Pensions Commission, which reports later this month.
Yet this cannot be the gimmicky, smash and grab policy so much favoured by New Labour. It must instead be policy for the next 30 or 40 years. Fleshing out its detail, selling it to the country and building the necessary political consensus to make it last will require skill, determination and clout. For all his faults, Mr Blunkett might have been the man to do it. The anonymous Mr Hutton is a much more questionable appointment. A Blairite loyalist, it is not known how he stands with the Prime Minister in waiting, Gordon Brown.
It must all make Lord Turner distinctly nervous as he puts the finishing touches to his recommendations. Another change in Work and Pensions Secretary was all he needed in the delicate task of winning Government support for his proposals, for there's no point in even suggesting the sort of universal, state-sponsored, contributory pension arrangements he's been looking at if they are only to become another victim of the Blair/Brown divide.
Vodafone balks at Swedish massage
Almost unnoticed amid all the excitement of Telefónica's bid for O2, Vodafone has quietly sold off its Swedish mobile phone business at a total cost to the balance sheet of £815m in write-offs. This is in some respects a more interesting story than the Spanish acquisition of O2, for it seems to me indicative of a certain lack of nerve and imagination.
Sweden certainly has its problems as a mobile phone market, in particular demands by the regulator that those wishing to offer 3G services must have networks covering virtually the whole of the country's sparsely spread population. But what does it say about the supposed advantages of Vodafone's global footprint if at the first sign of trouble, the company ups sticks and runs?
The challenge instead should have been to work around these difficulties and learn from the experience for the benefit of the group's other national networks. I'm sorry, but I always found the "One Vodafone" concept, which is the only real justification for holding so many local franchises under one roof, difficult to buy into. The mixed messages sent out by this sale makes it even harder.Reuse content