FOS Decision Not Arbitration Award

In Berkeley Burke SIPP Administration LLP v Charlton [2017] EWHC 2396 (Comm), a pension administrator (“Berkeley”) wished to determine whether the correct procedural route to challenge a second Financial Ombudsman Service (“FOS”) decision was by way of appeal under s69 of the Arbitration Act 1996, or judicial review. The High Court determined, as a preliminary issue, that the FOS decision was not an arbitration award capable of founding an appeal to the Court under s69.

In its first decision, FOS had upheld a complaint against Berkeley arising from the loss of a personal pension. Instead of Berkeley applying for judicial review of that decision, the parties agreed, as a cost saving measure, that the complaint would be reconsidered by a second FOS Ombudsman (“the Reconsideration Agreement”).

The second Ombudsman also upheld the complaint and Berkeley sought to appeal that decision under the Arbitration Act 1996. Berkeley said that the Reconsideration Agreement constituted an “arbitration agreement”, and therefore the second FOS decision was an arbitration award which was amenable to appeal under s69 of the Arbitration Act 1996.

The Court rejected Berkeley’s submission that FOS had no statutory power to reconsider a complaint under the Financial Services and Markets Act 2000 (“FSMA”). Although FSMA Sch 17 para 14 contained no express power for FOS to reconsider a complaint, such a power was inherent in its duty to consider a complaint which had been properly brought before it. By entering into the Reconsideration Agreement, the complainant had withdrawn his initial acceptance of the first FOS decision and therefore the first decision ceased to be binding on Berkeley. It followed that the parties continued to participate in the FOS scheme. Berkeley was statutorily compelled to comply with the FOS scheme and was not entering into an arbitration agreement by doing so.

Moreover, it could not be said that the Ombudsman was an arbitrator: both parties were bound by an arbitrator’s decision, whereas a complainant to FOS could elect to accept its decision, or reject it and pursue a legal remedy in court.

It followed that Berkeley could only challenge FOS’ decision by way of judicial review.