Bespoke justice? On financial ombudsmen, rules and principles

Abstract

Alternative dispute resolution systems exist in order to provide remedies to those who cannot approach the courts in order to enforce their rights.  Ombudsman schemes in particular have the advantages of being accessible, informal and quick. This article considers two schemes, namely the FAIS ombud in South Africa and the Financial Ombudsman Services (FOS) in England. The way in which these two institutions apply rules and principles, their jurisdictions and procedures and the ways in which disputes are resolved, are reviewed. The most significant difference between the two organisations, is that the decisions of the FAIS ombud have in all material respects the same effect as judgments of a court and are reported in full, while decisions by the FOS are not reported and do not set precedents. The FOS strives to achieve justice between individual parties within an existing legal framework, but with the supposition that fairness should be the primary consideration. This approach is justified because individual solutions are not made applicable to other cases. The FOS or a defendant are authorised by statute to refer cases to a court of law where an important or new legal question arises. The judgment in such a case then sets a precedent. The South African FAIS ombud is not compelled to refer cases to a high court, with the result that a determination which is mostly fair for the particular parties to the dispute, sets a precedent. This shortcoming of the FAIS Act has the effect that the FAIS ombud effectively becomes a second regulator and the danger is that incorrect interpretations of the legislation can lead to unfair results for other parties to a dispute. This aspect should be addressed by the legislator.