Financial Ombudsman Service decisions are not subject to appeal but only judicial review

Published on 25th Oct 2017

Following a novel application, the Commercial Court has unsurprisingly determined that a FOS award is not an arbitral award and is not therefore subject to appeal under the Arbitration Act

Litigators know very well the difficulties of challenging decisions made by bodies exercising public functions. The possibility of judicial review exists, but it is difficult to get permission and even more difficult to succeed.  Even if you do succeed, the effect of that success is, in most circumstances, not to get a different decision on the merits from the court (unless there is only one other possible outcome), but an order that the decision be quashed and the relevant public body have another go.  The public body’s reconsidered decision could, of course, end up exactly the same, particularly if the reason for the judicial review application succeeding is a procedural impropriety in the decision-making process rather than, say, irrationality.

FOS awards are no different. Indeed, the prospects of successfully challenging a FOS award by means of judicial review are arguably lower than for other public functions, given the lower statutory standard that applies to such complaints.

What test does FOS apply?

How FOS will determine a complaint is set out in section 228(2) of the Financial Services and Markets Act 2000:

A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case“.

This does not include a requirement to determine the complaint in accordance with the law (although it is normal for FOS to take the relevant law into account). Further, given its subjective qualification, it is very difficult to challenge on the grounds of irrationality.

Whilst the complainant can choose to accept the FOS award or not, the financial institution against which the award is made does not have the same luxury: the FOS award binds both the complainant and the respondent if the complainant accepts it. It could be said on the one hand that the financial impact on (at least the largest) financial institutions of an adverse FOS award is limited, given the £150,000 maximum money award.  However, now that there is a statutory requirement on FOS to publish its determinations (identifying the relevant firm but not the complainant), unless the relevant ombudsman considers it inappropriate to do so, the adverse publicity could lead to a rash of similar claims, in addition to the potential reputational damage.  It is not surprising, therefore, that inventive lawyers will seek to try to find an alternative route to challenge FOS decisions that their clients are unhappy with.

FOS reconsiders

One such case is Berkeley Burke SIPP Administration LLP v Wayne Charlton and Financial Ombudsman Service Ltd .  In that case, Berkeley Burke was unhappy with a FOS determination, which the complainant had accepted.  It determined that it would seek judicial review of that decision.  FOS clearly considered that there was some risk that the judicial review proceedings would be successful so agreed with Berkeley and the complainant that the original FOS determination would not be enforced and FOS would reconsider the matter afresh without a formal court order quashing the decision.

On reconsideration, FOS again found in favour of the complainant. Concerned that the judicial review proceedings would now be unsuccessful, because the statutory regime is not clear that FOS has a power voluntarily to reconsider its own determination (i.e., without a quashing order from the court), Berkeley Burke brought a claim under section 69 of the Arbitration Act 1996.  In effect, the argument was that the agreement by which the original determination had been withdrawn and FOS agreed to reconsider the matter afresh was an agreement to arbitrate, with FOS as the arbitrator. As such, the argument was that FOS’ second determination was an arbitral award and subject to appeal in the courts.

The High Court judge, Mr Justice Teare, resoundingly disagreed. He found that, as it remained open to the complainant unilaterally to accept or reject FOS’s second determination, as with FOS’ first determination, the agreement did not amount to an agreement that FOS would determine the dispute between the complainant and Berkeley Burke.  That agreement could not, therefore, be an arbitration agreement within section 6 of the Arbitration Act 1996.  FOS’s second determination could not, therefore, be an arbitration award, such that it could not be appealed pursuant to section 69 of the Arbitration Act 1996.


Whilst a very nice try, this decision clearly has to be right. FOS derives its powers from and operates under a statutory regime.  It would be very odd indeed if, by accepting that its determination might be amenable to a successful judicial review and therefore agreeing with the parties to take another look, FOS was thereby appointed as an arbitrator under the Arbitration Act 1996, with all of the powers and remedies that would follow.

Mr Justice Teare did not have to decide what effect FOS’ agreement to reconsider its decision and issue a second determination had on Berkeley Burke’s ability to seek judicial review of that determination. However,  his view, which appears sound, was that it would be surprising if the result was that an application for judicial review was not available.  It would seem unlikely that the legislature intended parties to financial disputes that are eligible for resolution by FOS to be obliged to proceed to a full judicial review and order of the court, if FOS – despite its best efforts – after issuing its determination considers there is a risk that it might have got it wrong.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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