The High Court has delivered an important judgment today in Pensions Ombudsman v EMC Europe and others, relating to Ombudsman procedure: in particular, when the Ombudsman must decline to investigate a case affecting the interests of third parties who are not within his jurisdiction.
A scheme member complained about an agreement made in 2002 under which the trustees of the EMC group's UK pension scheme agreed to compromise the liabilities of EMC group companies to fund the scheme in return for a lump sum payment funded by EMC Corporation (“EMC”), the group’s US parent company.
EMC argued that the Ombudsman should not accept jurisdiction. EMC would have to be a party to any claim to set aside the compromise agreement, but as it had never been the principal or participating employer of the scheme it was not actually within the Ombudsman’s jurisdiction, and any order that the Ombudsman made could not, of itself, bind EMC.
Unusually, the Ombudsman exercised his right under the Pension Schemes Act 1993 to refer a question of law in connection with a complaint or dispute to the High Court. In this case, the question was simple: whether it was open to him to investigate the member's complaint.
In the case of Edge v Pensions Ombudsman more than a decade ago, the Court of Appeal held that Parliament did not intend to give the Ombudsman power to determine a dispute which might adversely affect a party who was not bound by his determination.
In this new case, after considering Edge, the judge said that where a parent company was not subject to the Ombudsman's jurisdiction, and had a contractual right which would be adversely affected by a successful complaint to the Ombudsman, that right should not be overridden in proceedings to which it was not (or could not be made) a party. The judge said it was “plain” that no court of law would entertain the member’s claim to have the compromise agreement set aside without joining EMC to the proceedings. It was not therefore proper to allow the Ombudsman to assume jurisdiction over EMC.
The case is a useful restatement of the principle that the Ombudsman should not investigate complaints which ask him to make directions against parties who could not (absent further litigation) ever be bound by them. It is also a reminder how “arms’ length” parent companies may be subject to different jurisdictional rules than participating employers under schemes.