Equitable's policyholders should not look to the public inquiry in Britain for their financial salvation, advisers and lawyers warned yesterday. The inquiry has no powers to compel witnesses to give evidence or appear before it and will be held largely in private.
Critically, policyholders will have to take crucial decisions about what deal to accept and whether to initiate legal action long before the inquiry reaches any conclusions.
"It's puzzling - what exactly is it going to achieve? It does seem an oddity," said one City lawyer.
This "oddity" stems in part from the inquiry's timing and terms of reference. Lord Penrose has been told by the Treasury to exclude from his review not only the court rulings on the mutual's guaranteed annuity policies but future potential litigation.
"It would be inappropriate to seek to resolve issues which ought to be dealt with by the ordinary courts in the event of a dispute which cannot be resolved otherwise," Ms Ruth Kelly, economic secretary to the Treasury, said in her letter to Lord Penrose.
This would seem to preclude any ruling on negligence claims against the myriad advisers - including accountants, actuaries and lawyers - and board members involved in the Equitable debacle.
The insurer's new board has already commissioned Herbert Smith, the law firm, to conduct a review of potential negligence claims. Equitable said yesterday it hoped the report would be available before the end of the year - long before summer 2002, the earliest date at which the Treasury said Lord Penrose might report, and would decide what, if any, legal action to take then.
This risk of negligence claims is likely to weigh heavily on any witnesses called before the public inquiry. But Lord Penrose will not have powers to compel witnesses to produce information or give evidence because the inquiry is non-statutory - as were the inquiries into the collapse of the Bank of Credit and Commerce International and the arms-to-Iraq affair.
"We hope that everyone concerned will feel able to co-operate fully and frankly," the Treasury said, but warned it would make the inquiry statutory "if it proves necessary".
"I think Lord Penrose will want to keep that (threat) up his sleeve," said one legal expert. "A lot of professional reputations are going to be on the line."
The inquiry may also come under fire for being conducted largely in secret. The Treasury said that "much or all of the evidence will be private and confidential" but that the findings - apart from legal and commercially confidential issues - would be published.
While officials added that they hoped Lord Penrose would conduct public meetings to allow policyholders their say, they insisted that a fully open inquiry would be inappropriate.
The inquiry has been asked to delve back decades to look at the root causes of Equitable's problems.
But policyholders cannot afford such a long perspective. The compromise deal, which Equitable said would reflect the conclusions of yet another review - the inquiry by Nicholas Warren QC into possible mis-selling - is due to be published later this month.
