The All-Party Parliamentary Group on Fair Banking Group, R (on the application of) v The Financial Conduct Authority

This judicial review concerned the Financial Conduct Authority’s decision in 2021 not to seek to compel further redress for customers excluded from a 2012–13 voluntary redress scheme for Interest Rate Hedging Products (IRHPs). The independent Review (Mr Swift) had concluded the FSA was wrong to confine the scheme to a subset of Private Customers/Retail Clients by use of a Sophistication Test. The FCA accepted many of the Review’s criticisms but rejected the Review’s core conclusion on scope and decided not to exercise its statutory powers (notably under FSMA ss.404, 382, 384 and s.55L) to reopen the issue.

The court emphasised the correct public law test: it was the rationality of the FCA’s 2021 Decision that was under review, not the correctness of the Review. Applying the conventional Wednesbury/irrationality approach as explained in authority (including the Court of Appeal’s decision in Sneddon (2024)), the judge held that a reasoned merits-based disagreement with an independent reviewer may be lawful, and there was no rule requiring the FCA to demonstrate a specific additional threshold such as a ‘cogent’ or ‘very good’ reason before departing from a reviewer’s recommendation.

Having evaluated the evidence, the court rejected the Claimant’s submissions that the FCA’s Decision was irrational or procedurally unfair. The FCA’s reasons — including the urgency in 2012/13, the comparative benefits of a voluntary scheme (the ‘bird in the hand’), difficulties of evidence and limitation given the passage of time, and the risk to outcomes for the most vulnerable — fell within a range of rational responses. The procedural challenge (failure to consult prior to announcing the Response and Decision) was also dismissed: no conspicuous unfairness was shown.

The claimant, an All‑Party Parliamentary Group, brought judicial review of the FCA’s December 2021 Response to an independent Lessons Learned Review (the Review) into the FSA’s 2012–13 voluntary redress scheme for IRHP mis‑selling. The Review (Mr Swift KC) concluded the FSA had been wrong to exclude a substantial subset of Private Customers/Retail Clients by means of a Sophistication Test and recommended that, absent strong objective justification and consultation, members of the same regulatory class should not be treated differently. The FCA accepted many recommendations but decided not to seek further redress for those excluded customers, giving reasons including evidential difficulty, the passage of time, statutory limitation and the benefits already delivered by the voluntary Scheme.

Background and procedural posture

• The voluntary Scheme (2012–13) was negotiated with several banks and excluded customers meeting numerical or qualitative Sophistication Test criteria; the Scheme delivered c.£2.2bn redress to in‑scope customers but excluded about 34% of sales at initial assessment.
• The independent Review (published 26 November 2021, amended 7 February 2022) criticised the Sophistication Test and recommended consistency within regulatory classes and, where differentiation was proposed, strong evidence and consultation.
• The FCA published a Response in December 2021 declining to compel further redress and explaining why it disagreed with the Review on the Sophistication Test and why further action would not be appropriate or proportionate.
• Permission for judicial review of that Decision was granted (Fordham J, [2023] EWHC 1616 (Admin)); the present hearing concerned two grounds: irrationality/unreasonableness of the Decision and unfairness in timing/consultation.

Issues framed by the court

1. Whether the claimant could rely on alleged unlawfulness of the 2012–13 agreement as relevant to the rationality of the FCA’s 2021 Decision.
2. Whether the FCA needed a specially cogent justification to depart from an independent review (or whether a reasonable merits‑based disagreement could suffice).
3. Whether the FCA could permissibly take into account contractual or legitimate‑expectation arguments, and the effect of the passage of time and limitation.
4. Whether the Decision complied with common law standards of reasonableness and whether the timing/absence of consultation was unfair.

Court’s reasoning

• The legal focus is on the rationality of the FCA’s 2021 Decision, not on whether the Review itself was correct. The court applied the conventional irrationality test (Wednesbury) and relied on Sneddon (2024) for the proposition that a decision‑maker may lawfully reject expert/advisory conclusions if it has reasonable grounds to do so.
• The court accepted there was limited contemporaneous record‑keeping about 2012–13 decisions, which reduced clarity, but that did not render the 2021 Decision irrational. The FCA’s extensive consideration and representations to the Review, and its documented reasons (including urgency in 2012–13, evidential weaknesses, likely litigation complexity and resource constraints, limitation concerns and the practical benefits of the voluntary Scheme), provided an objectively intelligible basis for disagreement.
• Contractual or legitimate‑expectation defences advanced on behalf of the banks were not treated as decisive, but the court held that the passage of time and evidential deterioration were powerful and legitimate considerations in the FCA’s assessment of whether to reopen the matter.
• On procedural fairness, the court applied the high threshold for imposing a common law consultation duty outside statute (conspicuous unfairness). It found no conspicuous unfairness in the FCA choosing not to consult stakeholders before publishing the Review, Response and Decision together.

Outcome: the judicial review claim was dismissed. The court concluded the FCA’s Decision to decline further action fell within a range of rational responses and was not procedurally unfair.

The claim is dismissed. The court held that the correct inquiry was whether the FCA’s 2021 Decision not to compel further redress was irrational or otherwise unlawful; applying the ordinary Wednesbury/irrationality standard (as refined in subsequent authority), the FCA’s disagreement with the independent Review and its decision to take no further action were within the range of reasonable responses. The court also held there was no conspicuous unfairness in the FCA’s decision‑making sequence or failure to consult prior to publication.

Permission for judicial review was granted by Fordham J ([2023] EWHC 1616 (Admin)). An earlier 2013 application for judicial review (R (Jenkinson & ors) v Financial Conduct Authority, CO/5140/2013) had been refused on paper. The present judgment is a first‑instance substantive determination dismissing the claim.