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item0059A 890, 891 890 18 December 2003 Dear Roger Thank you for your interesting interview with Emmanuel Todd. I think his reasoning is very sound. I really hope (probably in vain) that most people in the USA could read it.
Christer Nikander Finland Where do you stand on Todd? Drop me a line
22 December 2003
The Court of Appeal gave an important ruling this week, in defence of abdroids (or "companies"). They held, in the Geologistics case, that in administering its compensation scheme for rescuing the clients of failed insurance companies, the industry was not entitled to withhold compensation from abdroids where they were ready to grant it to natural persons in comparable circumstances. This case is a cautionary tale in the workings of the "Third Way State". The Financial Services Compensation Scheme is not what it seems. It sounds like an official state body, but it is not. It is one of a raft of ambiguous institutions set up by private companies in a rearguard attempt to stop the State regulating their affairs effectively. Thatcher and Major loved them, and Labour has sadly continued with the same affair. The theory always is that the "industry" should be given the chance to put its house in order, under the mere threat of some future State intervention - these posturing PR-creations are to be found everywhere. In this case, the FSCS decided that, in assessing the claims for compensation arising out of the collapse of the insolvent insurer Independent Insurance, they should pay out 90% of personal claims in full, but refuse to pay any claims submitted by companies. One small company, Geologisitics Limited, had the courage to challenge this arbitrary behaviour - and this week won for the second time, having won in the High Court earlier in the year. Arbitrary discrimination of that kind was simply not acceptable, said the Court of Appeal. Pause with me for a moment, and think First: The Court of Appeal treated this "funny" third-way scheme as if it were discharging a mainstream public function - and disregarded the formality of its "private sector" status. It is, after all, one one step away from a public scheme, though "captured" by the PR machine of the private sector. The administrators of this "Scheme", held the Judges, had to behave in accordance with public service principles of fairness and objectivity - it was not open to them (as it would be in the private sector proper) to act arbitrarily, and to force, and bluster, and bludgeon their way through. This must have come as quite a shock to the FSCS administrators.Secondly, it demonstrated the poverty of manipulative commercial reasoning, in the deployment of artificial personality. It is common ground that small firms regard "incorporation" as an alternative to paying their full insurance whack - after all (the reasoning commonly goes) if I get into really deep water with an insurance claim, the company can always go into liquidation. And this was no doubt the reasoning of the insurance people running the FSCS: real people suffered real damage, but artificial people were often mere devices to avoid paying sufficient insurance premia in the first place - so why should "they" be compensated?But the Court verdict shows clearly that the Judges take artificial personality seriously. A company "is a person" in its own right, and to be taken seriously wherever that is possible - and here, it was perfectly possible. Indeed, great injustices were being done by the manipulative approach of the insurance industry. My own view is that tangles of this kind are only to be expected when you fudge issues of public primacy. The principle here is NOT one of private law, or of public interest. Competing companies have no ordinary corporate interest in bailing-out the customers of failed competitors - indeed, quite the contrary. On the other hand, the State has a perfectly legitimate public interest in protecting its citizens against the ravages of a seedy and fragile industry like the insurance industry. That is a proper State function, as would be a State decision to dun its own insurance company, for certain purposes. The State should do that in its own right, with its own officers and its own funds, spreading costs throughout society by way of general taxation.Just consider. It would have been wrong to hand over to Al Capone the responsibility for compensating the families of the victims of other godfathers' crimes. The system would not have worked, either in the short or long term. And this "Scheme" is similarly misconceived.
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