We should not have to rely on this libel circus to protect our reputations

`Ordinary people face ruin and bankruptcy when they take on a large or powerful institution'

ONE OF the most surprising but least remarked upon aspects of Neil Hamilton's action against Mohamed Al Fayed in the libel court is that a private citizen of no great wealth has been able to mount the case at all. I mean no innuendo about Hamilton's financial arrangements. I suppose that he is risking personal bankruptcy if he loses. What I mean is that ordinary people meet this same difficulty whenever they want to take on a large institution. You must be as brave - or reckless - as the former MP to use the civil courts, where no legal aid is available. And that is why an increasing number of institutions which can resolve disputes more swiftly and cost the complainant nothing have been set up outside the legal system during the past 15 years or so.

Many of them are ombudsman schemes of one sort or another. There are also others. For instance, so far as complaints against the police are concerned, there is the Police Complaints Authority. The Press Complaints Commission rules on disputes with newspapers and magazines. While substantial reforms have recently been made to the system of civil justice - even to the law of libel with a new Defamation Act - the unofficial sector has continued to grow.

However, an even more useful method of redress can be provided if companies and other bodies supplying goods and services make available effective complaints systems of their own. In the financial services sector, to take an example, the new super regulator, the Financial Services Authority, is insisting upon this. The plethora of pension mis-selling cases and recent concerns about endowment mortgages makes this essential.

I claim some rights of authorship in the press body; in 1990 I chaired the working party of newspaper editors which designed it. And now, after a long rest from worrying about the handling of complaints, I am involved once more, but in a different area.

I am chairman (in a non-executive capacity) of the organisation which is charged with bringing about a merger of the eight ombudsman schemes operating in the financial markets - banking, insurance, home loans, investment, personal pensions and the like. The Financial Ombudsman Service, as we shall be known, is expected to begin operating towards the end of 2000. In putting forward ideas for the design of the Press Complaints Commission, I thought in terms of self-regulation. I was influenced by my experience as a financial journalist in the City, where the self-regulation of stockmarket battles for control of companies had been a great success.

The object had been to make sure that small investors were not put at a disadvantage by the tactics of both attack and defence employed in take- overs. And the method was a code of conduct to which City institutions subscribed, and a panel to supervise the operation of the code upon which sat the chairmen or chief executives of the leading merchant banks and investment bodies. Both these features are present in the Press Complaints Commission today. The original code of 1991 has been revised nine times. And along with lay members of the Commission sit the editors of the Daily Mail, (Paul Dacre), the News of the World, (Phil Hall) and The Sunday Telegraph, (Dominic Lawson).

All this is excellent, but when I look at the Code of Practice again I find, as well as many admirable precepts, a big omission. While the code focuses on accuracy, right to reply, privacy, harassment and intrusion, it provides no protection for readers who believe they have been defamed.

Statements are defamatory if they tend to expose a person to hatred, ridicule or contempt, or cause him or her to be shunned or avoided, or lower the person in the estimation of others or disparage him or her in their business, trade, office or profession. For such wrongs, the Press Complaints Commission provides no redress. To obtain satisfaction, you must still go to the libel bar.

This comes about because self-regulation is concerned exclusively with providing rules of conduct in areas where the law is silent. The Press Code deals, as it should do, with accuracy because the law covers only malicious falsehood, where both untruth and malicious intent must be proved. The Code also covers right of reply and privacy precisely because there is no relevant legislation. Self-regulation enlarges the ambit of the law with what are essentially private systems of justice. Ombudsman schemes, on the other hand, aim to provide not enlargement but an alternative to the courts which is free, simple, informal and accessible.

In the case of the Financial Ombudsman Service, consumers who have experienced mis-selling, unsuitable advice, unfair treatment, misleading advertising, delay and poor service will first have to take their complaints to the firm which has provided the service. The firm will be given an opportunity to consider the complaint. If deadlock is reached, then the dispute will be able to be brought to the Financial Ombudsman Service.

Because, in the most intractable cases, this can take a few months during which a thorough investigation of the claim is conducted, every attempt is made to arrive at a conciliated settlement. However where a full investigation is required, the ombudsman will determine the case. This involves taking into account the relevant law, regulations and codes and good industry practice. In the existing schemes, roughly half the cases are decided in favour of the consumer. Ombudsman schemes can be voluntary or, as in the case of the Financial Ombudsman Service, statutory.

As it happens, the Press Complaints Commission is well placed to add an ombudsman service covering defamation to its existing activities. Last year it handled 2,600 complaints, of which all but 86 were successfully resolved by conciliation. In ombudsman schemes, case workers often have a legal qualification because what the law provides is a consideration, as it would be if defamation came within the purview of the Press Complaints Commission. Conciliation leading to the publication of an apology would remain an important technique. Newspapers would have to be prepared to pay damages if found against but it would be reasonable to have a low cap, say pounds 10,000. If the person complaining of defamation wanted more, he or she would have to go to the High Court in the usual way.

Even Hamilton, I like to think, would have wanted to use the ombudsman route had it been available. It would have allowed him to defend his honour without risking a substantial financial loss.