Law Report: Fayeds' rights not violated by DTI study: Fayed v The United Kingdom - European Court of Human Rights, Strasbourg, 21 September 1994

The limitation on the Fayed brothers' ability to take legal proceedings, such as by judicial review, to challenge findings, which were damaging to their reputations, in the report by inspectors appointed by the Secretary of State for Trade and Industry to investigate the brothers' acquisition of a public company did not involve an unjustified denial of the brothers' 'right to a court', having regard to the public interest in having a system which regulated the conduct of public companies.

The European Court of Human Rights decided there had been no violation of the right to a court under article 6(1) of the European Convention of Human Rights.

Article 6(1) provides: 'In the determination of his civil rights and obligations . . . everyone is entitled to a fair and public hearing . . . by an independent and impartial tribunal established by law . . . '

The three applicants, Mohamed al-Fayed, Ali Fayed and Salah Fayed, were brothers and businessmen. In March 1985, they acquired ownership of the House of Fraser plc, having taken active steps to promote their reputation, wealth, origins and resources. In 1987, inspectors were appointed under the Companies Act 1985 by the Secretary of State for Trade and Industry to investigate the takeover.

The report concluded the applicants had dishonestly misrepresented their origins, wealth, business interests and resources to the Secretary of State, the Office of Fair Trading, the press, the House of Fraser board and shareholders and their own advisers and had submitted false evidence to the inspectors.

In 1990, the Director of the Serious Fraud Office and the Director of Public Prosecutions announced that there was insufficient evidence to bring a criminal prosecution. The report was then published and its findings were widely reported. The applicants claimed it seriously damaged their personal and commercial reputations.

The applicants contended that, in violation of article 6(1), the inspectors' report had determined their civil right to honour and reputation and denied them effective court access. They also alleged a denial of effective domestic remedies to challenge the inspectors' findings.

THE EUROPEAN COURT OF HUMAN RIGHTS said that the functions performed by the inspectors were essentially investigative. The inspectors did not adjudicate, either in form or in substance. They did not make a legal determination as to criminal or civil liability concerning the Fayed brothers, and in particular concerning the latters' civil right to honour and reputation.

The right of access to the courts was not absolute but might be subject to limitations. The limitations to the applicants' ability to take legal proceedings could not be divorced from the context of the system of investigation and reporting under the Companies Act 1985. The underlying aim of the system was the furtherance of the public interest in the proper conduct of the affairs of public companies whose owners benefited from limited liability. The investigation into the takeover and the publication of the report in themselves pursued legitimate aims.

Judicial review, while not affording complete protection against possibly erroneous conclusions by the inspectors, did provide sufficient guarantees for persons affected by the report which were proportionate to the general public interest in inquiries.

Whilst the inspectors were accorded broad freedom in reporting on the affairs of public companies, the performance of their investigative functions was attended by not inconsiderable safeguards intended to ensure a fair procedure and the reliability of findings of fact. The applicants were given every reasonable opportunity to respond to the allegations made against them.

The risk of some uncompensated damage to reputation was inevitable if independent investigators such as those in the present case were to have the necessary freedom to report without fear. The court could not find that, in the exercise of their responsibility of regulating the conduct of the affairs of public companies, the national authorities exceeded their margin of appreciation to limit the applicants' access to the courts under article 6(1).