Is it time to accept that Guernsey’s regulatory enforcement process is no longer “fit and proper”?

Six years on, his words continue to ring true. For those who have experienced Guernsey’s regulatory enforcement process, whether before or since Sir Richard’s remarks, the concern he identified remains a fundamental one – a process may bear the hallmarks of independence and impartiality, but that is not the same as being independent and impartial.

It is worth stating at the outset that the role of the Enforcement Division of the GFSC is vital to Guernsey’s continued success and reputation as a well-respected international finance centre.  In fact, without the Enforcement Division’s work in recent years, Guernsey would likely not have received its excellent 2025 MONEYVAL assessment.  We also sincerely doubt that anyone would advocate for a return to the early years of regulation in Guernsey, when enforcement action was rare, and matters were often dealt with behind closed doors.

Effective enforcement, however, must be accompanied by an equally robust and fair decision-making process. Under the current process, cases brought by the Enforcement Division are considered by a SDM, typically being a KC appointed by the GFSC, with a right of appeal to the Royal Court. Superficially, this process may appear to have the necessary safeguards in place to ensure a fair hearing, yet three recent Court of Appeal decisions – two of which Appleby appeared in – demonstrate that the reality can, at times, be quite different.

This raises a fundamental question as to whether the present process – which determines whether individuals are fit and proper – is, itself, fit and proper?

The Cases

• Robilliard v Guernsey Financial Services Commission 2023

The facts in this case revolved around a finding of dishonesty against an individual in relation to a corporate structure which had been put in place to invest in student accommodation.  In essence, the allegation was that the structure was a sham, having been deliberately put in place to conceal the beneficial ownership of the investor.  There were a number of grounds of appeal raised in this case, including the belated adoption of an allegation of dishonesty by the GFSC.

The key question on appeal was whether or not the GFSC had a “burden of proof” to satisfy its allegations, as is the case in the UK where cases brought by the Financial Conduct Authority are heard by the Financial Services and Markets Tribunal.  In finding that there was no burden of proof in regulatory enforcement cases in Guernsey, the Court of Appeal accepted the GFSC’s argument that the process was more “akin to being inquisitorial in nature than adversarial”.

• Domaille & others v Guernsey Financial Services Commission 2024

This case related to allegations of systemic failings against the directors of a trust company, that led to a finding of lack of probity against the individuals.  On appeal to the Royal Court, LB Marshall KC issued a scathing judgment against the GFSC upholding the appeal on multiple grounds, not merely on the sanctions, but on the process and attitude of those involved at the GFSC, including the “flawed and unfair introduction of charges of want of probity at the Final Notice stage, based on no relevant further evidence”.

On appeal by the GFSC, the Court of Appeal determined that, whilst the original SDM decision was flawed and could not stand, the Royal Court had gone further than permitted under the statutory appeal regime with its detailed re-evaluation of the original Decision, and that it must not “usurp the primary decision-making function of the GFSC”.  In reaching its decision the Court of Appeal noted that Article 6 ECHR (Right to a Fair Hearing) requires that a person’s civil rights and obligations can only be determined by an “independent tribunal” with “full jurisdiction” and that, whilst the Royal Court fulfils the former role (as the SDM is not independent), in this instance full jurisdiction did not warrant the approach taken in this case.

• Fuller & others v Guernsey Financial Services Commission 2025

This case related to enforcement action taken arising from the collapse of Providence Group in 2016, which was found to be a “Ponzi” scheme, with money from new investors being used to repay existing investors, brokers and promoters of the scheme.  Given the seriousness of the issues at hand, the SDM in that case made various findings of dishonesty, and imposed unlimited prohibition orders as well as substantial financial penalties on some of the directors involved.

Following a partially successful appeal to the Royal Court, the case was appealed by both parties to the Court of Appeal. The central arguments in this case picked up directly from where the decision in Domaille had left off, with a challenge to the scope of the appellate review by the Royal Court, and whether the process remained compliant with Article 6 of the ECHR.  Key to this argument was whether the limitations placed in appeals in Domaille that the Royal Court was not permitted to undertake a detailed re-evaluation of the evidence in order to make its own findings of fact and that it was not permitted to substitute its own decision meant that it could not be said to have “full jurisdiction”.

The Court of Appeal, following its earlier decision in Domaille, upheld that the limited scope of review permitted by the Royal Court remained compliant with Article 6, and that the appropriate course of action for the Royal Court, where it regards the decision of the GFSC to be unreasonable, is to remit decisions back to the SDM to reconsider.

Where does this leave us now?

The question, therefore, is where this leaves regulatory enforcement cases in Guernsey.  Subject to the Supreme Court agreeing to hear an appeal in the Fuller case – having declined to do so in the case of Domaille – it would appear that the current unsatisfactory status quo remains that regulatory cases are not determined by an independent body, but rather by SDMs, who are officers of the GFSC.

For those in Guernsey who have not been directly or indirectly involved in an enforcement process, it may be easy to dismiss these concerns as a small number of “bad actors” who have been caught and sanctioned by the GFSC.  But that would miss the wider point entirely.

The issues raised go to fundamental principles of fairness and natural justice. At the very least, those principles should surely require an independent decision-maker in the first instance, particularly where the consequences for individuals concerned can include potentially career-ending sanctions.

The fact that the Court of Appeal finds that a system meets the basic legal minimum level of compliance for Article 6 of the ECHR, which was the finding in Domaille and Fuller does not necessarily mean that the system is a good one, or, to put it another way, does not make it “fit and proper”.

The practical reality of the current process

Appleby has acted in cases before the Royal Court where document comparisons have been produced between Final Reports published by the Enforcement Division against Decisions issued by SDM’s. Those comparisons revealed huge swathes of the Final Report adopted en masse by the SDM, without reference to any of the arguments advanced by the individual. In some instances, even typographical errors from the Final Report were carried across into the SDM’s Decision.

These instances do not offer a great deal of comfort that all of the SDMs are scrutinising the investigation of the Enforcement Division in the way one would hope, especially given the power they hold to issue career-ending sanctions on individuals.  This approach is now even more troubling given the restricted remit which the Royal Court now has to scrutinise the decision-making process following Domaille and Fuller.

In addition, even where an individual successfully appeals, the usual outcome is that the matter is remitted to the SDM to reconsider the sanction, often to the same individual, with only limited directions from the Court.

The practical consequences of this should not be underestimated. It typically takes up to three years from the point of a referral to enforcement for an SDM to issue their decision. If there is an appeal to the Royal Court, that can add another one or two years, meaning anyone who is seeking to challenge findings of the GFSC is likely to spend six or seven years fighting with the regulator, often while their career hangs by a thread.

Against that backdrop, requiring a successful appellant, who has already endured the time, cost, and considerable stress of the enforcement process, to effectively return to the start of a process they have already spent years challenging – potentially before the same SDM – is difficult to justify from a human perspective.

What is the solution?

Returning to Sir Richard Collas’ original observation, the inherent absence of independence in the enforcement process remains deeply unsatisfactory. So, what might the solution look like?

Interestingly, part of the answer may lie in Guernsey’s own regulatory history.  At paragraph 91 of the Fuller judgment, the Court considered Billet d’État XIX of 2007, which introduced the appeal provision relevant to that case, although that provision has since been superseded.  The Billet provides an illuminating account of the arrangements that had previously existed and the options considered as the GFSC’s enforcement powers were strengthened.

The Billet noted that, since 2002, there had been in operation a non-statutory but independent tribunal known as the ‘Guernsey Financial Services Tribunal’ to undertake a full review of the Commission’s proposed decisions.  Under that structure, the chair was assisted by two lay assessors with relevant experience in the case.  The Billet acknowledged the need to create a statutory framework for an appeal, and suggested appeals might be fulfilled either by way of a statutory financial services tribunal, or via the Royal Court with two lay assessors.

Given there are currently 17 separate independent tribunals operated by Guernsey – covering a range of topics from Employment & Discrimination, Social Insurance Appeals, the Guernsey Revenue Service, Industrial Disputes, Housing Appeals, Mental Health and Capacity Reviews, and Family Allowances Appeals – how is it there is not one to cover enforcement action by the GFSC, when financial services is, by a wide margin, the largest part of Guernsey’s economy?

Whilst it is acknowledged that any new Tribunal would require legislation, given the substantial impacts sanctions can have on individuals affected, the States of Guernsey should ask itself a fundamental policy question: Is the current system right for the jurisdiction?

There is nothing in law that would prevent an immediate short-term step to require the GFSC to have two lay assessors – with relevant experience – to sit alongside the current panel of SDMs in their decision-making process. This would, at least, fill the gap of first-hand industry experience which is currently lacking in the process.

Whilst we are sure that the GFSC may be emboldened by the findings in the Fuller decision, one would hope that it might step back and consider what these constant appeals are doing to the reputation of the Bailiwick, as well as the impact on the lives of those involved.  Even if the Court of Appeal has found that the process meets the minimum threshold required by Article 6, it does not necessarily mean it is a good one or fair by ordinary standards.

Next time the GFSC considers the question as to whether an individual is fit and proper to work in the financial services industry, hopefully it might ask that same question of its own enforcement process.

To find out more about our regulatory enforcement services in Guernsey, please contact our experienced Dispute Resolution partners.