THE RETIRED judge installed as the independent arbiter of Royal Bank of Scotland’s Global Restructuring Group compensation scheme is being warned that he will only be able to help a tiny fraction of the businesses that were wronged by the unit because the rules imposed on the scheme are so onerous.

Last year RBS revealed that it had set aside £400 million to compensate small business owners who had been placed in the controversial GRG unit, which was marketed as a turnaround specialist for businesses experiencing financial difficulties but has since been accused of deliberately stripping the assets of those businesses for its own profit.

The bank, which has acknowledged that the unit had failings but has stopped short of admitting liability for any business failures, is automatically refunding some fees charged to customers of GRG, who numbered 16,000 at the unit’s peak.

It has also put in place a complaints process that is being overseen by retired High Court judge Sir William Blackburne, who will consider whether any losses sustained were as a direct result of the bank’s actions.

Those affected will able to claim further compensation if their complaints are upheld by Mr Blackburne.

However, Cat MacLean, a lawyer at MBM Commercial who last year set up MBM Veritas alongside Edinburgh financial advisory firm Veritas Treasury to help people brings claims against banks, said that due to the rules RBS has applied to the scheme only a small proportion of businesses will be able to appeal to Mr Blackburne for compensation.

She explained that this is because the bank has said it can only handle complaints from “the officials of the company presently appointed and listed at Companies House” while Ms MacLean believes that a majority of the companies placed in the GRG unit subsequently failed.

Based on meetings MBM Veritas has held with business owners that went through the GRG unit, Ms MacLean said that “out of every 100 businesses that went into GRG, 93 didn’t survive”.

“That means we have a scheme that only works for about seven per cent of all the businesses that went through the GRG,” she added.

“Of that seven per cent another significant percentage are excluded because some of the fees were levied from them after 2013 [the scheme’s cut-off point].

“The scheme will therefore only look at something like five per cent of all the businesses in the GRG and that’s before you look at how many they will find in favour of.

“If they find in favour of 50 per cent of the claims they are willing to entertain - and that would be a very high percentage - then in fact they will be compensating just 2.5 per cent of the total number of businesses that were washed through GRG.”

Ms MacLean added that MBM Veritas would be writing to Mr Blackburne “to see if he’s aware that he’s only entitled to consider such a small number of claims”.

The bank disputes that Mr Blackburne will have a small number of claims to consider, with a spokesperson saying that “any current shareholder, or former shareholder where a company has been dissolved, can make a complaint" to the scheme.

"In the event that the complaint is upheld, they will receive any money over and above that which is owed to other parties,” the spokesperson added.

Despite this, Lord Cromwell, co-chair of the all-party parliamentary group on fair business banking, added that the scheme is not fit for purpose.

“The 92 per cent of businesses worst affected by the actions of GRG have no hope of any compensation via the scheme, which itself holds no credibility with either the public or within Parliament,” he said.