The European Commission is the only hope of compensation for Irish investors who lost money as a result of the crisis at the British mutual insurance company Equitable Life, according to an action group representing policyholders

Some 6,500 Irish investors and former investors in the troubled insurer are being urged to lobby their local MEP to support a petition made to the European Parliament by the UK-based Equitable Members Action Group (Emag).

The petition states that the British government was negligent in its regulation of the mutual insurer and calls on the European Commission to bring legal proceedings against the British government for its failure to provide proper regulation for investors who were not resident in the UK.

Submitted by Emag in December last year, the petition may come before the European Petitions Committee for the first time as early as next week.

Emag is asking former policyholders to write to their local MEP or to internal markets commissioner Charlie McCreevy to raise awareness of a regulatory loophole and ask for their support for the petition, which can be read at www.emag.org.uk.

Two Irish MEPs, Proinsias de Rossa (Dublin), and Mairéad McGuinness (East/Leinster), are on the petitions committee.

A spokesman for Mr Proinsias de Rossa confirmed that the MEP had received correspondence from Irish Equitable Life investors, who have suffered severe cuts in the value of their pensions and other investments but have been left stranded between UK and Irish regulators with little hope of compensation for mis-selling.

"The European Commission is aware of the problem," according to a spokesman for Mr de Rossa. Next week's meeting of the Petitions Committee is "the opening round" of the debate, he said.

Ms McGuinness said she had received a large volume of correspondence from Equitable members.

She was astounded by some of the losses, which ranged from a few thousand euro to hundreds of thousands of euro.

"They do feel that this is their last port of call," Ms McGuinness said. She hopes to meet with Emag representatives in Brussels shortly.

Equitable Life was brought to near-collapse in 2000 as a result of a House of Lords ruling forcing it to honour guarantees made on some older pension policies.

The ruling led to the closure of the company to new business and a series of cuts in the value of existing policies, leaving thousands of members out of pocket.

Last month, the UK's Financial Ombudsman Service (FOS) ruled in favour of a "late joiner" policyholder, Ms E.

She claimed she had been badly advised because she had not been told of Equitable Life's potential £1.5 billion liability to former policyholders when she bought a personal pension in 1999.

The test case is expected to trigger payouts to up to 1,500 policyholders in the UK and could cost the company millions.

However, investors from outside the UK, including thousands from the Republic and Germany, have since discovered that they are not eligible for compensation through the FOS and have no recourse through the UK parliamentary ombudsman, which is currently conducting its second inquiry into the affair.

Last year, the Irish Financial Services Regulatory Authority (Ifsra) also told Irish policyholders they had no power or jurisdiction to award compensation because the Irish arm of Equitable Life was a branch of the UK operation and was regulated from there.

Some Irish late joiners claimed they had been told that their money would be placed in a ringfenced fund and would not be affected by the mutual's liability to former policyholders.

It transpired that this was not the case.

Emag claims that the terms of the European third life directive, signed in 1992, requires the British government to redress all European citizens who have suffered financial loss as a result of a failure in regulation.

"It is only through the European petition process that remedy can be obtained and confidence rebuilt in cross-border trade," according to the group.

Individuals and groups can use petitions to make the commission aware of any possible breaches in European law.

The commission, once it has examined the issue, can then put pressure on member states to rectify any breach in European law.

Ultimately , the commission is the body with the power to eventually take the member state to the European Court of Justice.

However, there is no immediate hope of compensation for Irish Equitable Life investors, as this process usually takes at least two years.