The Equitable Life debacle that left 6,500 Irish investors out of pocket has raised questions over how effectively the EU regulatory framework protects consumers, according to Fine Gael MEP Mairéad McGuinness.

Ms McGuinness was yesterday appointed chairwoman of a special European Parliament committee of inquiry which was set up to examine the fallout of the crisis at the UK-based mutual insurer Equitable Life.

The committee's mandate is to examine how EU directives were applied by the UK regulators responsible for deciding if policyholders were eligible for compensation for their losses.

The committee will also investigate if the European Commission properly fulfilled its duty to monitor "the correct and timely" transposition of EU law by the UK.

The 22-member committee is due to report within 12 months but will publish an interim report after four months.

Around one million Equitable Life customers suffered heavy losses on their pensions investments following a House of Lords ruling requiring the UK mutual to honour guarantees made on some older policies.

The ruling triggered massive cuts on the value of newer policies in 2001. "Late joiner" Irish investors who had not been told of the company's potential £1.5 billion liability to former policyholders when they bought their policies later discovered they were not eligible for compensation for mis-selling from the UK financial services ombudsman.

The Equitable Members Action Group (Emag) took a petition to the European Commission, calling on it to bring legal proceedings against the UK government for its failure to provide proper regulation to over 15,000 non-UK investors.

"Emag has fought tirelessly to have this issue properly addressed through UK channels and have come to the European Parliament because the issue is a pan-European one of protecting consumers," said Ms McGuinness.