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Better regulation, administrative sanctions and constitutional values

Published online by Cambridge University Press:  02 January 2018

Karen Yeung
Karen Yeung*
Affiliation:
King's College London
*
Karen Yeung, The Dickson Poon School of Law, King's College London, Strand, London WC2R 2LS, UK. Email: karen.yeung@kcl.ac.uk
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Abstract

This paper interrogates the predisposition in favour of informal, low-intervention control styles of enforcement advocated by the ‘better regulation’ movement, and which resonates throughout the Hampton Report recommendations which are currently being implemented in the UK. It focuses on three practices that reflect the trend towards diverting regulatory enforcement action away from the courts in favour of reliance on formal administrative sanctioning powers ranging from ‘hard’ to ‘soft’: the use of negotiated penalty settlements, the acceptance of administrative undertakings (‘enforcement undertakings’) and the provision of firm-specific compliance advice by regulators. Each practice is explored through various analytical lenses which enable the underlying constitutional tensions to be identified and interrogated. In so doing, it demonstrates how the emphasis on bargaining, negotiation and discussions between regulators and those they are responsible for regulating advocated by the UK better regulation movement may antagonise several constitutional values, including transparency, accountability, due process and participation, as well as several values associated with formal conceptions of the rule of law. On the other hand, resort to negotiation and discussion in regulatory enforcement can generate important benefits, largely in facilitating the timely, creative and cost-effective resolution of enforcement disputes while avoiding the formality, delay and hostility associated with formal court adjudication. This ‘clash of logics’ can be traced to inherent differences between bargaining, on the one hand, and adjudication on the other. Bargaining and adjudication represent two quite different and distinct forms of ordering through which disputes can be resolved, and it is these differences that lie at the foundation of their respective virtues and shortcomings when employed to resolve disputes concerning regulatory violations.

Type
Research Article
Information
Legal Studies , Volume 33 , Issue 2 , June 2013 , pp. 312 - 339
Copyright
Copyright © Society of Legal Scholars 2013

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Footnotes

*

An earlier version of this paper was presented at the Law Commission's Symposium on Law Reform and Regulation, hosted in association with Warwick Law School, 13–14 September 2011. I am grateful to Symposium participants for their comments and encouragement, and for the helpful suggestions of two anonymous reviewers. Any errors remain my own.

References

1 The coalition programme on regulatory reform is set out in Better Regulation Executive Reducing Regulation Made Simple (London: HMSO, December 2010). For an analysis of the interpretation of the better regulation agenda adopted by the previous Labour administration, see ‘the core executive's approach to regulation: from “better regulation” to “risk-tolerant regulation”’ (2006) 40 Social Policy and Administration 526.

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8 Prior to RESA, there were several UK regulators that were empowered under their own legislation to impose variable financial penalties, including the Office of Fair Trading, the Financial Services Authority, the Pensions Regulator and HM Revenue and Customs. Regulators upon whom powers under Part III of the Act may apply are specified in Schedule 5 of the Act (‘designated regulators’), or any other person who has an enforcement function in relation to an offence specified in Schedule 6 of the Act: per s 37 RESA.

9 ss 39–41 RESA.

10 ss 42–45 RESA.

11 s 50 RESA.

12 s 42(2)(b) RESA.

13 ss 39–41 RESA (fixed monetary penalties) and ss 42–43 RESA (discretionary requirements).

14 ss 39–41 RESA. Details of fixed penalties will be provided for by the Minister in question. They may be set at a single amount, or they may vary according to certain factors such as the size of the business. The Better Regulation Executive, Department for Business, Enterprise and Regulatory Reform Regulatory Enforcement and Sanctions Act 2008: Guidance to the Act (London: Better Regulation Executive, July 2008) (hereafter ‘BRE Guidance to the Act’) states that fixed monetary penalties are intended to be used in respect of ‘low level, minor instances of regulatory compliance’.

15 Regulators may impose ‘discretionary requirements’ pursuant to s 42(3) of the Act which can include ‘a requirement to pay a monetary penalty to a regulator of such amount as the regulator may determine’ if satisfied beyond reasonable doubt that the person has committed a relevant offence as per s 42(2). Examples of possible aggravating and mitigating factors relevant in determining the size of the penalty are provided in the BRE Guidance to the Act, at 31.

16 s 43 RESA (discretionary requirements) and s 40 RESA (fixed monetary penalties). The making of a payment of a sum lower than or equal to the original penalty may be made before the expiry of the 28-day representation period, thereby stopping proceedings from progressing further.

17 s 40(2)(b) RESA.

18 s 43(5) RESA. The BRE Guidance to the Act, at 39, provides an example of a business committing to pay compensation to persons affected by the offence in question, with the variable monetary penalty reduced to take into account the compensation offered.

19 s 43(6) RESA. Rights of appeal against the decision are only available if there is an error of fact, error of law or if the decision is unreasonable: s 43(7) RESA.

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22 Hawkins (1984), above n 20.

23 Ibid.

24 A more comprehensive discussion of bargaining and negotiation in the context of Australian competition law enforcement is provided in Yeung, K Securing Compliance (Oxford: Hart, 2004)Google Scholar ch 5.

25 This definition excludes agreements that involve the grant of immunity from prosecutor to the accused.

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32 Galligan, D Due Process and Fair Procedures (Oxford: Oxford University Press, 1996)Google Scholar.

33 Ibid.

34 Article 6 of the Convention expressly confines a set of specified minimum procedural rights (such as the presumption of innocence, the right to legal assistance and so forth) to criminal proceedings, so that the European Court of Human Rights has often been called upon to classify offences as civil or criminal for the purposes of determining the range of procedural rights available in particular cases. See Ozturk v Germany (1984) EHRR 409; Maligne v France (1999) 28 EHRR 578; Escoubet v Belgium (2001) 31 EHRR 46.

35 K Crispin ‘Prosecutorial ethics’, in Parker, S and Samford, C. (eds) Legal Ethics and Legal Practice (Oxford: Clarendon Press, 1995)Google Scholar. s 63 RESA.

36 For a more extensive discussion of potential safeguards that appropriately circumscribe enforcement negotiations, see Yeung, above n 24, at 135–149.

37 Contrast the very light-handed scrutiny by the Australian Federal Court in competition penalty proceedings discussed in Yeung, above n 24, at 144–151.

38 A more comprehensive discussion of the use of administrative settlements in the context of Australian competition law proceedings is provided in Yeung, above n 24, ch 6 and 7.

39 The Macrory Report, at 65. Enforcement undertakings are defined in s 50(2) RESA as ‘an undertaking to take such action as may be specified in the undertaking within such period as may be so specified’.

40 Ibid, at 7.

41 Ibid, at 65.

42 Ibid, at 63.

43 Ayres, I and Braithwaite, J Responsive Regulation (New York: Oxford University Press, 1992)Google Scholar p 19.

44 For a concise account, see Black, J and Baldwin, R ‘Really responsive regulation’ (2008) 71 Modern Law Review 59 Google Scholar.

45 The Macrory Report, at 29.

46 Ibid, at 9.

47 Ibid, at 31.

48 Ibid.

49 s 50(3) RESA provides that the action specified in an enforcement undertaking must be (a) action to secure that the offence does not recur; (b) action to secure that the position is, so far as is possible, restored to what it would have been if the offence had not been committed; (c) action including payment of a sum of money to benefit any person affected by the offence; or (d) action of a prescribed description.

50 The Macrory Report, at 66.

51 Fuller, L ‘the forms and limits of adjudication’ (1978) 92 Harvard Law Review 353 CrossRefGoogle Scholar at 373.

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58 Black, above n 56.

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60 Auerbach, J Justice Without Law? (New York: Oxford University Press, 1983)Google Scholar p 145; Genn, H ‘Tribunals and informal justice’ (1993) 56 Modern Law Review 393 CrossRefGoogle Scholar at 394.

61 Abel, R The Politics of Informal Justice (Los Angeles, CA: Academic Press, 1982)Google Scholar p 271.

62 Ibid, p 5.

63 Ibid, p 270.

64 Auerbach, above n 60, p 145.

65 Fiss, O ‘against settlement’ (1984) 93 Yale Law Journal 1073 CrossRefGoogle Scholar.

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67 Lacey, above n 53, at 362.

68 Galligan, above n 32, p 285.

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70 Fuller, above n 51, at 245.

71 Abel, above n 61, p 271.

72 Baldwin, R Rules and Government (Oxford: Clarendon Press, 1996)Google Scholar.

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74 As part of the Australian Consumer Law amendments, the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010. For a more detailed analysis, see Yeung, above n 24, ch 7.

75 The statutory market power threshold specified in the Act is defined in terms of whether the merger or acquisition may lead to a ‘substantial lessening of competition’: per s 50 Trade Practices Act 1974 (Cth Aust).

76 Eg, undertakings by the firm to undertake broad-based compliance programmes. See ACCC v Z Tek Computers Pty Ltd (1997) FLR 197; Parker, C ‘Restorative justice in business regulation: the Australian Competition and Consumer Commission's use of enforceable undertakings’ (2004) 67 Modern Law Review 210 CrossRefGoogle Scholar.

77 There have, however, been some criticisms of remedial undertakings, including concerns that some of the purposes which it has pursued may exceed the scope of its legislative power, including the use of enforceable undertakings to secure penal purposes, and to enable the Commission to recover its investigation costs. See Yeung, above n 24, pp 204–214.

78 The Hampton Report, para 2.68.

79 Ibid.

80 Ibid, Recommendation 5.

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82 See, eg, Vestey v IRC (Nos. 1 & 2)[1980] AC 1148; R v Board of Inland Revenue , ex p MFK Underwriting Agencies Ltd[1990] 1 All ER 91; Welton v North Cornwall District Council[1997] 1 WLR 1285; Harris v Evans[1998] 1 WLR 1285; R v Commissioners of Customs & Excise ex p F & I Services[2000] STC 364; Neil Martin v HMRC[2007] EWCA Civ 1041; R v Inland Revenue Commissioners ex p Preston[1985] AC 835.

83 See, eg, Reynolds, P ‘Legitimate expectations and the protection of trust in public officials’ 2011 Public Law 330 Google Scholar; Knight, Cjs ‘Expectations in transition: recent developments in legitimate expectations’ 2009 Public Law 15 Google Scholar; Elliot, M ‘Legitimate expectations, consistency and abuse of power: the Rashid case’ (2005) 10 Judicial Review 281 CrossRefGoogle Scholar; Roberts, M ‘Public law representations and substantive legitimate expectations’ (2001) 61 Modern Law Review 112 CrossRefGoogle Scholar; Craig, Pp ‘Legitimate expectation: a conceptual analysis’ (1992) Law Quarterly Review 79 Google Scholar.

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85 Cf. R v North and East Devon Health Authority, ex p Coughlan[2001] QB 213.

86 J Brady The Point is to Change It: Exploring the Role of Advice, Guidance and Improvement in the Inspection of Health and Social Care EPCR Standing Group on Regulatory Governance, Third Biennial Conference, unpublished (University College Dublin, 2010).

87 Better Regulation Executive and National Audit Office Effective Inspection and Enforcement: Implementing the Hampton Vision in the Environment Agency (London: Department for Business, Enterprise and Regulatory Reform, March 2008).

88 Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses Ltd[1982] AC 617.

89 Better Regulation Task Force Principles of Good Regulation (London: Cabinet Office, 2003).

90 These principles are now enshrined in s 21(2) of the Legislative and Regulatory Reform Act 2006. Regulators who are afforded Part III RESA powers are also required to observe the principles set out in s 5(2) RESA, which requires that ‘(a) regulatory activities should be carried out in a way that is transparent, accountable, proportionate and consistent, and (b) regulatory activities should be targeted only at cases in which action is needed’: ss 64–65 RESA.

91 Baldwin, above n 2, at 265. I have expressed this clash of logics as a potential tension between the quest for effectiveness on the one hand, and constitutional values on the other: per Yeung, above n 24, ch 3.

92 An exception and an exemplar is Harlow, C and Rawlings, R Law and Administration (Cambridge: Cambridge University Press, 3rd edn, 2009)CrossRefGoogle Scholar.