4 Encouraging regulatory reform
38. In our view, it is for the Government to provide
the necessary justification for making constitutionally significant
changes to the RRO process. The Government's review of the working
of the RRA, which was initially promised within three years of
the Act, has unfortunately been delayed. When undertaken, it would
seem to be the ideal platform upon which the Government could
establish a detailed case for changing the RRO process. We look
forward to receiving the review during the latter part of this
year. We should welcome the opportunity to examine the arguments
and evidence underlying any Government proposals for further reform
of the RRA.
39. Meanwhile, in the absence of the opportunity
for an informed debate which we expect the review to provide,
we consider that it would be premature for us to comment further
on the Department's suggested changes to the RRA other than to
make clear that we have not seen any evidence
outside Government
of a wish that Ministers be given further discretionary powers
to amend primary legislation. On the contrary, such a transfer
of power from the legislature to the executive would seem to go
against the shift towards greater parliamentary scrutiny. A radical
jump in the opposite direction to enhance the powers of the executive
would need to be fully justified with detailed evidence. As noted
above, we expect the Government to accumulate the evidence justifying
any proposed changes as part of its review into the RRA. That
said, we make two suggestions for improving regulatory reform
that we hope the Government will include as part of its review.
Our suggestions relate to a new order-making power (which would
allow a certain degree of sub-delegation) aimed exclusively at
implementing Law Commission recommendations and amendments to
core company law. We set out our thoughts on this below.
Law Commission proposals
40. Since 2001, we have considered two RROs that
were derived from Law Commission proposals.[62]
The most recent Annual Report from the Law Commission reported
that there were 17 Law Commission proposals awaiting implementation.[63]
Some of these reports cover highly controversial areas where Parliament
would probably be unwilling to depart from the normal procedures
applying to primary legislation.[64]
Others, however, relate to more technical reforms of the law that
individually may require little parliamentary time.[65]
In general, the shortage of parliamentary time is often perceived
as a barrier to the implementation of Law Commission reports,
though this may place an undue emphasis on the actual procedures
in both Houses[66] rather
than on the effort required to carry out the preparatory work
required in Whitehall, not only in conducting a rigorous impact
assessment and taking up the valuable time of Parliamentary Counsel,
but also in simply deciding whether the Government wants to do
it or not.
41. The Halliday Report recommended that the Department
of Constitutional Affairs should initiate a project aimed at identifying
special parliamentary procedures to facilitate scrutiny of Law
Commission Bills.[67]
The Government is clearly aware of the potential use of the RRO
procedure to implement changes based on Law Commission recommendations
where the RRA applies. Nevertheless, we suggest that where Ministers
have reached a united view that a non-controversial Law Commission
proposal ought to proceed and the only remaining barrier is the
risk of a prolonged parliamentary process, there might be a case
for a fast-track through Parliament, subject to safeguards similar
to those we and our Lords counterparts operate in respect of RROs.
Such a power would need to be free from the constraints of section
1 of the RRA. To be an effective fast-track, a requirement would
be that an order should not be allowed to alter the substance
of the Law Commission's proposals, although one would probably
need to be able to make technical alterations, for instance to
accommodate developments in the law since the Law Commission reported.
When laying the proposed order a Minister may need to certify
that the order met this criterion. If the power were limited in
this way, there would be little point in requiring pre-laying
consultation (though the Minister might want to consult on any
technical changes from the Law Commission version). Essentially,
this process would allow a Law Commission Order to amend primary
legislation, on a "take it or leave it" basis, provided
that a committee scrutinised it for appropriateness and vires
(and perhaps any other technical issues). Importantly, the committee
would not be able to recommend other changes. This procedure might
still require a two-stage process, but only where the relevant
scrutiny committee recommended drafting changes. If the first
stage draft was acceptable, then we would see little objection
to it being put to the House by means of an affirmative resolution.
This suggested procedure for Law Commission proposals would thus
be materially different from that prescribed by the RRA and Standing
Order No. 141. Provided there is widespread support for introducing
such a bespoke, fast-track process for implementing Law Commission
proposals by order, then we consider the case for such a new legal
power deserves further exploration within the Government's review.
Special procedure for amending company law
42. In 2001 a review of company law concluded that
significant parts of company law were outmoded or had become redundant
and were enshrined in law that was often unnecessarily complicated
and inaccessible.[68]
This problem was thought to arise from a combination (on the one
hand) of very rapid changes to company law, including changes
derived from international commitments, and (on the other) a very
slow process of amending company legislation. In July 2002, the
Government published its White Paper: Modernising Company Law
that, amongst other things, suggested that the technical aspects
of company law should be able to be amended by secondary legislation.[69]
The Trade and Industry Committee (TISC) launched an inquiry into
the subject in 2002 and in its subsequent report recommended that
if the Government wanted to pursue the idea of amending company
law by means of secondary legislation, then "any changes
in the exercise of the most significant powers be subject to the
Regulatory Reform Order Procedure, which ensures both wide publication
and more detailed parliamentary scrutiny than other forms of secondary
legislation."[70]
In May 2004, the Government issued a further consultative document,
Company Law: Flexibility and Accessibility, which set out
its proposals for the procedure to be used to update company law
in future. That document concluded:
Although Regulatory Reform Orders are designed for
a different legislative purpose, the consultation and scrutiny
processes that are built into their use may provide a useful model.
The Government therefore proposes to build on these processes
in designing the new powers.[71]
43. In September 2004, TISC published a further report
in which it re-affirmed its view that the House should consider
the option of referring company law proposals to the Regulatory
Reform Committee.[72]
TISC noted that the Regulatory Reform Committee not only has expertise
in the type of procedure envisaged for company law proposals but
has already satisfactorily dealt with proposals relating to company
law under the Deregulation and Contracting Out Act. TISC further
recommended that the special procedure should be used only in
relation to so-called core company law, that is law relating to
companies as companies as opposed to law affecting companies in
any of their other roles, for example as employers or taxpayers.[73]
We agree that there is a strong case for the proposed new power
to use a super-affirmative procedure when reforming company law,
but we consider it an open question whether it is our Committee
or some other parliamentary Committee that is charged with the
task of scrutinising individual proposals.
62 The Regulatory Reform (Business Tenancies) (England
and Wales) Order 2003 and the proposal for the Regulatory Reform
(Execution of Deeds and Documents) Order 2004. See Second Report
from the Regulatory Reform Committee, Session 2002-03, Proposal
for the Regulatory Reform (Business Tenancies) (England and Wales)
Order 2003, HC 182, and Fourteenth Report from the Regulatory
Reform Committee, Session 2002-03, Draft Regulatory Reform
(Business Tenancies) (England and Wales) Order 2003 and Draft
Regulatory Reform (Gaming Machines) Order 2003, HC 1210, and
Fourteenth Report from the Regulatory Reform Committee, Session
2003-04, Proposal for the Regulatory Reform (Execution of Deeds
and Documents) Order 2004, HC 1271 Back
63
Law Commission Annual Report 2003-04, para 3.3(b). This is the
number of law reform reports accepted by the Government. In addition
a further 13 reports awaited consideration by the Government (both
figures as at March 2004). Back
64
For example, the Mental Capacity Bill in Session 2003-04, carried
over into Session 2004-05, and the draft Corruption Bill considered
by a Joint Committee in Session 2002-03. See Report from the Joint
Committee on the Draft Corruption Bill, Session 2002-03, HL 157
HC 705, and Government reply to the Report from the Joint Committee
on the Draft Corruption Bill (Cm 6086), published on 18 December
2003. Back
65
For example, The Rules against Perpetuities and Excessive Accumulations,
Law Commission Report No. 251 (1998), or Limitation of Actions
Law Commission Report No. 270 (2001). In its Annual Report, the
Law Commission drew attention to the Court of Appeal's view in
KR v Bryn Alyn Community (Holdings) Ltd (in liquidation),
[2004] 2 All ER 716, that early statutory implementation of the
latter proposal "would obviate much arid and highly wasteful
litigation turning on a distinction of no apparent principle or
other merit". Back
66
In the Commons, Standing Order No. 59 (Law commission bills) provides
that any public bill, the main purpose of which is to give effect
to proposals contained in a report by either of the Law Commissions,
other than a private Member's bill or a bill to which Standing
Order No. 58 (Consolidation bills) applies, shall, when it is
set down for second reading, stand referred to a second reading
committee, thereby taking the time for debating second reading
off the floor, while reserving the actual vote to approve the
bill to a question put to the House without debate. This leaves
open the extent to which Amendments might be brought forward in
Committee and on report and it is of course not possible to limit
such amendments to only those which have been considered and approved
by the Law Commission. The Lords Companion para 6.101 notes that
special public bill committees (i.e. public bill committees empowered
to take written and oral evidence on bills before considering
them clause by clause in the usual way) "are particularly
suitable for bills originating in reports of the Law Commissions"
but the last appointment of a public bill committee was in 1994. Back
67
Quinquennial Review of the Law Commission by John Halliday CB,
(Halliday Report) Recommendation 30, March 2003 Back
68
Company Law Review Steering Group, Modern Company Law: For
a Competitive Economy-Final Report, Volume 1, DTI (June 2001),
p ix Back
69
Modernising Company Law, Cm 5553, July 2002 Back
70
Trade and Industry Committee, Sixth Report of Session 2002-03,
The White Paper on Modernising Company Law, HC 439, para
121 Back
71
Consultative Document, p11 Back
72
Trade and Industry Committee, Ninth Report of Session 2003-04,
Updating Company Law: the Government's consultation document
on 'Company Law. Flexibility and Accessibility', HC 1041,
para 4 Back
73
ibid Back
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