Clause 11: The Claims Management Services Tribunal

78.     Clause 11 establishes the Claims Management Services Tribunal and makes provision about its constitution and proceedings.

79.     Subsection 2 provides that the Tribunal will consist of members of an existing Tribunal - the Financial Services and Markets Tribunal. It provides that members of the Financial Services and Markets Tribunal shall also be members of the Claims Management Services Tribunal; that the President and Deputy President of the Financial Services and Markets Tribunal shall also be the President and Deputy President respectively of the Claims Management Services Tribunal; and that the panel of Chairmen of the Financial Services and Markets Tribunal shall also be the panel of Chairmen of the Claims Management Services Tribunal.

80.     Subsection 3 sets out the arrangements for hearings. Hearings will be by a member of the panel of Chairmen, selected in accordance with arrangements made by the President. Hearings may be before a member of the panel of chairmen sitting alone, or with one or two members of the lay panel. It is anticipated that routine hearings will be heard by a Chairman and two lay members, although in certain circumstances (such as in an emergency) a Chairman might sit alone. In the event that a chairman sits with one other member, the Chairman will have the casting vote.

81.     Subsection 4 gives the Lord Chancellor the power to make rules about the proceedings of the Tribunal. In is anticipated that, in order to ensure compliance with the European Convention on Human Rights, the rules will specify that a decision of the Regulator to attach conditions to, suspend, or cancel a person's authorisation will not have effect for a period of 28 days during which an appeal may be brought. The rules may also provide that the Regulator may apply to the Tribunal for an interim order preventing the provision of regulated claims management services by an authorised person pending a full hearing. This could be used where there was evidence that there was a high risk of consumer detriment were an authorised person allowed to continue providing the services. The rules will be made by statutory instrument subject to the negative resolution procedure.

82.     Subsection 5 gives effect to various provisions of Schedule 13 of the Financial Services and Markets Act in relation to the Claims Management Services Tribunal. These include provisions about the remuneration of members of the Tribunal, the appointment of staff and procedural matters including practice directions, evidence and decisions.

83.     Subsection 6 amends the Tribunals and Inquiries Act 1992 to add the Claims Management Services Tribunal to the list of Tribunals under the general supervision of the Council on Tribunals.

Clause 12: Appeals and references to Tribunal

84.     Clause 12 specifies the circumstances in which appeals and references may be made to the Tribunal.

85.     Subsection 1 makes clear that a person may appeal to the Tribunal if the Regulator refuses the person's application for authorisation, grants the authorisation on terms or subject to conditions, or imposes conditions on, suspends, or cancels the person's authorisation.

86.     Subsection 2 makes clear that the Regulator may refer complaints about the professional conduct of an authorised person to the Tribunal, and may also refer to the Tribunal a question about whether an authorised person has complied with a rule of professional conduct.

87.     Subsection 3 outlines the powers of the Tribunal on a reference or appeal under this section. The Tribunal may take any decision on an application for authorisation that the Regulator could have taken. It may also impose or remove conditions on conditions on a person's authorisation, suspend or cancel a person's authorisation, or remit a matter to the Regulator.

88.     Subsection 4 makes clear that an authorised person may appeal to the Court of Appeal against a decision of the Tribunal.

Clause 14: Orders and Regulations

     89.     Clause 14 provides general information as to what may be included in orders and regulations under Part 2, and as such is self-explanatory, with the exception of subsections (3) and (5) which do need further explanation.

     90.     Subsection 3 requires the Secretary of State to consult the Office of Fair Trading and such other persons as he thinks appropriate before making an order under section 3(2)(e), bringing a sector within the ambit of regulation. Appropriate consultees will vary according to the particular activity under consideration: for example, the Secretary of State might want to consult the President of the Employment Tribunals if he is considering regulation of claims related to employment, or the Chief Executive of the Criminal Injuries Compensation Authority if considering regulation of claims related to criminal injuries compensation.

     91.     Subsection 5 applies where the Secretary of State makes an order under section 4(3), establishing a person for the purpose of being designated as Regulator. This subsection permits the Secretary of State to make provision for the appointment of members (where the person established is an unincorporated body). The order might also provide details about dissolution of the person established for the purpose of designation.

     FINANCIAL EFFECTS

92.     The provision on negligence will have no implications for public expenditure.

93.     The cost of regulating claims management services will vary according to the means of implementation. It is likely to have a limited effect on public expenditure if a private body is designated as the Regulator. In the event that the Secretary of State regulates directly, or through a new public body, the effect on public funding could be higher.

94.      It is envisaged that the regulatory costs will be recouped from those regulated by way of a registration and annual fee. However, to deliver the regulatory mechanism before sufficient income from fees is established it is likely that Government would need to provide funding for start up costs, and support during the early years of regulation. The aim will be to achieve a self-financing regime as soon as possible. The full Regulatory Impact Assessment published with the Bill sets out the estimated range of costs of introducing statutory regulation.

     PUBLIC SERVICE MANPOWER

95.     The provisions on negligence will have no implications for public service manpower.

96.     The provisions relating to the regulation of claims management services are likely to have an effect on public service manpower if the Secretary of State regulates directly or establishes an NDPB. However if a private body is designated as the Regulator, there may be limited effect on public manpower.

     REGULATORY IMPACT ASSESSMENT

     97.      The Regulatory Impact Assessment (RIA) for this Bill has been agreed with the Better Regulation Executive. The RIA assesses that in relation to claims management services, the introduction of statutory regulation will impose new regulatory burdens on the sector, leading to an increase in costs for new and potential new claims management companies. However, it will be outweighed by the benefits to businesses outside the claims management sector, who are likely to see a decrease in the number of vexatious or frivolous claims brought against them, and reducing the costs of dealing with them. The provision on negligence will have no cost to business or regulatory impact.

EUROPEAN CONVENTION ON HUMAN RIGHTS

     98.     The Bill is in two Parts. Convention issues do not arise in relation to Part 1, which is essentially declaratory in character. Part 1 does not involve procedural matters and is concerned with the substantive law of negligence, which has not been considered to raise any human rights issues.

     99.     Part 2 of the Bill provides for a regulatory framework within which the Regulator will have powers to grant authorisation to carry on the regulated activities, to prescribe rules for the professional conduct of authorised persons, to investigate complaints against providers of the regulated services and to take specified enforcement action. Convention issues arise in general terms under Article 6 in relation to investigations and decisions by or on behalf of the Regulator which may affect a person's civil rights, and also arise under Article 10 in relation to the offences created under clauses 6, 9 and 10, and under Article 8 in relation to the investigatory powers of the Regulator under clause 7 of and paragraphs 13 and 14 of the Schedule to the Bill. The Tribunal established by clause 11 ensures that where a decision of the Regulator affects a person's civil rights, they have the right to a fair hearing before an impartial Tribunal. The provisions in the Bill are such as to enable a framework to be established which complies with the Convention rights, and section 6 of the Human Rights Act will apply, making it unlawful for the Regulator to act incompatibly with the Convention rights.

100.     The offences under clauses 6 and 10 are punishable, following conviction on indictment, by a maximum sentence of two years imprisonment, in line with similar provision in relation to financial services and immigration services regulation. The aim of the Act is to regulate the supply of claims management services and effective sanctions are essential to ensure that its provisions are enforceable. It is considered that the offences, and the penalties provided, are proportionate to the desired aim.

101.     The investigatory powers under clause 7 are necessary to enable the Regulator to investigate the possible commission of criminal offences. Their exercise might interfere with the right to respect for private life in Article 8, but would be justifiable within Article 8(2) as both necessary and proportionate with the legitimate aim, with safeguards attached to the exercise of the powers. The power to enter and search premises in clause 7(5) and paragraph 14(2) of the Schedule cannot be exercised without the Regulator first having obtained a warrant. Clause 7(8) and sub-paragraph 14(6) of The Schedule require the Secretary of State to make regulations specifying the circumstances in which the powers will be used. It is intended that the power will under the regulations be strictly limited.

102.     Given these safeguards (and bearing in mind the effect of section 6 of the Human Rights Act), it is considered that the framework for the use of enforcement powers by the Regulator will be compatible with the Convention rights.