Regulatory Enforcement And Sanctions Bill [HL] - continued          House of Commons

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Clause 73: Functions to which section 72 applies

183.     This clause applies the duty in clause 72 to those functions carried out by regulators listed in subsection (2). Subsection (1)(b) confers on a Minister of the Crown the power to specify regulatory functions in respect of which the duty in clause 72 should apply. Subsections (3), (4) and (5) set out the arrangements in respect of Scotland, Northern Ireland and Wales.

184.     Subsection (6) requires that the Minister consult the person whose regulatory functions are to be specified in the order and such other persons as are considered appropriate before making an order. An order may make such consequential amendments as are necessary. Subsections (7) - (9) specify the procedural requirements that apply in respect of the order-making power in this clause.


Clause 75: Commencement

185.     Clause 75 specifies how and when the powers contained within the Bill will commence. Parts 1 to 4 will commence by way of order of the Secretary of State.


186.     There will be an impact for local authorities administrating primary authority schemes under Part 2. Overall, the Government expects the associated costs to be £7.5 million. This will however be offset by a number of factors: primary authorities may recover the costs to them of administering the primary authority scheme, and LBRO may provide financial support to them in this role. The requirements of the primary authority scheme will be further offset by the time savings that follow for local authorities as a whole, which the Government expects to amount to between £3.7 million to £7.5 million. Local Authorities will also benefit from LBRO's role in advising central government on regulatory priorities and the way in which local authorities carry out their regulatory functions, under Part 1. Overall, it is anticipated that Parts 1 and 2 will result in a net benefit to local authorities of between £0.5 to £4.3 million.

187.     The Regulatory Sanctions proposals under Part 3 will impact on regulators and the court system. While there will be new costs to regulators of approximately £16.5 million, the reduction in criminal prosecutions in the criminal courts will result in a estimated saving of £38.8 million for regulators and £6.million for the courts. Overall, the Government estimate that there will be a benefit of approximately £28.4 million a year once the powers have been taken up.

188.     The application of the Part 4 duty to the five listed regulators will have modest initial annual costs to the regulators, in a range between £0 and £450,000. These are expected to diminish after two years.


189.     The Regulatory Enforcement and Sanctions Bill will necessitate only minor changes in public service manpower, if any.


190.     An impact assessment related to the provisions for in the Bill has been completed. The impact assessment is available in the Vote Office. The impact assessment concludes that the Bill will have significant net benefits for business. The main cost to business will arise from the impact of new regulatory sanctions but these will not affect businesses that are compliant with the law. This cost is more than offset by the benefits to business: a new framework for primary authority partnerships, the Local Better Regulation Office's objective to secure that local authorities exercise their relevant functions in a way that does not give rise to unnecessary burdens, the reduced court costs associated with the regulatory sanctions proposals, and the reduction in unnecessary burdens under the Part 4 duty.


191.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill, in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Minister of State for Employment Relations and Postal Affairs, Pat McFadden, has made the following statement:

      "In my view the provisions of the Regulatory Enforcement and Sanctions Bill are compatible with the Convention rights."

Part 1: LBRO

192.     Part 1 of the Bill sets out the objectives and functions of LBRO, and, together with Schedules 1 and 2, sets out the way in which LBRO will be established and constituted. The clauses in this part deal with interactions between (i) LBRO as a company and LBRO as a body corporate (ii) LBRO and local authorities, and (iii) LBRO and Ministers. Most of these provisions do not engage Convention rights. Convention rights may potentially be affected when LBRO exercises its functions of giving guidance or directions, setting enforcement priorities, and giving advice to Ministers and this affects natural and legal persons who are regulated by local authorities.

193.     Potentially relevant rights might be those protected under Article 1 of Protocol 1 (right to peaceful enjoyment of property), Article 8 (right to respect for private life), and Article 10 (right to freedom of expression) on account of LBRO guidance giving power. Article 8 issues might arise where guidance relates to inspection of premises and Article 10 to regulations on trade descriptions.

194.     To the extent that rights under these provisions are engaged, no concerns about ECHR incompatibility arise. Where LBRO issues guidance or publishes its list of enforcement priorities, local authorities must have regard to it. To the extent that LBRO can issue directions with which local authorities must act in accordance, section 6 of the Human Rights Act would render it unlawful for LBRO or the local authority to act in a way that is incompatible with the right when giving guidance or when regulating. Therefore, LBRO's guidance, and local authority enforcement of regulations will be lawful only if compatible with ECHR rights. Where guidance or regulation interferes with an ECHR right, such interference will have a legitimate foundation in rules designed to protect public health and/or safety and will be lawful provided that it is proportionate and non-discriminatory.

Part 2: Co-ordination of Regulatory Enforcement

195.     Part 2 of the Bill sets out provision on the co-ordination of regulatory enforcement. It entitles persons carrying on activities in the area of more than one local authority to have a primary authority in respect of any one or more regulatory functions. Where a person has a primary authority, any other local authority must consult with the primary authority before taking enforcement action against that person, and in certain circumstances, the primary authority can block the enforcement action. Where there is a dispute about whether or not the enforcement action should proceed, the matter can be referred to LBRO. The clauses in this part do not generally engage Convention rights. There is a possibility that the clauses concerning primary authorities (clauses 27-30) may, in certain circumstances, affect Convention rights.

196.     Whether or not enforcement action, or failure to take enforcement action, engages any ECHR rights will depend upon the nature of the action that is envisaged. Those that potentially arise are the rights of the regulated persons that will be the target of any intended enforcement action under Article 1 of Protocol 1, Article 8 and Article 10.

197.     The provisions do not raise concerns as to their compatibility with ECHR. They introduce procedural requirements where a local authority wishes to take enforcement action against a regulated person. They do not seek to alter the substantive assessment of when a local authority may or may not lawfully take enforcement action in respect of a regulated person. As they introduce an additional procedural hurdle to enforcement action, and are in that sense negative, they are less likely to have an impact on ECHR rights than provisions which lower the hurdles to be crossed before enforcement action can be taken.

198.     Where a local authority wishes to take enforcement action but a primary authority blocks the action, the human rights of the public may arguably be engaged: for example, right to private life under Article 8 where there is threat to public health occasioned by inadequate or incorrect food labelling or inadequate instructions in respect of machinery. Clause 28(6) allows the Secretary of State to prescribe circumstances in which local authorities may take enforcement action without consent. This power will be used to exempt from the need to notify the primary authority in advance situations including where there is an imminent risk of serious harm to human health or the environment. Further, primary authorities are permitted to block enforcement action only where they have previously given inconsistent advice to the regulated person. Primary authorities are themselves bound by section 6 of the Human Rights Act both when giving guidance and when deciding whether to allow enforcement action to proceed where previously they have given inconsistent advice. If enforcement action is needed in order to preserve ECHR rights of the public, then the primary authority would need to get it wrong twice, once when giving guidance and again when deciding whether or not to stick by that guidance where it was inconsistent with the proposed enforcement action, before the action could be blocked. Even then, the enforcing authority could refer the matter to LBRO. LBRO is bound by section 6 of the Human Rights Act and its objective, set out in clause 5, is to secure that local authorities exercise their regulatory functions effectively. This means that LBRO should ensure that local authorities protect the rights of those whom environmental health and trading standards rules are designed to protect in exercising their functions.

Part 3: Civil Sanctions

199.     Clause 36 contains a single order-making power. The remainder of Part 3 contains provisions stipulating how that order making power may be exercised. Neither clause 36 nor the remaining provisions of this Part in themselves affect Convention rights. These rights will be engaged only when instruments under clause 36 or by virtue of clause 62 are made.

200.     In the Government's view, the order-making power is capable of being exercised in a way which is compatible with the Convention. Furthermore, by virtue of section 6 of the Human Rights Act 1998, it is unlawful for the Minister (or Welsh Ministers), when exercising these powers, to act incompatibly with a Convention right.

201.     Statutory Instrument Practice (3rd edition, at paragraph 5.4.11) provides that, as a matter of good practice, a Minister should make a statement regarding the compatibility of any secondary legislation amending primary legislation with the Convention rights. The exercise of the order-making power will therefore be reviewed for compliance with the ECHR at the stage when orders are made under clause 36. This means that it will also be subject to Parliamentary scrutiny. Instruments made by virtue of clause 62 and Schedule 7 will be subject to a statement similar to section 19 Human Rights Act 1998 statements as they are made under affirmative resolution.

202.     Where the alternative sanctioning powers are exercised by regulators, certain Convention rights may be engaged. The Convention rights that might be engaged are Article 6 (right to a fair trial), Article 7 (No punishment without law), Article 8 (Right to privacy) and Article 1 of the First Protocol (Protection of property). Regulators (see definition in clause 37) are all public authorities exercising public functions and are thus bound by section 6 of the Human Rights Act 1998 to act compatibly with the ECHR. In addition, the Bill makes associated provision with the enabling power, such as minimum procedural and transparency requirements, which will provide appropriate safeguards to ensure that a regulator will act compatibly with the ECHR when exercising its functions.

203.     There are requirements concerning the standard of proof that must be met before a regulator can impose a sanction. For example, clauses 39 and 42 require that the Minister must secure, when conferring powers to impose fixed and variable monetary penalties and discretionary requirements, that the regulator must be satisfied to the criminal standard of proof before it can impose the sanction. A regulator imposing a stop notice must have the reasonable belief that an activity gives rise to a significant risk of serious harm and that the activity involves the commission or likely commission of a relevant offence. This sanction is preventative in nature, rather than punitive and does not require the application of the criminal standard of proof. There are other requirements related to stop notices that in total will provide sufficient safeguards to guarantee Convention rights.

204.     Before imposing a fixed monetary penalty or a discretionary requirement a notice of intent is served on a person by the regulator, which informs the person of the grounds for proposing to impose a sanction and of the defences available, and gives the person a right to make representations and objections. The notices imposing the civil sanctions (including for stop notices) also have minimum information requirements thereby ensuring that persons know the case against them (see clauses 40, 43 and 47), and informing them of their right to appeal and grounds on which they may appeal. There is also a requirement on the regulator to publish guidance on the sanction (see clause 63) which will give the public information on defences, rights to make representations and rights of appeal.

205.     There are opportunities for a person liable to a civil sanction to make objections and representations. For fixed monetary penalties and discretionary requirements, the person can make objections and representations after a notice of intent has been served. For stop notices, the person can proceed direct to the appellate tribunal to raise objections to the imposition of the notice.

206.     All of the civil sanctions (with the exception of the enforcement undertakings) will be subject to an appeal system through an independent and impartial tribunal. The enforcement undertakings do not lead to a right to appeal, as they are not enforced on persons, but are offered by them and accepted by the regulators.

207.     This Part also explicitly preserves freedom from double jeopardy in clauses 41 and 43. These clauses provide that when a fixed or variable monetary penalty is imposed on a person, that person cannot be later criminally prosecuted for the relevant offence. In certain circumstances, a person may later become liable for criminal prosecution. Where a person is subject to a non-monetary discretionary requirement or an undertaking, and that person fails to comply with that requirement or undertaking, he may be later prosecuted for the relevant offence to which the requirement or undertaking related (clause 44(3)). Stop notices can be used in conjunction with other sanctions, except for fixed monetary penalties. This is considered not to infringe the freedom from double jeopardy as the Government considers that non-monetary discretionary requirements, undertakings, and stop notices are not punitive in nature. Time limits for criminal prosecution can be extended under the power in clause 43(4). The Minister would be bound by section 6 HRA to ensure that these time limits cannot be extended retrospectively in contravention of Article 7 of the Convention.

208.     To the extent that these sanctions interfere with a person's Convention rights, it is the Government's view that this is justified in the interests of ensuring that there is effective regulation and enforcement of the law. The wide range of regulators and regulatory offences covered mean that the following aims may be served by these provisions: protection of public safety, maintaining the economic well-being of the country, the prevention of disorder or crime, the protection of health or morals and the protection of the rights and freedoms of others. In the specific case of stop notices, the prohibition of a person's activities is particularly justified where there is a risk of serious harm to health, the environment, and consumer financial interests. To the extent that a person's rights under Article 1 of the First Protocol are adversely affected, compensation may be available to remedy such loss (clause 48).

209.     Clause 55 provides that an order made under this Part may include consequential, supplementary, incidental or transitional provision. Subsection (3) gives some examples of what the supplementary power might be used for. It allows the order to extend existing powers to require information, to enter, search, and seize, to be available when a regulator is investigating a matter, which merits a civil sanction provided for in this Part. It also allows for an exception against the prohibition against the collateral use of information in evidence to be made in respect of the civil sanctions. For example, there may be existing provision allowing for the use of compulsorily obtained statements in a prosecution for a relevant offence where a person makes a statement inconsistent with it. The supplementary power may be used to allow such an exception to apply where a regulator is imposing a civil sanction. This power is restricted to extending existing authorisations. The power can be used in these ways only for the purpose of facilitating the use of the alternative sanctioning powers contained in this Part. It cannot be used to remove protections for persons for any other purpose. It would be for the Minister to determine whether the adoption of the example provisions in subsection (3) would, in any given case, be compatible with ECHR rights.

210.     Clause 70 allows police and prosecution authorities to disclose information to a regulator who exercises an enforcement function in relation to a relevant offence so that they may consider whether to impose a civil sanction. To the extent that the exercise of this disclosure provision engages a person's Article 8 rights, it is the Government's view that it is a justified interference in the interests of effective regulation and enforcement of the law.

211.     The provisions in Part 3 do not therefore raise any concerns about incompatibility with Convention rights.

212.     The provisions in Parts 4 and 5 do not raise any concerns about incompatibility with Convention rights.

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Prepared: 30 April 2008