3 S.I.
2009/2331: Reported for unexpected use of the enabling power and
defective drafting
Financial Transparency (EC Directive) Regulations
2009 (S.I. 2009/2331)
3.1 The Committee draws the special attention
of both Houses to these Regulations on the grounds that they make
an unexpectedly limited exercise of power in one respect and are
defectively drafted in several related respects.
3.2 These Regulations are made under section 2(2)
of the European Communities Act 1972 and provide for the implementation
of Commission Directive 2006/111/EC on the transparency of financial
relations between Member States and public undertakings as well
as on transparency within certain undertakings. The structure
of the Regulations is as follows:
- Regulation 2(1) contains key
definitions. In particular, "contract" is to be construed
as any agreement linking a public authority to a public undertaking
(both expressions are defined) in respect of compensation (as
defined).
- Regulations 3 to 5 impose requirements on any
public undertaking with respect to the maintenance and retention
of records of any public funds which are made available to it
either directly by a public authority, or by a public authority
through another public undertaking or financial institution, and
with respect to the provision of certain information to the Secretary
of State on request.
- Regulations 6 to 8 impose requirements on certain
undertakings falling within paragraph (1) of regulation 6 (these
undertakings are not necessarily public ones) to maintain and
retain separate accounts showing the costs and revenues associated
with different activities and full details of the methods by which
costs and revenues are assigned or allocated to different activities,
and to provide certain information to the Secretary of State on
request.
- Regulation 9 requires public undertakings operating
in the manufacturing sector to provide the Secretary of State
with certain information each financial year and with such further
information as is requested.
- Regulations 11 and 12 make provision as to contract
terms with an implicit sanction for breach of contract. Those
regulations state:
11. Where a public
authority is a party to a contract that public authority shall
ensure that the contract contains the elements specified in—
(a) Regulations 3, 4 and 5, in respect of
public undertakings;
(b) Regulations 6, 7 and 8, in respect of
an undertaking required to maintain separate accounts; and
(c) Regulation 9 in respect of public undertakings
operating in the manufacturing sector.
12. It is an implied
term of a contract that undertakings to the contract comply with
the provisions of—
| (a) | Regulations 3, 4 and 5, in respect of public undertakings;
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| (b) | Regulations 6, 7 and 8, in respect of an undertaking required to maintain separate accounts; and
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| (c) | Regulation 9 in respect of public undertakings operating in the manufacturing sector.
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3.3 It seemed to the Committee that regulations 11
and 12 were unclear, and it sought a response from the Department
for Business, Innovation and Skills on various questions designed
to clarify the intended scope and purpose of those provisions.
In a memorandum printed at Appendix 3 the Department—
- explains that regulations 11
and 12 are intended to be mutually exclusive and that the failure
to set this out in the Regulations was an oversight;
- explains that in regulation 12 the phrase "undertakings
to the contract" is intended to cover any undertaking which
is a party to the contract (as defined), and accepts that this
could have been expressed more clearly in the drafting;
- recognises that in regulation 12 the drafting
does not adequately make clear that the implied term cannot be
excluded by any contrary agreement;
- acknowledges that, as a result of the definition
of "contract" in regulation 2, the scope of regulations
11 and 12 is too narrow and fails to cover cases involving undertakings
which are not public ones.
3.4 The Department states that it will make an amending
instrument to remedy these errors as soon as possible. The
Committee accordingly reports regulations 11 and 12 for defective
drafting as respects the matters identified in the first three
bullets in paragraph 3.3 above, acknowledged by the Department,
and reports those regulations for making an unexpectedly limited
use of power in respect of the matter identified in the fourth
bullet in that paragraph, also acknowledged by the Department.
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