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The authority is obliged, prior to imposing a penalty, to give notice of its intentions to do so, and to set out the acts or omissions by the licence holder which have resulted in the contravention or failure, together with the relevant condition, requirement or standard of performance. In the event that the authority, having considered any objections or representations made by the licence holder in question, proceeds with the penalty, the authority must give at least 42 days' notice of payment.
The authority is required, for example, by virtue of the proposed Section 30B, to prepare and publish a statement of policy with respect to the imposition of penalties and the determination of their amounts and undertake such consultation as it deems appropriate when preparing or revising the statement.
Proposed Section 30C provides certain time limits on the imposition of penalties where no final or provisional order has been made in relation to a contravention or failure. The authority may not impose a penalty in respect of the contravention or failure unless the notice relating to the penalty was served on the licence holder within 12 months from the time of the contravention or failure. Where a final or provisional order has been made, the notice must be served within three months from the confirmation of the provisional order or the making of the final order or, when the provisional order is not confirmed, within six months from the making of the provisional order.
An aggrieved licence holder may make an application to the court, which shall have the power to quash the penalty, substitute a lesser amount or substitute alternative dates for payment. The grounds on which the court may exercise its powers are only on the basis that the imposition of the penalty was not within the powers of the authority under, say, the proposed Section 30A; that the requirements of, say, proposed Section 30A have not been complied with; or that the date by which the penalty is to be paid is unreasonable.
The Opposition's view is that this is an enormous concentration of power in the authority. The authority is already empowered to determine and impose licence conditions and standards of service; Clauses 58 and 94 add the power to levy a fine. The limitations which circumscribe a court's ability to intervene in an abuse of this power leave the power exercisable without
The Minister is well aware of the Opposition's view that the use of these powers is likely to introduce conflict, most obviously with the European Convention on Human Rights. The Clause 58 and Clause 74 procedures, which authorise the imposition by the regulator of potentially unlimited penalties on licence holders with a wide swathe of obligations, clearly constitutes the determination of a civil right or obligation within the meaning of Article 6 of the convention. The procedure may also constitute the determination of a criminal charge within Article 6.
Since the procedure determines a civil obligation, Clauses 58 and 94 ought to offer a fair and public hearing before an independent and impartial tribunal. These clauses do not do so. The authority which determines whether to impose a penalty is not independent of the executive and, in any event, there is no provision for an oral hearing. As the Minister is aware, it is the Opposition's view that the right of appeal provided by Section 27E is a narrowly confined right and not a proper right of appeal, which at best offers similar grounds of review to those available on an application for judicial review. As such, it cannot operate to cure the deficiencies in the procedure before the authority.
The powers granted by Clauses 58 to 94 also lead to multiple exposure by licence holders. The licence holder is likely to be exposed to penalties both under the Competition Act 1998 and under Clauses 58 and 94. Whereas the Competition Act provides a clear framework determining the levels of fines that will be imposed, Clauses 58 and 94 have no such structure. There may also arise an obligation to make compensation payments to customers where they have failed to achieve a certain standard of performance.
Our amendments to these clauses seek to do the following. Amendment No. 204 relating to the electricity industry and Amendment No. 217 relating to the gas industry require the authority to be satisfied that compliance cannot be secured by other means before it imposes a penalty under the new Section 27A for electricity or 30A for gas.
Amendment No. 205 for electricity and Amendment No. 218 for gas insert a defence into what is otherwise an offence of strict liability--that is to say, a defence that says that if there was no intention or recklessness and the licence holder took all reasonable steps to avoid the alleged contravention or failure to act, there should be no penalty imposed.
This matter was debated in Committee in another place. If the Minister looks at columns 556 and 557 of Hansard, he will see that at one point in her contribution the Minister appeared to be suggesting that there should be no penalty where the contravention was genuinely inadvertent; but there are other parts of her contribution which suggest the
Amendments Nos. 210 to 214 with respect to electricity and Amendments Nos. 223 to 227 with respect to gas remove from the Bill the references to the expression "application procedure" and replace them with references to the rights of appeal under the new Sections 49B and 38B which the Opposition are trying to insert.
Finally, Amendment No. 215 regarding electricity and Amendment No. 228 regarding gas insert new Section 27G into the Electricity Act and new Section 30G into the Gas Act, requiring the authority to keep under review licence conditions which will give rise to penalties if breached. If they are insufficiently clear, in our view the authority must take appropriate steps to amend or revoke them. I beg to move.
Lord Borrie: It may be helpful to the Committee if I speak at this point to Amendments Nos. 206 and 219 standing in my name and that of my noble friend Lord Currie of Marylebone. The amendments form part of the group that we are discussing.
Our amendments propose to introduce an upper limit on the financial penalties envisaged in Clauses 58 and 94. The Liberal Democrat Front Bench has amendments covering similar ground, and will no doubt wish to speak to them. At present the only limitation on the penalty that may be imposed is--this phrase has been quoted many times today--that it should be,
The amendments represent one option for addressing the point by imposing an upper limit similar to that to be found in the Competition Act, passed as recently as 1998. On Second Reading of this Bill on 4th May, my noble friend the Minister said, as reported at col. 1175 of Hansard, that that Act was different, because it was based on European law, which is true, and that there was no reason to follow that. But in my view the Competition Act is an interesting, perhaps valid, precedent. There is a degree of overlap in the malpractices covered by that Act and by the Bill, and the gas and electricity regulator and the new authority created by the Bill have concurrent powers with those of the Director-General of Fair Trading to enforce the Competition Act.
Indeed, in March this year the Director-General of Fair Trading and the specific industry regulators, including the Office of Gas and Electricity Markets--the immediate predecessor of the new authority to be created by the Bill--published guidance, which I have in my hand. It is only eight pages long. It helpfully
It seems to me that when the new authority created by the Bill publishes, as the Bill requires it to do, its statement of policy on penalties, it is very likely to state very similar objectives; namely, to reflect the seriousness of the offence and the need to "incentivise" compliance and to use penalties as deterrents to malpractice.
The new authority may also have regard to the experience of the European Commission over not just a few months of the Competition Act 1998, which came into effect only in March this year, but over 30 years, with that maximum penalty of 10 per cent of turnover. That experience demonstrates that in determining penalties the European Commission has--I summarise, of course--taken account, on the one hand, of the length and gravity of infringement, the behaviour of the parties and the profits that may have been made out of unlawful behaviour, and, on the other hand, of such mitigating factors as a co-operative attitude towards the investigations.
Financial penalties under the Competition Act or under the Bill will need to reflect a very wide range of different circumstances, so the size of penalties in particular cases will vary considerably. But I rather doubt that any penalty would be above 10 per cent of turnover, because I doubt whether above 10 per cent of turnover could feasibly be,
There might be a perception by the public, licensees and the industry generally that without a top limit the authority newly created by the Bill would have an unduly large amount of power and be unduly arbitrary, even though we may think differently. Therefore, as a matter of perception, it may be as well if, as with the Competition Act 1998, we insert into the Bill such a maximum as we suggest in the amendments, or such other maximum as the Government think appropriate.
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