Select Committee on Constitution Sixth Report

CHAPTER 11: Improving the Appeals Mechanisms

219.  Challenge constitutes the most powerful form of accountability. The courts may overturn the decision of a regulator. Public bodies are subject to judicial review. Decisions of certain regulators may also be challenged on the merits of the case.

220.  In addition to judicial review, both the Competition Commission and the Competition Appeal Tribunal have roles in reviewing regulatory decisions. Where the regulator of a privatised utility seeks to modify a condition of licence, which modification is not accepted by a licence holder, the regulator must refer the matter to the Competition Commission which can propose its own modifications. This is in effect an appeal in all but name.[193] The Competition Appeal Tribunal, which operates under the Competition Act 1998 and the Enterprise Act 2002, hears appeals on the merits from the decisions of the Office of Fair Trading and sectoral regulators in relation to agreements restricting competition and to abuses of a dominant position in the market.[194] The Competition Appeal Tribunal also hears appeals by way of judicial review only in relation to merger and market investigations.[195] Apart from a few specified decisions of certain regulators, the above are the only situations where appeals on the merits are presently competent.

221.  We have noted already the problems with judicial review. Appeal to the courts is a powerful weapon. The prospect of it may serve as a deterrent to regulators. It can certainly be argued that it ensures that they are rigorous in their attachment to due process in the reaching of decisions. Nonetheless, taking a case to judicial review is expensive and time-consuming. Delay can result in regulatory drift. For those who are regulated, seeking judicial review may create more problems than the one they seek to resolve by taking such action. For many, therefore, judicial review is not a viable option. It is also, as we have noted previously, essentially a negative weapon and one that is narrow in focus. The test of unreasonableness is a difficult one to meet. There are, as we have just recorded, few other means of challenging a decision of a regulator.

222.  There is thus a prima facie case for considering looking at the appeals process to see if it can be simplified and better access afforded to those affected by regulation. In undertaking such a study, one has to balance the rights of the regulated and other affected parties and the problems that may be caused by excessive recourse to the courts or other statutory appeals bodies, especially when undertaken as part of a game-playing exercise or to undermine the effectiveness of the regulatory authority.

223.  Some think the current balance is about right. Stephen Timms, Minister of State at the DTI, told us that "On the whole I think the balance is now about right and the arrangements are working pretty well".[196] Tom Winsor told us that he thought "Network Rail have all the appeal rights that they need".[197]

224.  There are those who think there should be greater rights of appeal. According to Professor Prosser, "The safest course is to provide a full right of appeal on the merits whenever a regulatory decision may have substantial consequences for a regulated enterprise".[198] Royal Mail told us that lack of appropriate appeal mechanisms meant more confrontation in the regulatory relationship.[199] The Electricity Association, noting the development of the Competition Appeal Tribunal, suggested that the answer would be a comprehensive 'new animal', a regulatory appeals tribunal.[200] Professor Prosser supported an enhanced role for the Competition Appeal Tribunal[201] though his views were questioned by the Competition Commission, which suggested that its expertise and resources made it a suitable focus for any fast track appeals.[202]

225.  There are those who suggest that change is coming anyway. Professor Prosser advised us that judicial review is developing towards taking account of the merits.[203] The Communications Act 2003 has set a generic precedent of appeals on the merits (substance) of the case to an independent tribunal.[204] Management of the appeals mechanism therefore becomes the important issue. Sir Christopher Bellamy told us that "We would strike out frivolous appeals in a summary way if that became a problem".[205]

226.  The situation is a dynamic one. There are various developments internationally that have a bearing, not least in the European Union, as well as nationally. There is the relative newness of 'super complaints'. There is a review of the appeals process by the DTI and a growing trend towards granting greater appeal rights.

227.  These developments could form the basis of arguing that there should be a pause until the picture becomes clearer. We reach the opposite conclusion. The present situation is not static and as such creates uncertainties for the regulated and those affected by the actions of regulators. We believe that there should be greater coherence. We blend principle with practice in contending that there should be a move towards allowing appeals based on the merits of the case. We believe that this right should be introduced over time and accorded to all those who are subject to regulation, subject to the right of the appeals body to reject, and penalise those responsible for, unwarranted appeals.

228.  We have looked at fast track appeals and we have benefited considerably from the evidence given to us by the Competition Appeal Tribunal and the Competition Commission. We have been impressed by the way in which such procedures presently operate, appeals being dealt with expeditiously. Such expeditious treatment not only reduces the financial cost but also limits the prospect of regulatory uncertainty.

229.  We believe that fast track appeals on specific issues and other arbitration mechanisms should be developed, contingent on the approval of the appeals body, where there is opposition from one of the parties. We welcome the Competition Commission's willingness to play a part in this process.[206] However, the Commission and the Competition Appeal Tribunal do not cover all independent regulators. We therefore find persuasive the argument advanced by the Electricity Association that a Regulatory Appeals Tribunal be created, though we would see this as appropriate only for those regulators not presently covered by the Competition Commission or the Competition Appeal Tribunal. The effect would be to ensure that coverage of the regulatory state was comprehensive, enabling appeal on the merits of the case.

230.  Appeals should provide an opportunity for the regulated to have their objections reviewed on the merits of the case, subject only to the condition that the appeal body should have the clear ability and power to identify and penalise appeals designed to frustrate equitable regulation.

231.  Simplified systems of fast track appeals and arbitration should be developed for decisions by the Competition Commission and the Competition Appeal Tribunal and made available subject to the agreement of each of the parties concerned.

232.  We further recommend that a Regulatory Appeals Tribunal should be set up to cover regulatory decisions that do not fall within the jurisdiction of either the Competition Commission or the Competition Appeal Tribunal, with a similar provision for fast track appeals and arbitration.

193   Vol.II p180, para 20: Vol.II p351, para 13 Back

194   QQ1005-7, Vol.II p355 Back

195   QQ1009-12, Vol.II p356 Back

196   Q1119, Vol.II p398 Back

197   Q616, Vol.II p224 Back

198   Vol.II p53 Back

199   Q641, Vol.II p233 Back

200   Q501, Vol.II p171 Back

201   Vol.II p 60 Back

202   Vol.II p326, para 11 Back

203   Vol.II p51, para 2 Back

204   Vol.II pp352-353, paras 20 and 35 Back

205   Q1025, Vol.II p357 Back

206   Q919, Vol.II p322-323; and Vol.II p314, para 17 Back

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