Regulatory Enforcement and Sanctions Bill
[HL]
Introduction
34. This bill, among other things, enables subordinate
legislation to prescribe, to an unprecedented extent, sanctions
which may be imposed on those considered to have committed offences
under a range of Acts or under subordinate legislation. The Department
for Business, Enterprise and Regulatory Reform have provided a
memorandum, printed at Appendix 5, on the delegations proposed
in the bill.
Local Better Regulation Office — Part 1
35. Clause 1 establishes the Local Better Regulation
Office ("LBRO"). It is to have a number of functions,
some of which are mentioned in paragraph 6 of the memorandum.
36. In particular, the LBRO will have functions
under Part 1 of the bill. These include:
- giving guidance to local authorities
(as defined in clause 3) in England and Wales as to how to exercise
their relevant functions (as described in clause 4) - clause 6;
- giving directions to those local authorities
relating to relevant functions - clause 7;
- preparing lists of priority matters to which
those local authorities must have regard - clause 11.
The LBRO will also have functions under Part 2 of
the Bill. These include:
- nominating local authorities to
be the "primary authority" for any particular regulated
person - clause 23;
- dealing with references of questions under clause
26 (see Schedule 4), which can include giving directions to local
authorities (see paragraphs 2(5), 3(2) and (5) and 7(1) of Schedule
4);
- giving guidance to local authorities about the
operation of Part 2 - clause 31.
The Secretary of State may give the LBRO general
or specific directions as to the exercise of its functions (clause
15).
"Relevant function" — clause 4
37. The functions of the LBRO are determined
by reference to "relevant functions", as defined in
clause 4(1). This definition refers to the concept of a "relevant
enactment". "Relevant enactment" means the enactments
specified in Schedule 3 (including subordinate legislation made
under them) and regulations made under section 2(2) of the European
Communities Act 1972 which relate to any of the matters set out
in clause 4(3)(a) to (h). Neither the Explanatory Notes nor the
memorandum indicate why the particular regulations under section
2(2) have not been specified in the bill itself, as has been done
in Schedule 3 for the primary legislation. Any question whether
any particular instrument falls within clause 4(3) is to be determined
by direction of the Secretary of State, for which there is no
prescribed publicity requirement (in contrast to directions under
clause 15).
38. A direction under clause 4 has legislative
character because it determines the scope of Part 1, if only in
cases of doubt. If it is not possible to list the relevant
regulations under the 1972 Act in the bill itself, we consider
that the Secretary of State should prescribe by statutory instrument
subject to the negative procedure the regulations which fall within
the matters set out in clause 4(3).
39. Clause 4(4) enables the Secretary of State,
by order subject to affirmative procedure:
- to add to, or remove from, the
list in Schedule 3;
- to add to, or remove from, the list of matters
in clause 4(3).
The altering of lists of this type by subordinate
legislation is well precedented and in this instance is not inappropriate.
Guidance to local authorities: enforcement —
clause 7
40. The LBRO may, by using the powers in clause
7, direct one or more local authorities to comply with:
- any guidance under clause 6 (clause
7(1)(a));
- any guidance under any enactment given by any
other person if the guidance relates to the exercise of a relevant
function (clause 7(1)(b)).
The consent of the Secretary of State (or Welsh
Ministers, as appropriate) is required. Clause 15 enables the
Secretary of State to give general or specific directions to the
LBRO: the Secretary of State could direct the LBRO to direct an
authority or group of authorities to comply with guidance.
41. As the direction under clause 7 is that any
local authority to which it applies shall "comply with"
the guidance, the power can be used to make mandatory, at least
for some authorities, guidance which when sanctioned by Parliament
in passing the Act under which it was issued was not mandatory.
Under the statutory provision governing the issue of guidance,
the local authority would typically be required only to have regard
to it. Given the open-ended scope of clause 7(1)(b), it seems
to us that the "guidance" concerned covers at least
some provisions which, if made mandatory, would be of a legislative
character.
42. In considering whether any parliamentary
procedure need be applied to the guidance, both this Committee
and the House will have considered whether or not it was mandatory.
Making guidance mandatory changes the character of the guidance,
and this is what the LBRO with the consent of the Secretary of
State may, or at the direction of the Secretary of State must,
do under clause 7. We consider that the Minister should provide
a list of the guidance to which clause 7(1)(b) refers; that the
Secretary of State's consent to directions under clause 7 should
(if they will affect more than a single authority) be contained
in an instrument subject to the negative procedure; and that directions
by the Secretary of State under clause 15 requiring the LBRO to
give directions to local authorities under clause 7 should (if
they will affect more than a single authority) be given by an
instrument subject to negative procedure.
Power to dissolve LBRO — clause 17
43. Part 1 provides for the demise of the LBRO
as well as for its establishment: clause 17 enables the Secretary
of State, by order subject to affirmative procedure, to provide
for the dissolution of the LBRO. This is a Henry VIII power (see
clause 17(7)). The rationale for this is set out at paragraph
46 of the Explanatory Notes: "LBRO will be dissolved when
it is deemed to have achieved its objective" and paragraph
24 of the memorandum.
44. Among the matters for which the dissolution
order may provide is "the transfer of functions of LBRO to
another person" (clause 17(2)(b)). The powers given to the
LBRO by the bill are very considerable, including the power to
direct elected local authorities, yet it is proposed that the
powers should be transferable to any person in the public or private
sector, possibly including a body created specially for the purpose
by subordinate legislation (clause 17(5)). The department has
not justified the power at clause 17(2)(b). Indeed, the justification
for the main aspect of the power in clause 17 is that the job
will have been done, in which case we would presume there would
be no need to transfer the functions of the LBRO. We consider
this power inappropriate unless the Minister can justify its retention.
45. Paragraph 24 of the memorandum mentions the
precedent of section 90 of the Clean Neighbourhoods and Environment
Act 2005. That section is not comparable to clause 17 as it concerns
a body with a limited remit, the Commission for Architecture and
the Built Environment, which has no powers of direction.
Co-ordination of regulatory enforcement —
Part 2
46. The purpose of Part 2 is described in paragraphs
26 to 28 of the memorandum. Clause 22(1)(b) and (c) enables the
Secretary of State, by order subject to negative procedure, to
prescribe, for Scotland and Northern Ireland, the functions for
reserved/non-transferred matters which are "relevant functions"
for the purposes of Part 2. The orders will effectively determine
the scope of Part 2 for Scotland and Northern Ireland. Paragraph
30 of the memorandum explains that the power "merely allows
the Secretary of State to specify a subset of the enactments in
Schedule 3" but clause 22 does not confine the powers of
the Secretary of State in this way. If the power were limited
to the purpose set out in the memorandum, then the negative procedure
would be sufficient. If the power is not so limited, then we consider
that it should be subject to affirmative resolution.
Civil sanctions — Part 3
PURPOSE
47. Schedule 5 to the bill lists a number of
regulators. Schedule 6 to the bill lists a number of criminal
offences by reference to the statutory provisions imposing the
offence. Some of these offences are triable in England and Wales
only in the magistrates' court. Others (offences triable "either
way") are triable either in the magistrates' court or in
the Crown court. The Crown court has the power to impose higher
sentences. But in all contested cases the current situation is
that the guilt of the alleged offender must be proved beyond reasonable
doubt and the sentence given will be imposed by the court in the
light of the circumstances of the case and of the offender. The
maximum penalty on conviction is specified in the legislation
creating the offence.
48. The purpose of Part 3 of the bill is to enable
Ministers of the Crown to confer on regulators power to impose
sanctions as an alternative to prosecuting the offender through
the criminal courts. There are two categories of regulator on
whom powers may be conferred. The first category is the "designated
regulators" i.e. those listed in Schedule 5. Powers can be
conferred on those regulators for any offence (under any Act)
for which they have enforcement functions and which exists when
the bill is passed. The second category is the other regulators.
Those regulators are ones that have enforcement functions relating
to offences existing when the Bill is passed and created by an
enactment specified in Schedule 6. The Crown Prosecution Service,
the police and the others specified in clause 35(3) are excluded.
So in practice this second category will comprise largely local
authorities and Ministers.
49. The scheme under Part 3 must be distinguished
from the two types of "civil sanctions" scheme which
are more commonly to be found in existing legislation:
(a) the system under which the offender is given
the option of paying a fixed penalty as an alternative
to being prosecuted and being heard in the criminal courts, but
under which he may always choose to proceed to the criminal courts
(e.g. selling alcohol to children);
(b) the system under which the behaviour in question
is decriminalised altogether, i.e. the behaviour is no longer
a criminal offence and it can no longer be prosecuted in the criminal
courts at all, but penalties are payable if the offender is found
to have contravened the statutory provision concerned (e.g. parking
contraventions in London and some other parts of the country).
50. Clause 34 enables a Minister of the Crown
(or Welsh Ministers), by order subject to affirmative procedure,
to confer on regulators a range of powers, i.e.:
- to impose fixed monetary penalties
(clause 37);
- to impose discretionary requirements (clause
40);
- to prohibit the carrying on of activities until
specified steps have been taken (clause 44);
- to accept undertakings to take action to secure
that an offence does not continue or recur etc. (clause 48).
51. Under the bill, it will be for the regulator
to take a view on whether an offence has been committed beyond
reasonable doubt (fixed monetary penalties and discretionary requirements);
that activity involves or is likely to involve the commission
of an offence (stop notices); or that there are reasonable grounds
to suspect that an offence has been committed (enforcement undertakings).
At the first independent examination of the case (on appeal) it
is for the defaulter to show that the regulator's view was wrong,
on a specified ground of appeal. This is different from what would
happen on a prosecution (which remains an option for the regulator).
On a prosecution it would be for the regulator to prove the case
to the court beyond reasonable doubt. Yet the penalties which
might be awarded under the bill could exceed the fine which would
be likely to be imposed by a court on a conviction.
ROLE OF THIS COMMITTEE
52. The question for this Committee has not been
whether it is right to impose on such a scale civil sanctions
which might be more severe than the existing criminal penalties
likely to be imposed. The question has been whether it is appropriate
to delegate to Ministers the power to confer power to impose those
sanctions within the constraints of the bill. In doing so, we
have of course had to have regard to the nature and impact of
the policy. In their Report on this bill, the Constitution Committee
said:
"The scheme envisaged in the bill will enable
the transfer, on an unprecedented scale, of responsibilities for
deciding guilt and imposing financial sanctions (with no upper
limit) away from independent and impartial judges to officials."
and:
"There will be no requirement for a notice of
intent or an opportunity to make representations where a regulator
wishes to impose a fixed monetary penalty. We are unconvinced
that this meets the minimum standards of procedural fairness an
accused person ought to have in relation to what are ostensibly
criminal offences. The bill as currently drafted risks excluding
a basic common law principle of natural justice: audi alteram
partem (hear both sides before making a decision). The onus
will be placed on the individual or company to seek first an internal
review and then an appeal to the First-tier Tribunal (the new
general purpose tribunal established by the Tribunals, Courts
and Enforcement Act 2007)."[6]
These concerns have affected our consideration of
the delegations, particularly those proposed in respect of stop
notices and compensation (clauses 44 and 46) and appeals (clause
52).
GENERAL CRITERIA FOR THE CONFERRAL OF PART 3 POWERS
53. Paragraphs 54 and 55 of the memorandum seek
to justify conferring the powers in Part 3 by subordinate legislation.
We accept that if the powers are to be given to different regulators
at different times and/or for different offences at different
times, subordinate legislation is the only practical way to proceed.
Paragraph 54 of the memorandum suggests that the regulator will
have to comply with certain principles before the Secretary of
State will make an order under clause 34 in relation to that regulator,
notably that the regulator has satisfied the Secretary of State
that it complies with the Hampton principles of better regulation.
If the House intends that the powers in Part 3 should only
be conferred in particular circumstances, then those circumstances
should be set out in the bill.
54. Though the range of regulators and offences
to which Part 3 applies is considerable, and this is relevant
in considering the powers, we note that it is open to the House
to amend the bill if it considers there are any particular items
in Schedule 5 or Schedule 6 to which the arrangements should not
apply.
55. The issue for us is whether the framework
in the bill gives a sufficient indication of the overall policy.
In many respects, the bill sets out the principle of what an order
under Part 3 must secure with considerable particularity. Examples
are at clauses 38, 39, 41, 42(1) to (3), 43(3) and (4), 45 and
46(3). We comment below on our particular areas of concern but,
in general, the affirmative procedure should provide an adequate
safeguard against inappropriate use of the power, if combined
with some amendments to the bill.
Fixed monetary penalties — clause 37
56. Fixed monetary penalties are intended to
be imposed for low-level instances of non-compliance (paragraph
8 of the Explanatory Notes). The penalty is fixed: it will not
relate to the severity of the offence or to the circumstances
of the case.
57. Clause 37 leaves to the order the amount
of the penalty, or the criteria by reference to which it is to
be calculated. Though clause 37(4) provides that, for an offence
triable only summarily, the penalty cannot exceed the maximum
fine, there is no maximum for offences which can also be tried
on indictment ("either way" offences). We are not persuaded
that this distinction is justified. The bill should specify
that the maximum amount payable as a fixed monetary penalty may
not exceed the maximum amount payable if the offence had been
tried summarily.
Discretionary requirements — clause 40
58. For a monetary penalty imposed as a discretionary
requirement, there is no maximum in the bill, even when the offence
is triable only summarily and there would therefore have been
a maximum if the penalty had been imposed under clause 37. This
is also significant in the context of any late payment penalty
under clause 50, since the cap on the late payment penalty operates
by reference to the amount of the original penalty. We accept
the lack of an upper limit for either-way offences. Unless
the Government can make the case for the lack of an upper limit
for offences which can only be tried summarily, the bill should
specify that the maximum amount payable in such cases may not
exceed the maximum amount payable if the offence had been tried
summarily.
Stop notices — clause 44
59. Clause 44 enables an order to confer power
on a regulator to stop activity in certain circumstances when
he reasonably believes that the activity involves or is likely
to involve the commission of an offence. This is a powerful weapon
for a regulator and potentially of enormous significance to the
regulated person.
60. The acceptability of the delegation depends
on the robustness of the compensation arrangements but clause
46 leaves it to the order to state the cases in which compensation
will be awarded. In particular there is power for the order to
provide that compensation is payable only in prescribed cases.
This is insufficient: for the stop notices delegation to be
acceptable, the bill itself must specify the essential elements
of the compensation arrangements which the House considers necessary.
In particular, the bill should specify the result which any order
making provision under clause 46 needs to secure.
Appeals — clause 52
61. The rights of appeal are fundamental to the
scheme which can be introduced by orders under this Part because
the appeal tribunal is in effect taking the place of the magistrates'
court or Crown Court which otherwise would be dealing with the
alleged offence. Until the appeal stage, all the decisions (including
those taken on internal review under clause 38) are taken by the
regulator.
62. The order must specify the appeal tribunal,
and we accept the flexibility to prescribe some other tribunal
than the First Tier Tribunal, but the bill is not otherwise prescriptive
about the powers of the appeal tribunal. Clause 52(3) and (4)
give an indication of matters for which the order may provide
but, in contrast to some of the preceding clauses, clause 52 does
not require the order to secure any particular result. The
rights of appeal are of fundamental importance to the fairness
of this scheme. The bill itself should specify at least the minimum
items which any order making provision under clause 52 needs to
secure.
Supplementary provision: information and entry
— clause 53
63. Clause 53 enables an order, by way of supplementary
provision, and for the purposes of facilitating the use of powers
conferred by the order, to confer powers to require information
and to confer powers of entry, search and seizure. The power at
clause 53(3)(b), to authorise the use of information in evidence
which could not otherwise lawfully so be used, seems to us particularly
hard to justify; indeed the memorandum makes no attempt to justify
any of the powers at 53(3). We draw this to the attention of
the House so that the House might seek a justification of the
powers from the Minister. Without such a justification, we consider
these broad delegations inappropriate, though they might appropriately
be replaced by more comprehensive provision on the face of the
bill or a more limited power.
Offences under subordinate legislation —
clause 60
64. The power at clause 34, so far as it relates
to regulators who are not in the list in Schedule 5, does not
apply to offences contained in subordinate legislation, since
Schedule 6 lists only provisions of Acts. Clause 60 enlarges existing
powers of Ministers to create criminal offences. All of the powers
to create criminal offences listed in Schedule 7 will, under the
bill, automatically include power to make, in relation to the
offence, any provision which could be made in relation to regulators
and offences under the provisions of Acts listed in Schedule 6
by an order under clause 34. But the regulations or orders making
that provision will not be orders under Part 3 of the bill and
so will not automatically attract the affirmative procedure. The
procedure prescribed by the relevant enactment in Schedule 7 will
apply, which in many cases will be the negative procedure. We
consider that the affirmative procedure should apply to all orders
and regulations that make the provision mentioned in clause 60.
6 Select Committee on the Constituion, First Report
(2007-08), HL Paper 16, paragraphs 7-12. Back
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