The Regulatory Enforcement and Sanctions Act received Royal Assent on 21 July 2008. In our e-bulletin of 13 March 2008 we reported on the (then) Bill and in particular its proposed introduction of a new expanded framework of regulatory sanctions. This update highlights the key provisions of the Act. According to guidance published by the Department for Business, Enterprise and Regulatory Reform the intention is for the Act to come into force on 1 October 2008, apart from provisions in Part 2 relating to the Primary Authority Scheme which should come into force on 6 April 2009.
The Act deals with three separate but related areas, in four parts.
Parts 1& 2 – The Local Better Regulation Office
Part 1 of the Act provides for the establishment of the Local Better Regulation Office ("LBRO"), which has the statutory objective of ensuring that local authorities exercise their relevant functions in a way that is effective, does not give rise to unnecessary burdens and complies with the Better Regulation Commission's Principles of Good Regulation. The relevant functions relate to enforcement in a number of defined areas, covering consumer protection, environmental protection and public health and safety, and include the issuing of guidance to local authorities and reviewing national enforcement priorities for local authority regulatory services.
Part 2 of the Act promotes the co-ordination and consistency of regulatory enforcement by local authorities by establishing a Primary Authority scheme. This is intended to address the problems which can occur where a business or other regulated organisation operates across more than one local authority area. Essentially, the scheme will operate by identifying one local authority as the Primary Authority for a particular business. The Primary Authority will then be responsible for giving advice and guidance to that business.
Part 3 – Civil sanctions for regulatory offences
The Act allows a Minister, by order, to supplement the current powers of a number of regulators with a range of alternative civil sanctions intended to allow for a more proportionate and flexible response to cases of regulatory non-compliance. The new powers are an alternative to criminal prosecution and it will be for the regulator to determine the appropriate response to a particular incidence of regulatory non-compliance. The new powers are set out below.
(i) Fixed monetary penalties. A 'notice of intent" must be issued before any penalty can be imposed and the business will then have the right to make representations and objections. The DBERR guidance suggests that penalties will be of a relatively low amount and may be appropriate, for example, for offences such as failing to maintain appropriate records. The amount of the penalty will be specified in the order made by the Minister.
(ii) Imposition of "discretionary requirements". The "discretionary requirements" include: variable monetary penalties, requiring steps to be taken within a specified period to ensure that particular incidents of non-compliance will not continue or recur (compliance notice), or requiring steps to be taken to restore matters to how they would have been had the non-compliance not occurred (restoration notice).
(iii) Stop notices, which can prevent specified activities by a regulated entity until it has taken steps to ensure compliance.
(iv) Enforcement undertakings, where a regulated entity can give an undertaking to take corrective action.
Which regulators will have the new powers?
The Act provides that the enhanced regulatory powers described above may (subject to certain conditions) be granted to three categories of regulators. First, those listed by name in Schedule 5 to the Act (this includes the Competition Commission, Environment Agency, Financial Services Authority, Information Commissioner, Office of Communications and the Office of Rail Regulation). The powers will also apply to regulators that enforce offences contained in any Act listed in Schedule 6 and those that enforce offences created by secondary legislation made under enactments listed in Schedule 7. Before making any order under Part 3, the Minister must carry out a public consultation and the order itself will be subject to a vote in both Houses of Parliament.
Part 4 – Duty to avoid unnecessary regulatory burdens Part 4 of the Act provides that Ministers can impose upon public authorities a duty not to impose or maintain unnecessary burdens in their regulatory activities. In the transition from Bill to Act, the scope of this Part has been narrowed so that it will only apply, initially at least, to the regulatory functions exercised by five specified regulators: the Gas and Electricity Markets Authority, the Office of Fair Trading, the Office of Rail Regulation, the Postal Services Commission, and the Water Services Regulation Authority.