The main provisions of the Regulatory Enforcement and Sanctions Act 2008 (“the Act”) were brought into force in England and Wales on 1 October 2008.1 The Act gives the Minister for Business Enterprise and Regulatory Reform the power to give regulators, including local authorities and the Environment Agency, an unprecedented range of new enforcement powers (called “civil sanctions”). It is argued that these civil sanctions will create a more flexible and proportionate regulatory framework, whilst at the same time reducing the administrative burden for all of dealing with regulatory non-compliance issues. Civil sanctions are intended to provide regulators with an alternative to prosecutions and formal cautions.
This briefing explains, from an environmental law perspective, the new range of civil sanctions available to regulators and the impact that these will have on the status quo.
Overview of the Act
The Act is divided into four parts.
- Part 1 establishes the “Local Better Regulation Office” (“LBRO”) to improve the effectiveness and efficiency of local authorities in the performance of their regulatory services and to ensure that they exercise their powers in a manner which is transparent, accountable, proportionate, consistent and targeted, the five “principles of better regulation”.
- Part 2 deals with the co-ordination of regulatory enforcement matters between local authorities. (This part of the Act is not expected to come into force until April 2009).
- Part 3 is probably the most important for regulators and regulated alike as it introduces a new range of civil sanctions.
- Part 4 applies to particular regulators only, such as the Office of Fair Trading (OFT) and the Water Services Regulation Authority (Ofwat). Duties are given to these regulators not to impose unnecessary burdens on businesses or individuals.
New civil sanctions
Part 3 of the Act outlines four new civil sanctions.
- Fixed monetary penalties
- Discretionary requirements (These include variable monetary penalties and non-monetary discretionary requirements)
- Stop notices
- Enforcement undertakings (These are not technically “sanctions” as they are purely voluntary; regulators have no power to compel them to be given.)
Each sanction is considered in more detail later in this section.
To whom are the new sanctions available?
The new range of civil sanctions will be available to:
1 “designated regulators” listed in Schedule 5 to the Act, including, for example, the Environment Agency, Natural England and the Health & Safety Executive;
2 those, other than designated regulators, with enforcement powers in respect of offences contained in one of the pieces of legislation listed in Schedule 6 to the Act, such as Parts 2 and 2A of the Environmental Protection Act 1990 and the Health & Safety at Work etc Act 1974; and
3 those with enforcement powers under secondary legislation made under one of the Acts of Parliament listed in Schedule 7.2
According to guidance which accompanies the Act, regulators will not automatically be able to use the new civil sanctions. The ability to use the sanctions will be granted by ministerial order. Before granting such an order, the Minister must be satisfied that the new powers will be exercised in a way that complies with the principles of good regulation, which are transparency, accountability, proportionality, consistency and that use of the powers is targeted. This assessment will be evidence based and will, in the case of local authorities, be made in consultation with the LBRO and national regulators where appropriate.
To which offences do they apply?
“Designated regulators” will be able to apply the new civil sanctions for offences in relation to which they have enforcement powers. Regulators with enforcement powers under legislation listed in Schedule 6 can use civil sanctions for offences that existed on 20 July 2008 (the day before the Act was passed). Regulators will also be able to use civil sanctions for offences created in the future by regulations made under those Acts of Parliament which are listed in Schedule 7.
Fixed monetary penalties
Fixed monetary penalties (“FMPs”) are fines intended for minor non-compliance issues. Regulators can impose these without involving the courts. The key features of FMPs are as follows.
- The power to issue FMPs is only available where the regulator is satisfied beyond reasonable doubt that a person has committed a relevant offence. (“Person” also includes companies.)
- Before imposing a FMP, the regulator must serve a “notice of intent“ on the relevant person. The notice must include, amongst other things, the regulator’s grounds for its proposal to impose a FMP; the fact that the person has the right to make representations and objections within a certain period; and the period within which liability to the FMP may be discharged.
- The person may choose not to discharge its liability at the notice of intent stage and, instead make representations and objections. Once the period for representations and objections has ended, the regulator must decide whether or not a FMP should still be imposed – the person may, for example have a defence. If a FMP is still considered appropriate, the regulator will serve a “final notice”, setting out much of the same information as is required in the notice of intent, but with the addition of information relating rights of appeal and the consequences of non-payment.
- The amount of a FMP will be prescribed by ministerial order; regulators will not be able to exercise discretion in determining the amount of the fixed monetary penalty in individual cases. The Act caps the level of FMPs for those offences which are triable summarily (ie less serious types of offences which would only be heard by Magistrates’ Courts and not Crown Courts). The cap for that type of offence is usually £5000.
- If a person served with a final notice fails to pay the FMP within the specified time, the regulator can pursue the penalty as a civil debt or under a court order, and can also claim interest or other financial penalties for late payment, provided the total of any interest or financial penalties does not exceed the amount of the original FMP.
- A person can appeal the imposition of a FMP. The grounds of appeal are that the regulator’s decision was based on an error of fact; the decision was wrong in law; or the decision was unreasonable.
- Once a regulator has imposed a FMP, criminal proceedings cannot be brought against a person for the same offence.
These provide more flexible sanctions which the regulator can seek to impose, including:
- Variable Monetary Penalties (“VMPs”) – monetary penalties where the regulator can determine the amount; and
- Non-monetary Discretionary Requirements (“NDRs”) – a requirement for a person to
- take steps specified by the regulator, within a given timeframe, to prevent an offence from continuing or re-occurring; or
- take steps specified by the regulator, within a given timeframe, to restore the status quo, ie before the offence was committed. This could, for example, enable the regulator to ask for clean up of pollution.
Regulators must comply with the same procedural requirements as for FMPs. When deciding whether or not to impose a discretionary requirement after the period for representations and objections has passed, the regulator can take into account whether the person is able to offer an undertaking as to action to be taken by that person (including the payment of a sum of money) to benefit any person affected by the offence. The regulator has the power to accept or reject such an undertaking.
If a person served with a final notice fails to pay the VMP within the specified time, the regulator can pursue the penalty as a civil debt or under a court order and can also claim interest or other financial penalties for late payment, provided that the total of any interest or financial penalties does not exceed the amount of the original VMP.
A person can appeal the imposition of a discretionary requirement. The grounds of appeal are the same as those relating to FMPs, but with two additions: in the case of VMPs, a person can appeal if the amount of the penalty is unreasonable; and, in the case of NDRs, that the nature of the requirement is unreasonable.
Regulators are able to impose a “non compliance penalty” if a person fails to comply with a NDR or an undertaking to benefit any person affected by the offence. The decision to impose such a penalty can be appealed, the grounds of appeal being the same as those for FMPs. In addition, the penalty can be appealed if the amount is unreasonable.
These orders are intended for preventative rather than after the event measures. Stop notices will enable regulators to prohibit a person from conducting a specified activity until they have taken the steps detailed in the stop notice. The regulator must reasonably believe that:
- the activity is causing, or presents a significant risk of causing, serious harm to human health, the environment, or the financial interests of consumers and that the person is committing, or will commit, an offence by conducting that activity; and
- the activity will involve or will be likely to involve the commission of a relevant offence by that person.
The stop notice must include the grounds for serving the notice, the right of appeal, and the consequences of non-compliance with the notice. When satisfied that the steps referred to in the stop notice have been complied with, the regulator must issue a “completion certificate” to that effect. Failure to comply with a stop notice will be a criminal offence.
Regulators will have to compensate the person served with a stop notice for any loss which they suffer as a result, although this is likely to extend to losses suffered in particular cases and of a particular type.
A stop notice can be appealed. In addition to the grounds of appeal for FMPs, a person on whom a stop notice is served can appeal if any step identified in the notice is unreasonable; the person has not committed the relevant offence and would not have committed it had the stop notice not been served; and if the person would not, by reason of a defence, have been convicted had the stop notice not been served.
Those familiar with the planning regime will recognise the concept of stop notices, which can be quite a potent weapon for a regulator.
These are undertakings to take action to secure that
- a relevant offence does not continue;
- the position is restored to what it would have been if the offence had not been committed;
- action is taken to benefit any person affected by an offence; or
- any other action as may be prescribed by Ministerial order is taken.
Enforcement undertakings can only be accepted by a regulator where it has reasonable grounds to suspect that the person giving the undertaking has committed a relevant offence.
As enforcement undertakings are voluntary, there is no right of appeal.
Recovery of costs
The Act allows regulators to recover its investigation and administrative costs, as well as the cost of obtaining expert advice (including legal advice). Costs can only be recovered in respect of discretionary requirements and stop notices.
The Act has the potential to impact significantly on the way businesses are regulated. Businesses may regularly find themselves on the receiving end of civil sanctions, particularly in respect of minor non compliance issues where, previously, a regulator would not have considered it to be in the public interest to prosecute. (Regulators will still need to follow their own enforcement policies before taking advantage of any of the new sanctions.) One example of an area where regulators may, in future, decide to use the new range of civil sanctions is in respect of relatively minor breaches of Environmental Permit conditions.
Businesses may be able to “head off” prosecutions by offering enforcement undertakings, although regulators will be able to refuse such an offer if it considers it appropriate.
Regulators will still have to be satisfied, beyond all reasonable doubt that an offence has been committed (or, in some cases, that an offence will be committed) before the new sanctions can be used. Businesses will be able to appeal the imposition of a civil sanction on the basis that a regulator’s decision was based on an error of fact. Therefore, the evidence gathering process will need to be just as robust as in situations where the regulator is prosecuting.
It is not clear when regulators will have access to the new suite of enforcement powers. The Department for Business Enterprise and Regulatory Reform’s progress can be followed on its website.