As a result of draft legislation currently before Parliament, a number of regulators may soon be able to apply for an enhanced range of sanctioning powers. The Regulatory Enforcement and Sanctions Bill also provides for a duty to be imposed on regulators not to maintain unnecessary burdens in their regulatory activities. However, the Bill has been the subject of considerable criticism, not least by Parliamentary scrutiny committees.
Additional powers to impose sanctions
The Regulatory Enforcement and Sanctions Bill (the Bill) will, once it enters the statute book, supplement the current powers of a number of regulators with a range of alternative civil sanctions. Currently before Parliament, the key objective of the Bill is to allow regulators to respond to cases of non-compliance in a more flexible, effective and proportionate manner. The Bill seeks to implement a number of recommendations arising out of the Hampton Review, which made several proposals with a view to improving regulation by public authorities.
In summary, the Bill provides for four new sanctions:
- Fixed monetary penalties, with the amount of the penalty to be set out in delegated legislation. A regulator with the power to impose this sanction will be able to do so only where it is satisfied beyond reasonable doubt that an offence has been committed.
- Imposition of "discretionary requirements" instead of a prosecution, where the regulator is satisfied beyond reasonable doubt that a relevant offence has been committed. The "discretionary requirements" include: variable monetary penalties, requiring steps to be taken within a specified timeframe to ensure that particular incidents of non-compliance will not continue or recur, or requiring steps to be taken to restore matters to how they would have been had the non-compliance not occurred;
- Stop notices, which can prevent specified activities by a regulated entity until it has taken steps to ensure compliance; and
- Enforcement undertakings, where a regulated entity can give an undertaking to take corrective action.
Any appeal of a sanction imposed under the Bill will lie to an independent tribunal, to be established under the Tribunals, Courts and Enforcement Act 2007.
Application of the Bill to regulatory bodies
Not all regulators will be given the powers described above, and not in relation to all regulatory offences. Rather, the Bill provides that the enhanced regulatory powers described above will be granted to three categories of regulators: first, those listed by name in Schedule 5 to the Bill, secondly, those that enforce offences contained in any Act listed in Schedule 6, and thirdly those that enforce offences in secondary legislation made under enactments listed in Schedule 7. Regulators which may benefit from the expanded sanctioning powers include the Civil Aviation Authority, the Environment Agency, the Financial Services Authority, the Gambling Commission, the Health and Safety Executive, the OFT, the Competition Commission, Ofgem, Ofcom and the Office of Rail Regulation.
The new sanctioning powers will be granted to particular regulators by means of ministerial order. In order to be eligible, the Minister must be satisfied that a regulator is in compliance with the Better Regulation Executive's five principles of good regulation (i.e. transparency, accountability, proportionality, consistency and ensuring that regulation is targeted only at cases where action is needed). These principles were recently placed upon a statutory footing by way of the Legislative and Regulatory Reform Act 2006 (see our e-bulletin of 13 February 2008). Regulators will also be required to publish guidance in relation to the penalties that they may enforce under the Bill and how they will prosecute offences.
Duty upon Regulators
Part 4 of the Bill provides that Ministers can impose upon public authorities a duty not to impose or maintain unnecessary burdens in their regulatory activities. This is in line with a recent House of Lords Select Committee report on UK economic regulators, which suggested that economic regulators be statutorily required to remove burdens wherever possible. The duty contained in the Bill is said to be modelled on section 6 of the Communications Act 2003, which imposes an analogous duty on Ofcom.
Where these provisions apply, a regulator will be required to review the obligations it imposes in the delivery of its objectives and remove any unnecessary burdens where possible. An 'unnecessary burden' is defined as being either disproportionate to the regulator’s policy objective, or targeted at situations where action is not required to achieve that objective, or imposed in circumstances where it is possible to achieve the desired outcome in a less onerous way.
In principle any person or public authority which performs regulatory functions may fall within the scope of the duty. The Government has not provided a list of regulatory functions that will trigger the duty: Ministers will consult with relevant regulators and any other appropriate bodies to determine the bodies which will be caught. However, the Government has said that it only intends to apply the duty to a particular regulator where there is reason to believe that the duty would help to further the Better Regulation agenda. The Bill provides that the Government would be required to lay a statutory instrument before Parliament for affirmative resolution if it intended to apply the new duty to a public authority.
Criticism of the Bill
The Bill has been subject to criticism from a number of sources, in particular the House of Lords Constitution Committee. This Committee drew to the attention of the House three particular issues of concern. First, the complex nature of the schemes proposed by the Bill, which include powers for Ministers by means of "directions" to suspend and revoke suspensions of regulators' powers to impose sanctions. Secondly, the extent to which it is constitutionally appropriate for regulatory authorities (rather than the ordinary courts) to make determinations as to whether a person has committed a criminal offence and to impose unlimited financial penalties. Thirdly, whether the procedural protections provided in the Bill—which include the application of the criminal standard of proof and a right to make representations in some (but not all) situations—match up to the minimum standards of procedural fairness that a person accused of a criminal offence ought to have.
The Bill has been promoted by the Government as a means to ensure greater certainty for regulated businesses, including swifter and more appropriate treatment for those who have flouted regulatory requirements. However much of the Bill's impact will only become apparent once it is clear how it is to be applied to individual regulators and for which particular offences. It may be that businesses faced with the threat of sanctions under the Bill may find they have more scope to offer proactively voluntary undertakings or enforcement undertakings in order to avoid formal sanctions or prosecution. The criticism of the Bill by the Constitution Committee means that substantial amendments are likely to be tabled to the Bill before it finally enters the statute book.