Experience suggests that the level of scrutiny of regulatory processes and their effectiveness continues to grow. This is the case for a range of regulatory sectors and markets, including, for example, financial services (placed in sharp relief by the current turmoil) and the various professional services regulatory regimes. The underlying challenge in each case is to find the best formula for effective regulation of that sector. To some extent it may be argued that this is a case of 'different horses for different courses' and this may be seen to be borne out by the range of regulatory machinery and approaches adopted by different regulators. It goes without saying, however, that experience from other sectors can be informative. In this article we comment on a recent high profile example in which we have been involved from the world of politics, which we believe provides an interesting regulatory case study.
The Wendy Alexander affair
It will be recalled that a number of UK politicians have recently been the subject of regulatory scrutiny in relation to their compliance, or otherwise, with the requirements for the disclosure and registration of interests by members of parliament. Put short, the policy behind this area of regulation lies in the argument that elected public figures should properly disclose any relevant financial interest or appointment which might reasonably be perceived to prevent them from acting objectively in the exercise of their public functions. So, for example, an MP who is in receipt of a gift or benefit in kind from a leading car manufacturer might not as a result be seen to be appropriately objective and impartial in the context of voting on legislation which is likely to have a direct impact on the car industry. In Scotland, the most well known recent case has been that of Wendy Alexander MSP, the former leader of Labour in the Scottish Parliament. By any measure, the regulatory process by which her case was handled was extraordinary and worthy of some reflection in the context of a debate about effective regulation.
Let us recall, in brief, the relevant facts. Wendy Alexander announced her candidature for the leadership of the Labour Party in Scotland in August 2007, following the resignation of Jack McConnell. Although the sole leadership candidate, she was required to co-ordinate some level of leadership campaign and, for the purposes of funding that campaign, a number of financial donations were sought on her behalf from known supporters. In October 2007, press reports suggested that there may have been an irregularity, under electoral law, and in particular the Political Parties, Elections and Referendums Act 2000, in the obtaining of an unlawful donation from an individual donor based, not in the UK, but in Jersey. Breach of the 2000 Act can amount to a criminal offence.
As a result, the donation in question, in the sum of £950, was the subject of detailed enquiry by the relevant statutory regulator, the Electoral Commission. The Electoral Commission published its formal determination on the matter on 7 February 2008. It is not necessary for present purposes to go into further detail as to the circumstances in which the donation was received, or as to the specific terms of the decision published by the Electoral Commission. Suffice it to say that the Electoral Commission did not consider it necessary to refer the matter to the Procurator Fiscal for the purposes of considering a criminal investigation.
At the same time, a further investigation was being undertaken by the Scottish Parliamentary Standards Commissioner, in exercise of his own specific legislative functions and in particular around the question as to whether donations (including the Jersey donation) received by Ms Alexander's leadership election campaign team should properly have been registered in the Register of Members' Interests under the Code of Conduct for Members of the Scottish Parliament. The relevant legislation this time was the Interests of Members of the Scottish Parliament Act 2006, as well as, in relation to the investigative procedure, the Scottish Parliamentary Standards Commissioner Act 2002. Ms Alexander's response, as stated publicly, included reference to the fact that she had previously sought advice from relevant parliamentary authorities as to whether the donations in question required to be registered, and had been advised that this was not the case. The Scottish Parliamentary Standards Commissioner, having taken his own independent legal advice, reached the conclusion, on the other hand, that this was incorrect and that the failure to register the donations constituted a breach of the legislative requirements. That being the case, the matter was referred by the Commissioner to the Procurator Fiscal, upon the basis that any such breach might in principle constitute a criminal offence. All of this is in the public domain and has been the subject of considerable scrutiny in the media, as was the subsequent decision by the Procurator Fiscal, following her own inquiry, to the effect that it would not be appropriate under the circumstances to instigate a criminal prosecution.
The matter was then referred back to the Commissioner, who duly completed his enquiries and referred his findings to the appropriate Parliamentary Committee, which in turn upheld the Commissioner's findings to the extent of concluding that there had been a breach of the registration requirements and recommending that the Parliament imposed a sanction on Ms Alexander of a one day suspension. The matter then proceeded to a full parliamentary debate in the Autumn of this year, before, finally, the Committee's recommendations were rejected by the Parliament, which declined to impose any sanction on Ms Alexander. It had by that stage been the best part of a year since questions surrounding the "Jersey donor" had first appeared in the press.
But there was still a further twist in this particular regulatory saga. In the meantime, a further complaint had been received and investigated by the Scottish Parliamentary Standards Commissioner, as to the appropriateness of a press statement issued by Ms Alexander during the course of his consideration of the first complaint. Again, the Commissioner issued a report to the relevant Committee, again concluding that Ms Alexander had breached the provisions of the Code of Conduct, this time in terms of her right to comment pending an ongoing investigation. The Committee finally determined that particular matter in terms of its seventh report, published on 26 September this year, disagreeing with the Commissioner's conclusion and determining that Ms Alexander had not in fact breached the relevant requirements. Again, it is not necessary for present purposes to look further at the detailed conclusions, which have now been published.
What will be clear from this brief recap is that, regardless of the merits or otherwise of the various issues and complaints, it is the case that Ms Alexander was the subject of a number of multi-layered regulatory investigations over a significant period of time, each relating to the same donations received in the context of the same leadership campaign. These various regulatory investigations proceeded under different but arguably overlapping legislation and involved regulatory, parliamentary and criminal authorities. At the same time, this particular process was undergone in the context of, at times, intense media attention and scrutiny. Such attention, whilst serving an important function in being the principal mechanism of public awareness and transparency, can at the same time naturally be detrimental to the process, to the extent that it is prejudicial and arguably subjects the individual concerned to "trial by media" pending a proper determination following a balanced and objective consideration of the evidence by the proper regulatory authorities. This risk, of course, is nowhere more heightened than in the context of regulation which operates in the political arena.
Taking this specific example, and looking to the future, certain legislative reform is already in train with a view in particular to removing some of the potential for regulatory duplication in this context. Standing back, there is perhaps something to be learned more widely which might usefully be applied in relation to other regulatory contexts and sectors. This is all the more true in the current economic climate, in which our approach to regulation in Scotland and the UK is itself under intense scrutiny.
Looking to the future, it will no doubt be appropriate to focus on the key principles of regulatory transparency, objectivity and proportionality, avoiding so far as possible unnecessary regulatory duplication and complexity. The public interest is of course central and implicit in that there are considerations of fairness, both to the regulator and to the regulated, as well as to those – the "consumers" – for whose benefit regulation is properly and justifiably undertaken. It is critical that regulatory processes are and are seen to be sufficiently independent, to that extent properly robust in the face of prejudicial media and other external pressures and influences.
Ultimately, effective regulation does not mean necessarily "more" regulation, but better focussed, recognisably fit-for-purpose methods of ensuring proper accountability.
NOTE: Shepherd and Wedderburn was instructed to represent the interests of Wendy Alexander MSP in relation to the case discussed in this article.