Statutory guidance must remain within the purpose of the primary legislation

In R (on the application of Palestine Solidarity Campaign Ltd) v Secretary of State for Housing, Communities and Local Government [2020] UKSC 16, the Supreme Court demonstrates that statutory guidance will be considered unlawful if it does not remain within the scope of what Parliament intended when it was conferring the power to issue that guidance.

Key points

  • If a statute gives a public authority a discretion it is important to look at the wording of the legislation as a whole to see the purpose which Parliament had in mind.
  • A public authority should not use a statutory discretion so as to thwart or run counter to the policy and objects of the Act.

Background

The Public Services Pensions Act 2013 (the “2013 Act”) governs the establishment and management of certain pension schemes by local authorities for the benefit of their employees. The 2013 Act empowers the Secretary of State for Housing, Communities and Local Government (the “Secretary of State”) to issue more detailed regulations and guidance regarding the schemes. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 (the “2016 Regulations”) and a guidance document entitled the Local Government Pension Scheme: Guidance on Preparing and Maintaining an Investment Strategy Statement” (the “Guidance”), were then issued pursuant to Regulation 7(1) of those 2016 Regulations.

The Guidance noted that local authorities were not trustees of these pension schemes and so were not subject to trust law. It nonetheless stated that those responsible for making investment decisions “must comply with general legal principles governing the administration of scheme investments”. These principles included a requirement to consider various factors including “social, environmental and corporate governance considerations” – wording which had appeared in the 2016 Regulations.

The Guidance included a caveat to this obligation for the purposes of ethical investments. It permitted local authorities to take non-financial considerations into account when determining which investments to make as part of their pension schemes as long as: (1) there was good reason to think that the scheme members would support the investments; and (2) the investments did not involve significant risk of financial detriment to the scheme. These two tests for non-financial considerations had in fact already been set out in a 2014 report by the Law Commission which the Secretary of State drew from when preparing the Guidance. However, unlike the Law Commission’s report, the Guidance went onto state that “using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are (sic) inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government”. In other words, the Guidance required local authorities to only make or continue to hold ethical investments which were in accordance with the United Kingdom’s foreign and defence policies.

The lawfulness of the Guidance was challenged by the Palestine Solidarity Campaign Limited and Ms Jacqueline Lewis (the “Appellants”). Ms Lewis was an executive committee member of the Palestine Solidarity Campaign as well as a local authority employee. Although the Appellants were initially successful in the High Court in 2017, the Court of Appeal overturned that decision in 2018 and held that the Guidance was lawful. The Appellants therefore brought the case before the Supreme Court.

Judgment

The Supreme Court found the relevant section of the Guidance to be unlawful by a majority of three to two. Lady Hale, Lord Wilson and Lord Carnwath constituted the majority whilst Lady Arden and Lord Sales provided the dissenting opinion.

The fundamental finding in the judgment prepared by Lord Wilson and agreed by Lady Hale was that certain sections of the Guidance were unlawful on the basis that they were ultra vires i.e. they went beyond the Secretary of State’s powers. Lord Wilson and Lady Hale reached this conclusion through applying the Padfield principle[1], where it was held that an unfettered statutory power could only be exercised to promote the policy and objects of the statute. Discerning the policy and objects of an Act must be determined by construing the Act as a whole and construction is always a matter of law for the Court.

Lord Wilson and Lady Hale therefore considered the 2013 Act in order to identify exactly what Parliament had intended regarding the scope of the Secretary of State’s discretion when issuing the 2016 Regulations and the Guidance. Sections 1(1) and 3(1) of the 2013 Act permitted the Secretary of State to make further provisions as the Secretary of State “consider[ed] appropriate”. Section 3(2)(a) and Schedule 3 read together indicated that the Secretary of State was permitted “in particular” (i.e. not exclusively) to make provision regarding the “administration and management of the scheme”.

It is established[2] that unchallenged secondary legislation can serve as a guide to the interpretation of an enabling Act. Lord Wilson and Lady Hale therefore also considered the 2016 Regulations, specifically the fact that Regulation 7(e) mandated a local authority’s investment strategy to include the authority’s policy on “how” it took non-financial considerations into account.

Finally, Lord Wilson and Lady Hale reviewed other unchallenged sections of the Guidance itself. They noted that the Guidance, the 2013 Act and the 2016 Regulations and the Guidance contained a number of words such as “administration”, “management” and “strategy”. They found that all of these words, considered in their contexts, pointed in the same direction: that Parliament had intended to identify the procedures and strategy that administrators of schemes should adopt in the discharge of their functions. Importantly, Lord Wilson and Lady Hale did not consider that this included a discretion to direct what investments they should make or not make. By seeking to restrict the schemes in such a way that they could only make ethical investments which were in accordance with the United Kingdom’s foreign and defence policies, the Secretary of State was unlawfully exceeding his powers.

Lord Wilson and Lady Hale also made direct reference to the Secretary of State’s justification for those challenged sections of the Guidance. They disagreed with the Secretary of State’s “misconception” of the investment decisions as a function of local government and the pension funds as public money. They found instead that the funds properly belonged to the local authority employees whose pensions it would pay and that investment decisions were made by administrators who were acting in the role of quasi-trustees acting in the best interests of their members. They noted that this misconception might have emboldened the Secretary of State to exceed his powers when issuing the Guidance.

Lord Carnwath gave a separate judgment reaching the same outcome as Lord Wilson and Lady Hale. He disagreed with the Secretary of State’s argument that the Guidance was intended to deal with concerns about the specific Boycott, Divestment and Sanctions movement rather than ethical investments as a whole. Even if this were the case, he said that forbidding local authorities to invest in one particular movement was not related to a pensions purpose and thus was unlawful in any event on the basis of improper purpose.

Lady Arden and Lord Sales dissented from the majority – they considered that it fell within the Secretary of State’s broad discretion under the 2013 Act to promulgate the Guidance in its existing form. They similarly considered the Padfield principle and agreed that the Courts were the “authoritative organ for the interpretation of a statutory power”. However, they did not read the same limitations into the 2013 Act from its wording and context as the majority did. The Secretary of State could make further provision regarding non-financial considerations as he “consider[ed] appropriate” – they did not limit this to provisions regarding only the administration and management of the scheme as the majority did. They agreed with the Court of Appeal that it was “plainly within the scope of the legislation for the guidance to cover the extent to which such non-financial considerations may be taken into account by an authority”.[3]

Moreover, the 2013 Act permitted the Secretary of State to take “wider considerations of public interest” into account when preparing this Guidance. Lady Arden and Lord Sales recognised that this gave wide discretion to the Secretary of State but found the reasoning for this in the context of the Act. They noted that it had emerged as part of a package of measures which were intended to reform public service pensions so that they took due account of beneficiaries’ interests but also the public interest and the role of central Government in relation to such pension schemes. The Government underwrote funded schemes such as this and, if necessary and subject to a cap, would compensate for any shortfall. The Government therefore had a legitimate interest in ensuring that the schemes, which might potentially require public funding, pursued the public interest.

Comment

The Supreme Court’s decision serves as a reminder of fundamental public law principles. It is well-established that public bodies’ actions, including the preparation of documentation such as secondary legislation and statutory guidance, will be considered unlawful if they exceed the powers afforded to them by statute. However, what those powers might be is not always easy to divine. The Padfield principle tells public authorities to limit themselves in accordance with the policy and objects of an Act. This is to be ascertained by construing that Act as a whole. Public authorities should look to the context surrounding the passing of that statute by Parliament. This might include Parliamentary debates and any relevant reports from select committees or otherwise. Given the split across judicial opinion in the Supreme Court in this case, it is clear that this is not necessarily a simple task.

[1] See Padfield v Minister of Agriculture, Fisheries and Food [1968] UKHL 1

[2] See Hales v Bolton Leathers Ltd [1951] AC 33

[3] See paragraph 20 of R (on the application of Palestine Solidarity Campaign Ltd) v Secretary of State for Housing, Communities and Local Government [2018] EWCA Civ 1284

 

Andrew Lidbetter
Andrew Lidbetter
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Nusrat Zar
Nusrat Zar
Partner
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Jasveer Randhawa
Jasveer Randhawa
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Anisa Kassamali
Anisa Kassamali
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Court of Appeal considers the legality of policies

In Bayer Plc v NHS Darlington Clinical Commissioning Groups [2020] EWCA Civ 449 the Court of Appeal had to consider the legality of a policy issued by NHS Clinical Commissioning Groups (“CCGs”) in the light of EU law.  The court concluded that a policy which would permit the prescription of Avastin, an off-label drug for the treatment of wet age-related macular degeneration (“WAMD”), thereby resulting in significant cost savings for the NHS, as compared with licensed alternatives for the treatment of WAMD, was lawful.

The key points are:

  • A policy should be construed in accordance with EU law and domestic legislation.
  • The fact that one of the ways in which a policy might be implemented is unlawful does not mean that the policy itself is unlawful. It is sufficient if there are lawful means of implementation that are both realistic and (at least in outline) envisaged at the time that it was promulgated.

Background

Bayer Plc and Novartis Pharmaceuticals UK challenged the lawfulness of a policy adopted by a number of CCGs, which asked NHS Trusts, servicing the CCGs, to use Avastin as the preferred treatment option for WAMD (the “Policy”). The use of Avastin (or in its compounded form, CB) was not licensed for WAMD but was recommended as being a cost effective treatment.

The National Institute of Clinical Excellence’s Guidelines (the “NICE Guidelines”) concluded that there was no significant difference between the effectiveness of CB and licensed alternatives and the General Medical Council (“GMC”) Guidance stated that where there was no distinction in treatment, clinicians should consider costs when recommending a particular treatment.

The companies argued that implementing the Policy would result in a breach of EU legislation regulating the marketing and manufacture of medicines and the associated implementing domestic legislation. Whipple J at first instance held the Policy to be lawful and the companies appealed. The Court of Appeal rejected the appeal. In doing so, the court considered four potential modes of CB supply under the Policy.

  • Mode 1: where the hospital would use Avastin in its uncompounded form (although the Court held that the Policy had not envisaged the use of Avastin in this manner in any event).
  • Modes 2 and 3: supply of CB by pharmacies
  • Mode 4: where a third party entity (not a pharmacy) provided CB to the Trusts.

Issues on appeal

The main questions before the court were:

Did the Judge get the test for reviewing the lawfulness of the Policy wrong or wrongly apply the test?

The court disagreed with Whipple J’s formulation of the test for the lawfulness of the Policy, namely, whether the Policy was “realistically capable of implementation by the NHS Trusts in a way which does not lead to, permit or encourage unlawful acts?” and concluded that the correct formulation, based on R (Letts) v Lord Chancellor [2015] EWHC 402, was “whether the Policy would (when construed objectively and purposively) lead to, permit or encourage unlawful acts”.

In the court’s view the Policy would realistically only be implemented with CB either being obtained from an NHS pharmacy (Modes 2 and 3) on the one hand or from a commercial compounder (Mode 4) on the other. Modes 2 and 3 were lawful. The court was unable to come to a conclusion on the lawfulness of Mode 4 but was willing to assume it was unlawful.

The companies argued that since the Policy could be implemented through Mode 4, the Policy was unlawful. However, the court concluded that the Policy could not be unlawful, just because it did not prescribe the lawful alternative and proscribe the unlawful. It was sufficient that there were lawful means of implementing the Policy which were realistic (at least in outline) at the time it was promulgated.

Was the Judge wrong to find Modes 2, 3 and 4 to be potentially lawful?

(a) Is CB a modification of Avastin such that when it is supplied under Modes 2-4 it is necessarily a new placing on the market? Is there in any event a placing on the market in relation to Modes 2-4 because there is a release into the distribution chain for each of these modes?

The court followed the decision of the Court of Justice of the European Union (“CJEU”) in Novartis Pharma GmbH v Apozyt GmbH (“Apozyt”), which established that the compounding of Avastin to produce CB would not be a “placing on the market”, and therefore not require a marketing authorisation, provided:

(i) there was no modification to the biological, chemical or physical attributes of the product and

(ii) the compounding was carried out solely on the basis of individual prescriptions (the “Marketing Exemption”)

The CJEU also concluded that a manufacturing authorisation was not required for the preparation of CB where compounding was carried out by pharmacists in dispensing pharmacies solely for retail supply (the “Manufacturing Exemption”). Individual prescriptions evidenced that the supply was for retail purposes and not wholesale distribution.

The Marketing Exemption and the Manufacturing Exemption are collectively referred to as “the Apozyt Exemption”.

The court concluded that, pursuant to the Apozyt Exemption, Modes 2 and 3 did not constitute a “placing on the market”.

The court further concluded that while the Policy did not appear to deal with the mechanics of an individual prescriptions system, the companies had failed to show that the implementation of such a system would be unrealistic.

The court could not come to a conclusion on the lawfulness of Mode 4 but did not consider this necessary to decide the appeal.

(b) Does the Policy unlawfully undermine the Directive (including if all the supply is done under the compounding exemption in Article 3 of the Directive?)

The companies argued that even if the Trusts’ use of CB to treat WAMD in accordance with one or more of the four modes could be brought within the terms of the Apozyt Exemption, “the invariable and systematic use” of the exemption would undermine the scheme of the Directive. The court concluded that this would have the effect of calling into question the Apozyt Exemption in circumstances where the CJEU had already accepted and validated the exemption. Further the court found that the Apozyt Exemption was not limited to small scale preparation and supply of CB. The limitation which the CJEU placed on the scope of the exemption was based not on scale but on the “downstream” or “retail” nature of the supply as manifested by the requirement for prior individual prescriptions. The court found that it did not need to reach a decision on safety as the NICE Guidelines had concluded that such use was safe and that conclusion was not challenged.

(c) Is the Policy contrary to the General Medical Council’s Guidance (the “GMC Guidance”) and if so does that make it unlawful?

Under Section 1 of the Medicines Act 1983, the GMC promotes and maintains proper professional standards. Under the GMC Guidance, doctors should take into account the NICE Guidelines and should usually prescribe licensed medicines. However, doctors are permitted to prescribe unlicensed medicines, where necessary, based on an assessment of individual patients and use resources efficiently for the benefit of patients and the public. In the light of the NICE Guidelines indicating that there are no clinically significant differences in the effectiveness and safety of Avastin as compared to its licensed counterparts, the GMC concluded that it would not be a breach of good medical practice for a clinician to prescribe Avastin off-label as it is cheaper than the licensed alternatives.

Conclusion

Public bodies including CCGs are not required to specify the lawful manner in which their policies can be implemented. As long as there is a lawful option to implement a policy, and the CCGs do not recommend an unlawful course of action, the policy will pass the threshold of lawfulness.

 

Andrew Lidbetter
Andrew Lidbetter
Partner
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Nusrat Zar
Nusrat Zar
Partner
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Jasveer Randhawa
Jasveer Randhawa
Of Counsel
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Sanam Zulfiqar Khan
Sanam Zulfiqar Khan
Senior Associate
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Navigating Public Procurement in the COVID-19 era

As with almost all areas of commercial activity, public procurement across all sectors is currently experiencing varying degrees of extreme disruption. The UK Cabinet Office has issued general guidance and support in the form of three Procurement Policy Notes: PPN 01/20, addressing how public authorities may meet their urgent and unexpected needs for certain goods, works or services during the COVID-19 outbreak, without infringing procurement law; PPN 02/20, which encourages public authorities to support their existing “at risk” suppliers, in particular by continuing to pay those suppliers promptly during the crisis; and PPN 03/20 advocating the use of procurement cards to ensure the prompt payment of suppliers.  The European Commission has also issued a communication, giving similar guidance to PPN 01/20 (the “EU guidance”).

While the UK and EU guidance give a helpful steer for public bodies and their suppliers alike, time will tell whether the legal framework will be sufficiently flexible to withstand the pressures being exerted by the pandemic.

Key points

  • PPN 01/20 and the EU guidance helpfully confirm that the COVID-19 crisis is an unforeseeable emergency which will generally justify the direct award of public contracts for vital, time-sensitive supplies (such as ventilators and PPE), without any prior competitive tendering procedure.
  • The existing regulations allow for such direct awards, but only where strictly necessary for reasons of extreme urgency. If the urgency is no longer acute, public authorities should instead use an accelerated version of a standard, competitive procedure.
  • Contracting authorities will need to be alive to whether an emergency direct award or an accelerated ordinary procurement procedure is appropriate and lawful.
  • Authorities should continue paying their vulnerable suppliers promptly during the crisis in order to ensure continuity of supply going forwards.
  • The PPNs and the EU guidance are not strictly binding, but ought to be followed where possible and fact-appropriate to do so.
  • Legal challenges might arise, as rival suppliers fight to survive, but courts may be even more deferential than usual towards the discretion of contracting authorities as they seek to manage the crisis.

The UK’s failure to join the EU’s joint procurement scheme

The challenges of procuring large quantities of essential medical equipment in a global health crisis have been highlighted by the recent headlines regarding the UK’s failure to participate in the EU’s joint procurement initiative.

Between 28 February and 19 March 2020, under a mechanism called the Joint Procurement Agreement, the European Commission launched four calls for tenders for personal protective equipment (“PPE“), ventilators and testing kits, on behalf of 25 EU Member States.  The UK did not participate (despite being eligible to do so) but, as has been widely reported, the precise reason is unclear.  In any event, it appears that the four calls for tenders by the Commission have had varying degrees of success and that, to date, none of them has actually resulted in the delivery of any items of equipment within the EU.

PPN 01/20 and the EU guidance

The headline message of PPN 01/20 and the EU guidance is that contracting authorities at a national level may deploy direct awards, without holding any advertised, competitive tendering procedure, where this is necessary to meet an urgent demand for goods, works or services triggered by the pandemic.  Such urgency may well exist for medical supplies such as ventilators and PPE, including masks and gowns.

The PPN advocates recourse to regulation 32(2)(c) of the Public Contracts Regulations 2015 (PCR), which permits a direct award where:

  • there is an extremely urgent need to procure the relevant goods, works, or services;
  • such urgency was triggered by events unforeseeable by the contracting authority;
  • the accelerated version of the ordinary open or restricted procedure would not be sufficiently rapid; and
  • the urgency is not attributable to the contracting authority.

Reasons of extreme urgency triggered by unforeseeable events

In the immediate term, the message from the UK Government and the European Commission is that the COVID-19 crisis is clearly a circumstance of “extreme urgency”, which was wholly unforeseeable by contracting authorities. Procurements for goods that are urgently required for tackling the ongoing public health crisis (e.g. ventilators and PPE) will almost certainly satisfy these limbs, and will be difficult to challenge on any meritorious basis, depending on the exact circumstances.

As the crisis continues over time, it will progressively become less likely that circumstances can be considered sufficiently urgent and “unforeseeable” that it is lawful for a contracting authority to default to a direct award. Legal challenges to direct awards by contracting authorities could be seen in due course.

Accelerated procedure not sufficient

The recognition of urgency is not an unlimited pass for contracting authorities to make direct awards, circumventing the usual requirement for a competitive procedure. The accelerated ordinary procedures may be deemed sufficiently rapid. In particular, using a direct award is unlikely to be appropriate where it is not possible to put in place the contract in a timescale that is shorter than the minimum period permitted for completion of an accelerated competitive procedure.

Not attributable to the contracting authority

Contracting authorities are precluded from using the direct award procedure where their own actions (e.g. delay) have caused the need for an urgent process.  Hence, an authority may not revert to a direct award simply because it has been slow to start the necessary procurement process.

Other options

PPN 01/20 also sets out various additional options for contracting authorities to consider when meeting the demands of the crisis. These include the options of calling off contracts from existing framework agreements and of  extending their existing contracts in order to meet increased demand.  Such variations to an existing public contract are permitted by Regulation 72(1)(c) of the PCR, provided that the increase in demand was unforeseeable, the overall nature of the contract is not substantially altered and any additional sum payable does not exceed 50% of the value of the original contract. It would be prudent to limit any contract modifications to what is strictly necessary in order to deal with the present crisis.

PPN 02/20

PPN 02/20 focuses on relief for the existing contractors of public bodies. The key message is that public bodies should continue to make payments to any of their suppliers who are “at risk”, at least until 30 June 2020. Whether a supplier is “at risk” is a low bar.

Contracting authorities are advised to conduct a full review of their supplier portfolio at speed, in order to identify “at risk” suppliers. Simultaneously, they are asked to consider carefully the risks of continuing to make payments to such suppliers, and to balance such payments against the continuing need to achieve value for money for the taxpayer; although such checks should not delay payments being made. Suppliers who were already struggling to meet performance standards pre-crisis should not benefit from the relief.

PPN 02/20 also contains advice for contracting authorities dealing with suppliers who threaten to invoke the force majeure clause in their contract, or else claim that the contract has been frustrated. Broadly, force majeure is a contractual term that may permit a party to terminate the contract, or be excused from performing it to some degree; frustration is a common law doctrine whereby a contract may be automatically terminated because an event not contemplated by it has rendered performance of the contract impossible. Both concepts have a high bar. The main takeaway from PPN 02/20 here is that contracting authorities should engage with suppliers making such claims, attempt to maintain service continuity as far as possible, and otherwise seek legal advice.

PPN 03/20 follows up PPN 02/20 by urging Central Government authorities to use procurement cards as a means of ensuring the prompt payment of their suppliers.  It recommends that the spending limits for key card holders are increased to £20,000 per transaction and £100,000 per month.

The potential for future disputes and legal challenges

It is easy to see how an already overstretched public body in crisis mode may struggle to comply fully with its procurement law obligations and with the guidance. The added pressures associated with managing existing contracts may also adversely affect the timetabling of future procurements addressed by PPN 01/20, particularly if resource is stretched as result of the crisis such that the same team within the public body covers both areas.

It will be key for contracting authorities and their suppliers to proceed in as open and communicative a fashion as possible, in order to avoid any potential disputes. PPN 02/20 notably provides some guidance for contracting authorities facing claims of contract frustration or force majeure. Suppliers should exercise caution in invoking a force majeure clause, or claiming the contract has been frustrated, given the high bars applicable to such claims, and instead seek to come to a mutually agreeable arrangement as far as is possible.

In the event that a dispute does arise, COVID-19 will not be a “get out of jail free” card for contracting authorities. Courts, which are generally already deferential to public bodies in any public law challenge, are naturally likely to view any detours from the guidance through that lens, but will nonetheless scrutinise whether the public body’s contingency arrangements were adequate in the circumstances.

Nusrat Zar
Nusrat Zar
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Adrian Brown
Adrian Brown
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Andrew Lidbetter
Andrew Lidbetter
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Tim Briggs
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Rachel Lidgate
Rachel Lidgate
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Chloe Woodward
Chloe Woodward
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Jasveer Randhawa
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COVID-19 Pressure Points: The Right to Property

The current pandemic has led to an extraordinary level of state action. In many cases this has involved interference with the private rights of businesses and individuals. While states are undoubtedly seeking to balance health and economic concerns of the utmost importance, their actions nevertheless must comply with rules of domestic and international law.

In this short article we consider one particular form of state action, namely interference with private property, and the domestic protections available to those who find that their right to property has been infringed. This builds on our Arbitration Notes piece which considered the international law obligations relevant in this context.

The Right to Property

The right to peaceful enjoyment of property is protected by both the common law and Article 1 of the First Protocol (“A1P1”) of the European Convention on Human Rights (the “ECHR”), as incorporated into UK law by the Human Rights Act 1998 (the “HRA”).

Under the HRA, legislation must be read compatibly with the ECHR and the courts can issue a declaration of incompatibility in the event that primary legislation contravenes the ECHR. The courts can also strike down secondary legislation (such as regulations) which is incompatible with the ECHR. The HRA allows “victims” whose ECHR rights have been infringed to bring claims against public authorities, including claims for damages where appropriate. Claims can be brought against governmental organisations and other public bodies such as regulators.

Under A1P1, any interference with property must be justified. In particular the interference must serve a legitimate interest and be proportionate. This means that compensation can be payable if a lack of compensation would make the measure disproportionate in the circumstances. Compensation is ordinarily payable in cases of deprivation (or expropriation) of property but is rather less likely to be available where actions instead amount to a “control on use” of property.

Coronavirus legislation

There are a number of provisions in the Coronavirus Act 2020 (the “Act”) and the other coronavirus-related regulations which could result in interference with the right to the peaceful enjoyment of property. Indeed the Department of Health and Social Care’s assessment of the Coronavirus Bill 2020 in its memorandum to the Joint Committee on Human Rights (the “Memorandum”) identifies a number of clauses which may engage A1P1.

Legislative provisions which appear likely to lead to interference with property rights include:

  • Closure of various businesses: Actions taken under the various legislative provisions which operate to close (or restrict the opening of) premises and businesses are likely to interfere with the right to peaceful enjoyment of property. One such provision is section 52 of the Act (together with Schedule 22), which the Memorandum accepts may engage A1P1. While these directions may amount to a “control on use” rather than a deprivation, they can still be challenged through the courts if the use of the powers is disproportionate or does not appear to pursue a legitimate aim.
  • Directions in relation to schools and childcare providers: The Act (sections 37 and 38, together with Schedules 16 and 17) contains various powers in relation to education and childcare. This includes powers to direct the closure of facilities and to direct that they remain open to provide education, training or childcare. Given that such powers apply to private organisations (in addition to state facilities), the directions contemplated by these provisions are likely to engage A1P1. Directions that particular facilities must close (or indeed remain open) may amount to a “control on use” of property and may be challenged through the courts.
  • Directions in relation to ports: Section 50 of the Act (together with Schedule 20) gives the Secretary of State power to direct the closure of ports (including airports) and make consequential directions requiring operators to take specified steps. Notably the Memorandum does not consider the compatibility of these provisions with the ECHR but instead says that this analysis will be undertaken at the point when the Secretary of State decides to make a direction. Again any such direction may engage A1P1 as a “control on use” of property and entities which are affected by a direction may be able to challenge it in the courts.
  • Directions given in relation to bodies: While this issue is not addressed in the Memorandum, the powers in the Act in relation to the transportation, storage, and disposal of dead bodies are likely to engage A1P1. Under these provisions (in particular paragraph 5 of Schedule 28) local or national authorities may “give a direction requiring a person to do anything calculated to facilitate the transportation, storage or disposal of dead bodies or other human remains”. Such a direction can involve a requirement to provide services or property (including “facilities, premises, vehicles, equipment or anything else within the person’s possession or under the person’s control”). Paragraph 8 of Schedule 28 then requires the establishment of a scheme to provide compensation to those to whom a direction under paragraph 5 is given. While we are not aware that such a direction has yet been given, it seems likely that directions would engage A1P1 and may either amount to a “deprivation” or “control on use” of property. As contemplated by the legislation, compensation may be payable in order to make any such direction proportionate.

The circumstances of the COVID-19 pandemic also raise concerns about the peaceful enjoyment of property beyond those currently set out in legislation. For example questions may arise in relation to requisitioning private medical supplies or in relation to consumer credit, whereby firms may be forced to forego income or use their property in a particular manner. In all such circumstances public authorities and private organisations alike need to be alive to possible infringements of the right to property.

Comment

There is a general acceptance of the need for the curtailment of private rights, including the right to peaceful enjoyment of property, as a result of the COVID-19 pandemic. Interference with property rights can take many forms – it may involve directions (whether by the government or other public authorities such as regulators) that property cannot be used or indeed requirements that property must be used in particular ways. However, even in these extreme circumstances, the law does provide protection for those who find their rights interfered with. Those who find that their property rights have been infringed may be able to challenge actions which are disproportionate or do not serve a legitimate purpose. In such circumstances, the courts could quash unlawful decisions or require compensation to be payable.

If you have any questions on the Coronavirus Act 2020 or other COVID-19 developments, please contact Andrew Lidbetter, Nusrat Zar, Jasveer Randhawa, James Wood or Sahil Kher. Please also visit our client COVID-19 hub here for more insight from Herbert Smith Freehills on the legal issues surrounding the current outbreak.

 

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
James Wood
James Wood
Senior Associate
+44 20 7466 2306
Sahil Kher
Sahil Kher
Associate
+44 20 7466 6440

Today in a unanimous decision the Court of Appeal found that the current Government policy in relation to the expansion of Heathrow Airport is unlawful

Background

The Court of Appeal has today handed down two related judgments both concerned with the Government’s policy in relation to the proposed expansion of Heathrow by way of a third runway, one dealing with the detail of how expansion should take place and the other considering the planning aspects and process of the policy. This latter case originated as five judicial review applications at the High Court. The policy in question was set out in the “Airports National Policy Statement: new runway capacity and infrastructure at airports in the south east of England” (the “ANPS”), which was designated by the then Secretary of State for Transport under section 5(1) of the Planning Act 2008.

The appellants in this appeal ranged from local authorities and climate change campaigners to the Mayor of London. The Court of Appeal was unconvinced by the appellants’ attempts to overturn the first instance judgment on various issues relating to the Habitats Directive and the Strategic Environmental Assessment Directive and broadly agreed with the judgment of the Divisional Court on many of those aspects.

And then there was one…

The appellants succeeded today on only one ground: the Court of Appeal found that the designation of the ANPS was unlawful by reason of a failure to take into account the Government’s commitment to the provisions of the Paris Agreement on climate change.

The question upon which the decision turned was what is “Government policy” relating to climate change, pursuant to section 5(8) of the Planning Act which requires that the reasons for the policy set out in the ANPS “must … include an explanation of how the policy set out in the statement takes account of Government policy relating to the mitigation of, and adaptation to, climate change” [emphasis added].

The court found that the Government’s commitment to the Paris Agreement was “clearly” part of Government policy by the time of the designation of the ANPS because the Paris Agreement was ratified and there were firm statements re-iterating Government policy of adherence to the Paris Agreement by relevant Ministers. The concept of “Government policy” did not have any specific technical meaning, but should be applied in its ordinary sense. In particular, there was nothing to warrant limiting the phrase “Government policy” to mean only the legal requirements of the Climate Change Act. The concept of policy is necessarily broader than legislation.

The Court of Appeal concluded that the Paris Agreement was not taken into account by the Secretary of State in the preparation of the ANPS and so there was no explanation provided as to how it was taken into account. Indeed it appears that the Secretary of State received legal advice that not only did he not have to take the Paris Agreement into account but that he was legally obliged not to take it into account, which amounted to a material misdirection of law at an important stage of the process.

Potential consequences

Although the appellants won today and at the time of seeing the draft judgment the Government did not seek to appeal the decision to the Supreme Court, this is not necessarily the end of the matter.

The court decided not to quash the ANPS. Instead, it declared that the ANPS in its present form is unlawful and cannot have legal effect, which gives the Secretary of State the opportunity to reconsider the ANPS. The court stated that the initiation, scope and timescale of any such review must and will be a matter for the Secretary of State to decide. The court also explained that the duty in section 5(8) does not require the Government to conform to its own policy commitments, “simply to take them into account and explain how it has done so”.

Importantly, the court repeatedly emphasised the line between its judgment and the politics of the third runway:

“[We] are required to consider whether the Divisional Court was wrong to conclude that the Government’s policy in favour of the development of a third runway at Heathrow was produced lawfully. That is the question here. It is an entirely legal question. …”

“We have made it clear that we are not concerned in these proceedings with the political debate and controversy to which the prospect of a third runway being constructed at Heathrow has given rise. That is none of the court’s business…..”

“Our decision should be properly understood. We have not decided, and could not decide, that there will be no third runway at Heathrow.”

These comments reflect the well-established purpose and role of judicial review, aimed at ensuring that the Executive is held to account in its decision making but without straying into the sphere of policy making and politics.

The judgments can be found here: R (on the application of (1) Heathrow Hub Limited (2) Runway Innovations Limited) v Secretary of State for Transport [2020] EWCA 213 and R (on the application of Plan B Earth and others) v Secretary of State for Transport [2020] EWCA 214.

Andrew Lidbetter
Andrew Lidbetter
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Nusrat Zar
Nusrat Zar
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Jasveer Randhawa
Jasveer Randhawa
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Shameem Ahmad
Shameem Ahmad
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High Court finds that the suspension of pension benefits breaches the Human Rights Act

In R (on the application of British Medical Association) v Secretary of State for Health and Social Care [2020] EWHC 64 (Admin) the British Medical Association (the “Claimant”), a trade union and professional body for doctors, successfully challenged the National Health Service Pension Schemes, Additional Voluntary Contributions and Injury Benefits (Amendment) Regulations 2019 (the “Regulations”). These brought in a new power of the Secretary of State (the “Defendant”) to suspend the payment of benefits under the NHS Pension Scheme where a member of the scheme was charged with certain offences.

The court found that the Regulations breached Article 14 of the European Convention on Human Rights (the “ECHR”), the right against discrimination, when read with Article 1, Protocol 1 (“A1P1”) ECHR, the right to property. In addition, it was found that there was an absence of appropriate procedural safeguards as required by Article 6(1) of the ECHR, the right to a fair trial, and the principles of natural justice.

Key points

  • Public bodies must ensure that during the development of policy they have due regard to any fundamental rights which they might be engaging to ensure that their actions are appropriately justified.
  • Decision makers must properly consider all the outcomes and consequences of their proposed decisions including any unintended consequences.
  • Although there is often a wide margin of appreciation afforded to the State, and procedural flaws can sometimes be cured, where a measure is manifestly without reasonable foundation the court will usually have no option but to quash the relevant measure.

Background

This claim challenged the lawfulness of certain provisions of the Regulations by which amendments were made to the terms of the NHS Pension Scheme.

Before the Regulations were brought in, the Defendant had the power to forfeit a pension after a member or beneficiary of the pension scheme had been convicted of a prescribed criminal offence which was committed before the benefit became payable. Most, if not all, public sector pension schemes contain similar provisions. However, the hiatus between the conviction and the certification and forfeiture decisions, even if short, gave rise to the risk of the individual concerned using an accrued entitlement to a lump sum drawdown as a means of circumventing the effects of forfeiture. The aim of the Regulations was to reduce this risk by conferring upon the Defendant an additional power to suspend payment of pension benefits where a person was charged with certain serious offences.

There was nothing in the Regulations that entitled a person affected to appeal the decision to suspend their benefits. Suspension did not terminate automatically upon acquittal or in other circumstances in which forfeiture could no longer take place. Also, there was no limit in terms of time or amount, except that in most cases the guaranteed minimum pension could not be forfeited or suspended.

Most of the Claimant’s members belong to the NHS Pension Scheme. The Claimant had serious concerns about the potential impact on its members of the introduction of the suspension power.

Judgment

Mrs Justice Andrews held that the Claimant was entitled to declaratory relief and to a quashing order on the basis of a number of grounds of challenge.

Article 14 and A1P1 of the ECHR: Interestingly, for the purposes of the discrimination test, it was found that there was a sufficient analogy between the position of a current NHS employee and that of a retired NHS employee for a comparison to be made between them for the purposes of Article 14 read with A1P1. The suspension power subjected retired NHS employees to an immediate financial detriment which was not imposed on NHS employees who faced similar criminal charges.

The court considered it unnecessary to decide what the appropriate standard of review was for a case of this kind, because whichever of the tests was applied and however wide the margin of appreciation afforded to the State, the result was the same: this measure was found to be manifestly without reasonable foundation. It was not simply capable of causing hardship in individual cases; it was inherently unfair. This was because it offended against the presumption of innocence, which could not be put right. There was no objective rational justification for it. This finding was all the more forceful given that there was no evidence that anyone had turned their mind to how this new power might impact upon the presumption of innocence.

Article 6(1) of the ECHR: The court acknowledged that the power to suspend following charge was expressed in extremely broad terms, such that it would be difficult to challenge by way of judicial review. Therefore, the court took the view that nothing less than a full right of appeal to a court on the merits would suffice to satisfy the requirements of Article 6(1) and the principles of natural justice.

It was notable that in determining whether the discriminatory effect of the suspension power was justified and assessing the lawfulness of the measure challenged, the court stated that it must take a holistic view by considering the presence or absence of procedural safeguards. Nonetheless, it found that the introduction of a full right of appeal to a court would be insufficient to cure the breach of Article 14 read with A1P1. The breaches of Article 6(1) simply made an inherently unfair measure even more unfair.

Comment

The High Court found that the development of the new power had not taken into account serious consequences on individuals’ rights. Some issues might have been curable, for example by providing appropriate procedural safeguards. Nonetheless, the cornerstone of this judgment was the lack of consideration of the presumption of innocence which rendered the Regulations “manifestly without reasonable foundation”. The judgment also found that the justifications advanced by the Secretary of State for this were “woefully inadequate”. This case is therefore a reminder of the need for decision makers to think through all the consequences of their actions, including any unintended consequences, and appropriately assess those consequences before finalising their decisions.

In terms of the case’s wider application, the Defendant raised the issue of how the court should approach a challenge to the legality of a measure of general application which permits, but does not compel, a breach of the common law or the ECHR. While the court accepted that it is obliged to interpret legislation compatibly with the ECHR insofar as that is possible, it must also focus on whether there is something inherent in that measure that makes it incompatible with a fundamental right. If a measure appears to be incompatible there are limits to how far the court will be able to use its powers to read in provisions to make it compatible.

Andrew Lidbetter
Andrew Lidbetter
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Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
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Shameem Ahmad
Shameem Ahmad
Associate
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Artificial Intelligence in the Public Sector – a new regulatory field?

The Committee on Standards in Public Life (the “Committee”) has published a report on artificial intelligence (“AI”) and its impact on public standards following the Committee’s review into this fast-developing field (the “Report”).  The Report sets out the Committee’s recommendations for the governance and regulation of AI in the public sector, aimed at ensuring high standards of conduct across all areas of public sector practice.

The Report comes at a time when public bodies continue to increasingly seek to adopt technologically assisted and data-driven decision-making in varied sectors. This trend looks set to continue, albeit with many potential uses of AI in the public sector still at the development or ‘proof-of-concept’ stage. Although work on the ethical use of data is already being carried out by various organisations such as The Alan Turing Institute, the Centre for Data Ethics and Innovation (CDEI) and the Information Commissioner’s Office, the Report identifies “significant deficiencies” in the UK’s existing regulatory and governance framework for AI in the public sector and a pressing need for practical guidance and enforceable regulatory standards.

The recommendations in the Report, addressed in more detail below, suggest broad, overarching changes to the regulatory and governance framework and environment that will need buy-in from government if they are to result in a tangible impact on the approach to AI across the public sector. In addition to these systemic proposals, several of the recommendations of the Committee are directed at providers of public services, both public and private. These relate to both the planning stages of projects involving the use of AI and also the implementation stages, including in relation to monitoring and evaluation and also appeal and redress routes that are available to individuals impacted by automated and AI-assisted decisions.

What exactly counts as AI?

As the Report recognises, there is not one, universally accepted definition of what counts as AI. The term can be used to describe a broad range of processes, from simple automated data analysis to complex deep neural networks. Machine learning is an important subset of AI – machine learning systems are trained on existing datasets and identify patterns in the data. The systems employ inference to make predictions, and can automatically hone how they function and learn from experience, without explicit programming instructions.

Why is regulation needed?

The increased use of AI by public bodies has the potential to provide quick, efficient and accurate solutions to challenges faced in the delivery of public services. However, the potential benefits of AI in public administration come with potential challenges – in particular, the Committee identifies that certain key principles of public life such as openness, accountability and objectivity could be threatened by the use of AI, if it is not correctly implemented. Key issues that arise in the use of AI in both private and public settings are issues of transparency and data bias, and these issues, amongst others, have the potential to have significant implications in the context of public decision-making.

If AI is going to be successfully integrated into public sector life, the Report suggests it is essential that the regulatory framework inspires public confidence in the deployment of new technologies. In addition to reassuring the public, the Report notes that implementing clear standards around AI may actually increase the rate of adoption by public bodies, as it will assist organisations to grow their confidence in using AI. ‘A guide to using artificial intelligence in the public sector’ has been published by the Government Digital Service and Office for Artificial Intelligence and is intended to serve as comprehensive guidance for public bodies to use. Nonetheless, the Committee considers that guidance alone is insufficient and that well-established regulation is needed.

Are existing legal tools relevant?

In part, yes. The use of AI in the public sector has the potential to engage several existing legal frameworks. This includes human rights law under the European Convention on Human Rights, which is incorporated into domestic law by the Human Rights Act 1998; equality and non-discrimination law, for example under the Equality Act 2010; data protection regimes, including the General Data Protection Regulation; the Freedom of Information Act 2000; and also common law grounds of judicial review such as illegality and irrationality.

The relevance of existing frameworks is evidenced by the fact that already the Administrative Court has seen challenges to the deployment of the use of algorithmic technologies, such as R (on the application of Edward Bridges) v Secretary of State for the Home Department [2019] EWHC 2341 (Admin) examining the use of automated facial recognition technology by South Wales. In other jurisdictions there is also an emerging body of case law that considers the use of AI by public bodies. For example, there are judgments on the high profile ‘Robodebt’ programme in Australia; COMPAS, a technology used in criminal sentencing in the United States; and the recent NJCM cs/ De Staat der Nederlanden decision in The Netherlands concerning the unlawful use of the SyRI programme, which used data compiled from various public bodies to identify individuals with a higher fraud risk in relation to welfare benefits.

If AI is deployed in the UK without a clear legal framework and in a manner which upholds existing principles of good public sector practice, the likelihood of there being further challenges by way of judicial review in the UK is high. Whilst such challenges have the potential to serve as an important safeguard against inappropriate use of AI by public bodies, the recommendations proposed by the Committee clearly envisage that a more robust regulatory framework is needed, in addition to existing tools, to ensure that high standards of public conduct are upheld. Even with such a framework in place, it is not difficult to envisage that challenges will nonetheless arise, in circumstances where public bodies are grappling with new technologies.

A role for a new AI regulator?

Although the report identifies the need for a regulatory body to have responsibility for identifying gaps in the regulatory landscape of the use of AI in the public sector, the Committee concluded that a new, separate AI regulator is not necessary. Instead it is suggested that the Centre for Data Ethics and Innovation (CDEI) be given an independent statutory footing to act as a central regulatory assurance body, providing advice to existing regulators and government on how to deal with emerging AI related issues in their respective fields (Recommendation 4). This proposal would allow existing regulators to continue to utilise their sector-specific experience whilst also having an expert regulatory body focused exclusively on AI. For this arrangement to function effectively however, it will be important for the regulatory assurance body to have a sufficiently broad remit and powers.

Combatting data bias

As mentioned above, a key issue in the field of AI, in both private and public sectors, is that of data bias. The Committee expresses concerns that the prevalence of data bias poses a threat to a key principle of public life – objectivity. In order to avoid the embedding and amplification of discrimination in public sector practice, the report calls for the application of anti-discrimination law to AI to be clarified. It is suggested that the Equality and Human Rights Commission should develop guidance in partnership with the Alan Turing Institute and the CDEI on how public bodies should best comply with the Equality Act 2010 (Recommendation 3). Another important method to manage data bias is ensuring diversity within AI teams who are designing or developing products. A further recommendation aimed at public and private providers of public services suggests that they must consciously tackle issues of bias and discrimination in order to provide a fair service (Recommendation 10).

Making private sector waves…

The evidence gathered in the course of the review by the Committee suggests that the majority of public bodies utilising AI will rely on external private sector providers to design, produce and even manage their systems. As a way of mitigating the potential issues which may arise from these arrangements, the Report suggests that public procurement requirements ensure that private companies appropriately address public standards when developing AI solutions for the public sector and that tenders and contractual arrangements explicitly deal with these issues (Recommendation 5).

The supply of AI systems by external private entities also poses a challenge for upholding transparency and accountability standards in the public sector. Private companies may seek to protect ‘trade secrets’ which may in turn prevent public bodies from disclosing the inner workings of the AI they are using, irrespective of their impact on the public. The Report recommends that clear guidelines for public bodies should be established as to what information they should disclose about the AI systems they use (Recommendation 8). This is particularly the case where the current proactive disclosure requirements under the Freedom of Information Act 2000 are of limited use in this novel context. Consideration of the introduction of mandatory, published AI impact assessments could also be a way in which transparency could be enhanced (Recommendation 7).

What next?

The discussion on the adoption of AI in the public sector will inevitably continue to develop following the publication of this Report. Government, public bodies, regulators, private companies, technology specialists, lawyers, academics and civil society groups are just some of the actors who have a role to play in the ongoing debate. Whilst the AI regulatory and governance framework may face widespread changes in the future, for the moment at least our existing legal frameworks will need to be applied in a manner which takes account of the specific and novel issues that arise as a result of the use of AI in the public sector.

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
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Claire Hall
Claire Hall
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Policy making through the back door – Spotting issues and challenging Brexit-related SIs

With the European Union (Withdrawal Agreement) Act 2020 (the Withdrawal Agreement Act) now formally on the statute books, Britain is set to exit the EU at the end of January. Exit day, however, only marks the next step in the Brexit process. The UK will enter into a transition period until 31 December 2020, during which time the UK and the EU will seek to negotiate a trade deal.

Meanwhile, work is continuing to fill the gaps in the UK’s legislative landscape following Brexit in accordance with the scheme laid down in the European Union (Withdrawal) Act 2018 (the Withdrawal Act). These gaps are largely being filled through statutory instruments (SIs) rather than primary legislation. Research by the Public Law Project as part of its Statutory Instruments: Filtering and Tracking (SIFT) project suggests that a total of nearly 1000 SIs will have been laid down by exit day. Introducing secondary legislation is undoubtedly quicker and administratively easier for law makers, and in most cases the legislation will go no further than is permitted by the Withdrawal Act, as amended by the Withdrawal Agreement Act. Brexit-related Statutory SIs may, however, provide cause for concern for businesses and individuals if there is a risk that SIs are being used to introduce significant legal and policy changes.

What are Statutory Instruments?

The power to make an SI is usually conferred on a Minister through an Act of Parliament, and the Minister is then able to make law on the matters identified in the relevant Act. SIs typically do not go through the same Parliamentary scrutiny as Acts of Parliament. Some SIs are subject to the “affirmative procedure”, which means that they are scrutinised by the Joint Committee on Statutory Instruments (JCSI), and then approved by both Houses before being signed by a Minister. However, the majority of SIs in Parliament are laid under the “negative procedure”, by which they become law (after the JCSI scrutinises them) on the day the Minister signs them, and automatically remain law unless a motion to reject the SI is agreed by either House within 40 sitting days. Such a motion has not been agreed in the House of Commons since 1979 and in the House of Lords since 2000. Additionally, there is now a European Statutory Instruments Committee (ESIC) in the Commons. The ESIC ‘sifts’ through Brexit-related SIs and can recommend that a different procedure be used to make a particular SI. The Secondary Legislation Scrutiny Committee (SLSC) is tasked with a similar sifting exercise in the House of Lords. However, there remain concerns around whether this sifting process is effective (and in any case, it does not apply where a Minister makes a declaration of urgency).

In the context of Brexit, sweepingly broad powers have been given to the executive under the  Withdrawal Act to make regulations in order to ensure that the law functions as normal on exit day. Section 8 of the Withdrawal Act gives ministers the power to “make any provision that could be made by an Act of Parliament” to “prevent, remedy or mitigate” any failure of retained EU law to operate effectively, or any other deficiency in retained EU law, arising from the withdrawal of the UK from the EU. Additionally, the Withdrawal Agreement Act inserts a number of new powers into the Withdrawal Act – including powers under a new section 8A to modify any provision made by or under an enactment for purposes connected with the arrangements for a transitional period. Further, the so-called ‘Henry VIII power’ to amend primary legislation via secondary legislation (which has been subject to considerable criticism) has been extended to Ministers for use in a number of other contexts.

Possible impact

Brexit is a period of exceptional legislative change and challenge. There is therefore a chance that the body of SIs being introduced is not entirely cohesive and joined up. There is also a risk that new SIs are introduced which go further than was envisaged in the primary legislation whilst, in practice, being subject to little or no scrutiny by Parliament.

This is not merely an academic issue. SIs that have been introduced or proposed in the lead up to exit day cover a wide range of topics including cross-border taxation, pharmaceutical testing, financial services, energy regulation, and environmental protections. Often, they contain the nuts and bolts of the regulatory framework that primary legislation does not cover, and deal with complex technical topics that only businesses and experts may fully be able to understand and analyse. Consequently, unless businesses are vigilant, there is a risk that the raft of SIs introduced could inadvertently bring in new obligations on businesses through the back door or fundamentally alter the regulatory landscape.

For instance, the Cross-border Trade (Public Notices) (EU Exit) Regulations 2019 were laid and would have empowered officials to amend VAT or customs and excise law by public notice following Brexit. These regulations would have represented a fundamental shift in tax law in the UK as it would have equipped Treasury officials with the power to amend the law simply by giving public notice. However, HMRC were forced to back down and revoke this SI following the threat of legal action.

On the other hand, the suite of SIs dealing with the financial services sector have been the subject of extensive consultation involving both the financial regulators and the affected institutions as well as lawyers operating in the relevant area, in a way which reduces the risk of legislative overreach.

Spotting issues and challenging SIs

The HMRC example shows why it would be prudent for businesses to keep a close eye on SIs relevant to their industry or sector and to engage with the relevant government department directly, or through a trade association on the contents of such legislation.

Courts do not generally have the power to strike down Acts of Parliament save in EU law cases (and there could be a “declaration of incompatibility” in Human Rights Act cases). However, the position is different for statutory instruments as they can be challenged on administrative law grounds and potentially struck down. For example, the Supreme Court recently reaffirmed the position that secondary legislation is subordinate to the requirements of an Act of Parliament (RR v Secretary of State for Work and Pensions [2019] UKSC 52). [1] There is therefore scope for challenging SIs if they are ultra vires i.e. where they go beyond the scope of the power conferred by the relevant Act of Parliament.

In the Brexit context, it is important to note that the legislative purpose underpinning section 8 and the new section 8A of the Withdrawal Agreement is to plug legislative gaps and fix deficiencies following Brexit, and not to introduce new policies. Consequently, any SIs that introduce wider policy changes could be open to challenge. There may also be other substantive grounds to challenge SIs. For example:

  • If its provisions contravene the European Convention on Human Rights (ECHR);
  • If it can be demonstrated that the SI is irrational; or
  • If irrelevant considerations were taken into account, or relevant considerations not taken into account, when the SI was made.

There is also the possibility that an SI could introduce new wording that is open to interpretation. While the wording itself might on its face be interpreted as being within the scope of the Withdrawal Act powers given to Ministers, the Government could in the future interpret such wording in a way that could be considered to be beyond such powers. The English Courts have not yet had occasion to fully set out how it would deal with such situations. However, in an early challenge against three separate Brexit-related SIs (R on the application of Client Earth and anr v Secretary of State for Environment, Food and Rural Affairs [2019] EWHC 2682 (Admin)), the High Court indicated that challenges could in theory be brought against “a specific future decision” relying on the terms of an SI.

In any event, a decision to challenge an SI (or an act of the Government relying on the terms of an SI) will have to be taken swiftly. Applications for judicial review must be made promptly and, in any event, within three months of the relevant decision. It is therefore essential for businesses and organisations to take immediate legal advice to consider whether an SI throws up concerns, whether it can be challenged by way of judicial review, and if so, how and when to bring such a challenge.

Conclusion

The Government’s use of SIs to fill legislative gaps is understandable. That being said, there remains a concern that SIs could introduce wider legal and policy changes. In the circumstances, it is important for businesses and their advisers to monitor whether these SIs impact their operations (or, indeed, whether they could impact their operations in the future). If there is a risk of that happening, businesses should consider whether seeking the court’s oversight via judicial review proceedings is necessary.

[1] HSF acted for three charities who jointly intervened before the Supreme Court in this case. More detailed insight into the judgment is available in our e-bulletin here and in our Public Law podcast here.

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
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Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
Sahil Kher
Sahil Kher
Associate
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Labour’s plans for energy and medicines – public law analysis

We have published two papers which consider the impact of the Labour Party’s recently announced policies on two heavily regulated sectors, namely the energy and pharmaceutical industries. The policies proposed in relation to both sectors, which are similar to those now also proposed in other industries (such as the water industry and in relation to Royal Mail) are central aspects of Labour’s nationalisation agenda. Taking forward such policies would engage key public law principles and would give rise to likely challenges on the basis of the level of compensation payable, amongst other things.

In Labour’s recent report entitled “Medicines for the Many”, Labour has proposed using existing powers of “Crown Use” and “compulsory licenses” to acquire patented information for the state’s purposes. Labour’s report also suggests that a future Labour government would seek to limit the basis on which compensation would be payable to holders of such patents. In addition to concerns which these proposals raise under intellectual property and investment treaty law, they give rise to questions about the compatibility of such measures with the right to property, which is protected by the common law, the EU Charter, and the European Convention on Human Rights (as incorporated into domestic law by the Human Rights Act 1998). For more information please see our briefing paper here.

Similarly, in its manifesto, the Labour Party has set out in more detail the measures which it proposes in relation to the energy industry. Broadly these measures would involve the nationalisation of significant parts of the energy sector (including the network companies and the energy supply businesses of the Big Six). As with its medicines proposals, if a future Labour government sought to implement these policies, we envisage challenges being brought on public law and human rights grounds given that they would involve interference with the companies’ and investors’ property. For more information on these issues, including in relation to steps that can be taken to protect property rights, please see our briefing paper here.

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
James Wood
James Wood
Senior Associate
+44 20 7466 2306