Shepherd and Wedderburn LLP
  April 10, 2006 - Scotland

Regulatory Reform - Sanctioning Business Post-Hampton

The Cabinet Office's Better Regulation Executive (BRE) is currently undertaking a review of penalties for businesses that fall foul of the law and business should ensure their views are heard. This spring, a consultation paper will be released which will be the final opportunity for stakeholders and interested parties to contribute to the review before it makes its recommendations to the Government in late 2006. The current review arose as a result of recommendations made by Phillip Hampton in his report Reducing Administrative Burdens: effective inspections and enforcement, which was published in March 2005. In that report, Mr Hampton described the current system for penalising businesses as cumbersome, inconsistent, and inefficient. The Hampton Report therefore recommended that the BRE undertake a comprehensive review of the penalty system and suggest reforms to address the concerns identified. The resulting review has now been underway for some time. It was established in September 2005 with Richard Macrory, Professor of Environmental Law from University College London, at its head. The review is limited to English regulatory authorities, but covers some regulatory activities in Scotland, Wales and Northern Ireland where these are carried out by bodies also covering England. In December 2005, the review published its first discussion document 'Regulatory Justice: Sanctioning in a post-Hampton World'. That document explored some of the findings of the Hampton Report regarding penalties and set out some areas that the review wanted to explore when considering reform. It is likely the consultation paper to be issued this spring will rely heavily on the ideas expressed in that document. The December document set out the review's thoughts on a number of areas. In particular, the review considered the current use of criminal proceedings and whether these should be reserved for the most serious offences. The December document raised concern with the consideration of these cases in magistrates? courts as magistrates are less experienced in dealing with regulatory offences and often impose low financial penalties that do not act as an adequate deterrent to business. The review was also concerned at the common use of strict liability offences for these cases. The December document states: "The entrenchment of criminal proceedings at the very heart of regulatory law in the context of strict liability offences does not permit any differentiation between companies that intentionally flout the law and those that make their best efforts to comply, other than through the discretion of the regulator as to whether to prosecute or through the sentencing practice of the courts." Finally, the review was concerned that the wholesale use of criminal proceedings to sanction regulatory offences imposed too great a burden on the court system, resulting in lengthy delays for both regulators and business. The review therefore indicated it wished to consider ways to address these issues. Examples include additional training for magistrates, providing greater delineation of offences to ensure more serious offences are treated with greater penalties, and the possible introduction of intermediate, informal sanctions, such as warning letters. The review has also wished to discuss the decriminalisation of certain regulatory offences and the possible introduction of civil penalties to deal with non-compliance outside the criminal context. Finally, the December document raised the possibility of having a specialist forum to consider business regulation cases. The consultation period on the December document closed in February 2006 and the collated results will have helped formulate the content of the discussion document to be released this spring. The reforms likely to arise out of this review will have substantial impact on the business community. Businesses should therefore consider the spring discussion document carefully and make their views known to the BRE.