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Last chance in consultation on new regulatory code

The Consultation on Code brings important chance to unlock regulators' behaviour. Anthony Vines, barrister, Civitas Law has drafted an article outlining the opportunities and issues raised by the consultation for regulators with regard to the Regulators' Compliance Code; particularly its impact on local authorities and businesses in the management of issues affecting our everyday lives. 

Businesses and regulators, as well as the public, have a last and important chance to comment upon the Government's plans for the new regulation framework.  Investing the time thinking about the issues now may well reduce the practical problems later.

In addition to local authorities, there are at least 69 non-economic regulators who are currently required to have regard to the Regulators' Compliance Code. These bodies, critical to our daily lives, range from the more common Health and Safety Executive, Food Standards Agency and the Financial Conduct Authority to the less familiar Sports Grounds Safety Authority, the new Groceries' Code Adjudicator and the Drinking Water Inspectorate.  The Regulators' Compliance Code, which seeks to control how they all exercise their duties and powers will be changing in the near future and the extent to which it changes is the subject of an important consultation which comes to a close this Friday, 3 May.  The Consultation Paper,Amending the Regulators' Compliance Code(link below), was published by the Better Regulation Delivery Office within the Department for Business, Innovation and Skills. 

Since 2008 the Regulators' Compliance Code, the RCC, should have been the starting-point for the enforcement behaviour of all non-economic regulators.  From the point of view of those the subject of regulation, the intention was that they could learn from the enforcement policy of the regulator, which would be based on the RCC, what to expect of their regulators and to hold them to account.  The RCC requires regulators to consider the impact of their activities on economic progress, to take a risk-based approach to enforcement to provide advice and guidance to assist businesses and to take proportionate enforcement decisions.

The DBIS paper 'Transforming Regulatory Enforcement' (2011) included a commitment to review the RCC and this was assisted by the findings of last year's review by the BRDO into its implementation.  That review highlighted the fact that the RCC has been broadly adopted by regulators although, on a local and day-to-day basis, it is less used than the extant Enforcement Concordat to guide behaviour.  Businesses will know that the approach of the RCC advocated that intervention should only be pursued if the benefits justify the costs and it imposes the minimum burden on business.  We learn that "the review findings suggest that this is currently not the approach being taken by regulators".

Significant portions of business and front-line officers were however found not to be aware of the RCC.  Other findings included the lack of transparency by regulators in respect of their enforcement policies, the difficult nature of the requirements of the RCC for regulators and the untapped potential for business (and indeed members of the public) using the RCC to hold regulators to account.

The Government's reaction to that review was to publish the current Consultation Paper which sets out to meet the highlighted issues by amending the RCC by the creation of The Regulator's Code. 

The new draft Code relies upon five principles:

1.Regulators should carry out their activities in a way that helps businesses and regulated bodies to comply and grow.

2.Regulators should provide simple and straightforward ways to communicate with those they regulate, and resolve disputes.

3.Regulators should base their regulatory activities, including use of alternatives to enforcement, on risk.

4.Regulators should share information about compliance and risk.

5.Regulators should provide advice and guidance to help businesses and other regulated bodies meet their responsibilities to comply with the law.

The proposed draft Code contains 30 specific paragraphs setting out the various requirements for regulators. 

One requirement is for regulators to have an "open, independent, impartial and transparent appeals procedure" for those unhappy with a regulatory decision. The driving-force for this would appear to be to render actions ECHR-compliant.  In practice however, how would this work?  The market-place contains a range of trade including competitors reporting one another for questionable breaches to those taking every chance to continue to make a buck from sharper practices. 

The opportunity to appeal any regulatory decision (which could surely include the giving of advice) seems likely to give considerable managerial difficulty to regulators particularly where there are traders with deep pockets happy to argue with their regulator. 

Who would be the appeal body? 

Bearing in mind the reluctance to spend extra public money on a new body, would it be the magistrates' court or the administrative court?  Would costs be awarded within the process of appeal because a regulator is merely using best efforts to exercise the enforcement process?  The practical difficulties of the proposal however bring to mind the lesser-observed paragraph in the Enforcement Concordat, whereby regulators were required to "provide an opportunity to discuss the circumstances of the case and, if possible, resolve points of difference".  Quite how this part of the new draft Code is intended to fit with the machinery of formal enforcement orders or prosecution, particularly where there are strict time-limits, is not made clear.

Looking at the Code from the viewpoint of business, regulators are expected to have more understanding of business and to recognise the efforts made by those regulated.  Regulators are expected to have as theirprimary concern"the provision of reliable advice and guidance necessary to help ensure compliance and to do so in a manner that enables businesses and regulated bodies to rely on the advice they receive".   The regulated should also "be able to seek advice without fear of triggering enforcement action".  Regulators are to be required annually to publish the results of client satisfaction surveys and to be clear about charging structures for any services provided.  Taken together those points would suggest that fees could be charged for the provision of referral advice or that dispute resolution techniques such as early neutral evaluation could be introduced.  It is perhaps the ultimate intention that advice will be taken nationally by the regulator on a specific point and then cascaded as required.  In itself this raises interesting points about the duty of care.  Perhaps the more likely consequence is that deeply conservative interpretations of legislation and behaviour will be adopted by regulators but the Courts will still be required to make the determinative decisions.

The perennial issue highlighted by the Code is the inherent difficulty in being both friendly advisor and strict enforcer: the problem for teachers and parents the world over.  The draft Code correctly gives improved requirements consistent with transparency and accountability: those requirements however also expose quite how tricky in practice it will be for so many regulators to ride both horses at the same time.  The Consultation Paper does say that there will be guidance provided to demonstrate good practice.  It refers to the need for a balance including the reduction of unnecessary direction from the centre and a need for regulators to have freedom and flexibility in how they meet the requirements.  The guidance should however resolve the knotty issues: there will otherwise be the legal departments of the local authorities and 69 regulators all at the same time trying to make sense of the new code, as they seek to clarify their enforcement policies and instruct their officers how to behave.  Those affected by the consultation should take the chance to review what is intended, think through what the new code might mean and respond to the questions asked.  This consultation comes hot on the heels of the consultation which considered the introduction of a statutory duty upon non-economic regulators to have regard to growth. 

As ever, guidance being clear, comprehensive and simple would give the best chance of regulators and businesses being able to concentrate on economic growth.

For more details, please email Anthony Vines (anthony.vines@civitaslaw.com) and visit: www.bis.gov.uk/assets/brdo/docs/publications-2013/13-685-rcc-consultation.pdf