Proposals published today by the UK Department of Business Innovation and Skills (BIS) (Streamlining Regulatory and Competition Appeals: Consultation on Options for Reform) promise a long overdue overhaul of the patchwork quilt of appeals bodies and processes that has been built up over the years in the field of economic regulation and competition law. However, the sheer ambition of the proposals and the major issues which they confront (e.g., in terms of the UK devolution settlement, fundamental human rights and investor confidence) suggest BIS is beginning a ‘long haul’ rather than ‘fast track’ reform journey.
Overview of proposals
The proposals (on which comments are invited by 11 September) and the accompanying impact assessment cover all steps in the appeals process, including the initial incentives on firms to launch an appeal, the grounds on which an appeal is heard, the body which hears the appeal, and streamlining the processes for conducting appeals.
The proposals cover (a) all appeals of competition decisions made by the Office of Fair Trading (OFT) and Competition Commission, and other sector regulators exercising concurrent competition powers and (b) all reviews and appeals of economic regulatory decisions made by Ofcom, Ofwat, Ofgem, CAA and ORR and NIAUR.
Whilst the Government considers that the principles outlined in this consultation could apply more widely to other economic regulator functions, such as those of Monitor in the healthcare sector, it is not proposing specific recommendations in relation to these regulators as part of this consultation. Issues raised in the consultation which touch on economic regulation matters which are devolved (in Northern Ireland and Scotland) will be followed up by BIS with the Devolved Administrations in those jurisdictions.
Proposal 1 – Basis for Appeals
The Government is proposing that, where appeals are currently heard ‘on the merits’, these appeals should shift either to a judicial review standard, or to defined grounds of appeal setting out more clearly the basis on which firms can challenge a regulator’s decision. The Government’s objective here is described as being to, “ensure that appeals are focused on identifying cases where regulators have made mistakes which have a material impact on outcomes or where a decision is unreasonable”. The specific changes being consulted on include:
* Changing the standard of review for appeals under the Communications Act 2003 from appeal on the merits to a flexible judicial review or specifying more focused grounds for these appeals;
* Making similar changes to the standard of review for appeals under the Competition Act 1998 (excepting decisions relating to the level of penalty);
* Aligning the grounds of appeal for energy (in Great Britain), aviation and postal services decisions; and
* Considering what the costs and benefits would be of moving to a similar appeal model for rail decisions.
Proposal 2 – Reforms to Appeals Bodies
The Government is also proposing reforms to appeal bodies, including reviewing governance of the Competition Appeal Tribunal (CAT), which it proposes to retain, and also re-routing appeals between different appeals bodies to increase the overall effectiveness of the system and make it easier to understand for firms and investors.
Proposal 3 – Incentives for Appeals
The Government is also proposing a series of reforms to ensure, as it puts it, “that regulatory decisions are transparent and well-informed and that firms are not incentivised to make unmeritorious appeals”. Proposed measures include:
* Making clearer rules on the admissibility of new evidence in an appeal, and awarding costs against new evidence which could have been brought earlier at the decision-making stage;
* Increasing use of confidentiality rings by regulators and/or greater transparency and more effective consultation;
* Encouraging regulators to claim their full costs and consulting on whether courts will only award costs against a regulator where they have acted unreasonably.
Proposal 4 – Streamlining Appeals Processes
The final proposal is to streamline processes for hearing appeals, e.g., by (a) introducing (and where they exist reducing) target case time limits and/ or fast track processes similar to those proposed for private actions in competition law and (b) encouraging cases to be resolved on the papers wherever possible, for example for cost awards and straightforward matters.
Comments – Where to Begin?
BIS should be congratulated on starting this process – the development of the regulatory and competition appeals landscape in the UK over the years since the privatisation and liberalisation moves in the1980′s and early1990′s has lacked coherence and consistency and has left us with a confusing and uneven (if not uneasy) settlement. The sheer ambition of BIS’s proposals will, however, mean that delivering meaningful reform is a very big ask indeed.
As a flavour of the sort of issues which BIS’s proposals raise, consider the following as ‘tasters’:
England and Wales water regulation: BIS point out the controversy that has flared around Ofwat’s proposals for licence modifications and the prospect which this has raised of references to the Competition Commission. BIS point out that Department of Food and Rural Affairs (DEFRA) will shortly be issuing its own consultation on this reference process and whether there is a case for reform, but that “any proposals to reform the process for appealing changes to water and sewerage company licences will be made in the light of this [i.e. BIS] consultation process”. What BIS does not advertise is what approach DEFRA may take (with or without encouragement from BIS) in relation to Ofwat’s price control determinations which do not take the form of licence modifications. However, it seems likely that the current process for referring such determinations to the CC will also be put in the mix as part of the reform debate.
Devolution: BIS points out that its consultation is not proposing any change to the regulation of water industry in Scotland and that the Northern Ireland Executive will consider separately, following the BIS consultation, if it wishes to make revision to its current arrangements for economic regulation in Northern Ireland. However, both the Scottish and Northern Ireland regimes for economic regulation rely to a significant extent on the role played by the Competition Commission in disposing of statutory ‘on the merits’ references. If the proposed reforms are implemented, especially on restricting the nature and grounds for appeals, then will it remain feasible for the CC (or Competition and Markets Authority (CMA) as it is to become) to continue to undertake ‘on the merits’ reviews for these two devolved jurisdictions?
Fundamental rights: The BIS paper discusses in a relatively superficial way the role which the European Convention on Human Rights (ECHR) plays in the context of appeals from competition decisions. It does not appear to consider at all the role which the ECHR plays in the context of regulatory appeals. Nor does it examine the application of the EU Charter of Fundamental Rights. The superficiality of that discussion, and these important omissions, will certainly come under scrutiny as the proposals are tested with stakeholders. Businesses and regulated utilities are becoming ever more assertive in this area and the suggestion, for instance, that removing appeals on the merits is entirely consistent with Article 6 ECHR (right to a fair trial) – as well as these notable omissions – will raise quite a few eyebrows.