Olu Fasan Better Regulation Executive

1
Olu FasanBetter Regulation Executive

• Applying the Compliance Code
• An Implementation Workshop for
  Regulators
• 27
  February 2008

2
Outline of Presentation

• Policy and Legislative Background
• Overview of the Codes provisions
• Applying the Code Nature and scope of the
  statutory duty
• Summary and conclusion

3
Policy Background Why the focus
on regulatory enforcement?

• Regulation can help business prosper/protect
  workers and environment
• But needs to be enforced fairly and properly
• Some old enforcement approach based on
• - box-ticking inspections regardless of risk
• - unnecessary form-filling data requests
• - less focus on advice and guidance
• Old approach bad for outcomes penalises low
  risk legally compliant businesses

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Policy response since 1997(1) The
enforcement Concordat (1998)

• First major attempt to tackle weaknesses
• Developed in cooperation with business and
  enforcement agencies
• Sets out 6 principles of good enforcement,
  including openness, helpfulness
  proportionality.
• But is a voluntary, non-statutory Code
• Adopted by 96 of regulators, but only partially
  successful because of inconsistent application

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Policy response(2) Better
Regulation Task Force (2004)

• BRTF to look at cutting admin costs on business
• Recommends the 5 Principles of Good Regulation
• - Proportionality
• - Accountability
• - Consistency
• - Transparency
• - Targeting
• All regulatory activity, including enforcement,
  should pass these five tests.

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Policy response(3) The Hampton Review
(2004)

• Looked specifically at inspection and enforcement
• Much good in current system, but problems remain
• - patchy use of risk assessment
• - low emphasis on providing advice and
  support
• - too many/overlapping form data
  requirements
• - lack of joined-up approaches/sharing
  of data
• Recommended the 7 principles of Effective
  Inspection and Enforcement (the Hampton
  Principles)

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Governments response to the Reviews

• Government accepted all the recommendations
• - published a comprehensive plan to
  implement them, including through legislation
• - commitment to place the Hampton
  principles on a statutory footing through a
  statutory code
• A statutory code would give Hampton principles
  necessary weight to effect real change
• Broad support for a statutory rather than a
  voluntary Code

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Legislative and Drafting History

• Legislative Regulatory Reform Act (LRRA) 2006
• Part 2 of the LRRA gives effect to key BRTF and
  Hampton recommendations
• Section 21 incorporates the Five Principles and
  imposes a duty to have regard to them
• Section 22 allows Minister to issue a statutory
  code of practice imposes a duty to have regard
  to it.
• The Compliance Code is issued under the section
  22 power.

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Drafting and Legislative History

• (2) Code drafting and public consultation
• Initial draft March 2006 extensive informal
  consultation
• Substantial redraft in February 2007 further
  informal consultation
• Public consultation on draft code, listing order
  and impact assessment launched on 15 May 2007
• Consultation closed 15 August 105 written
  responses
• Governments response published on 8 October

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Drafting and Legislative History

• (3) Parliamentary Process and Issuing of the Code
• Draft Code Order laid before Parliament15
  October
• Affirmative resolutions required (debates)
• Draft instruments approved by Lords on 26
  November and the Commons on 27 November
• Minister issued Code (17 December). Made Order on
  18 December to bring Code Listing Order into
  force
• Both Code and Order come into force on 6 April
  2008

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Overview of the Codes Provisions
Part 1 General Purpose

• Overarching aim to promote a compliance based
  approach rather than enforcement-driven one
• - a compliance-based approach makes more
  use of advice and support to encourage compliance
• - focus is on helping business to
  understand comply with legislation more easily
• - enforcement actions are proportionate
  targeted
• Approach is effective and efficient improves
  outcomes without imposing unnecessary burdens on
  the regulated.

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Hampton Principles and the Code

• Part 2 of the Code sets out the 7 Hampton
  principles
• - economic progress
• - risk assessment
• - information advice
• - inspections and other visits
• - data requirements
• - compliance enforcement
• - accountability
• Part 2 reduces the 7 principles to a set of
  specific obligations the principles are not part
  of the Code.

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Part 2 Specific Obligations of the Code
(1) Economic Progress

• Impact of interventions on economic progress
  (enforcement should not stand in the way)
• Impact includes, cost, effectiveness and
  fairness
• Benefits of measures should justify costs
• Measures should entail the minimum burden
  necessary to achieve outcome
• Interventions should be kept under review to
  remove or reduce burdens, where appropriate

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Specific Obligations

• (2) Risk Assessment
• Risk Assessment should precede and inform
  regulatory activity
• Consult and involve business etc in designing
  risk methodologies
• Publish details of risk methodologies
• Regularly review and improve risk methodologies
• In doing so, take into account feedback and other
  relevant information.

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Specific obligations

• (3) Advice and Guidance
• Legal requirements/changes promptly communicated
  to relevant stakeholders
• Clear and easily accessible information and
  guidance
• Involve stakeholders in developing content and
  style
• Provide targeted and practical advice that meet
  needs
• Confirm advice in writing, if requested
• Ensure seeking advice doesnt directly trigger
  enforcement

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Specific obligations

• (4) Inspections and other visits
• Inspections/visits should be based on risk
  assessment except where visits are
  requested/relevant intelligence
• Random inspections should form only a small
  element of inspection programme
• Regulators should give positive feedback after
  visits
• Where regulators inspect the same entity they
  should undertake joint inspections and share data

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Specific Obligations

• (5) Information requirements
• Should analyse costs benefits to regulated
  entities
• To reduce cost, should e.g. base requests on
  risk collect data less often electronically
  obtain data from other sources
• Share data to avoid duplication of collection
• Note the Information Commissioners letter on
  Data Protection Act to avoid restricting the
  sharing of data
• Involve businesses/others in vetting data
  requirements and form design for clarity and
  simplification

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Specific obligations

• (6) Compliance and enforcement actions
• Should incentivise and reward compliant behaviour
• Where appropriate, discuss specific breaches
  before taking formal enforcement action
• Sanctions policies should be consistent with
  Macrory
• Give clear reasons for enforcement actions and
  confirm in writing/ explain complaints
  mechanism
• Ensure legislation and enforcement policies are
  interpreted and applied fairly and consistently.

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Specific obligations

• (7) Accountability
• Create effective consultation/feedback
  opportunities
• Should identify explain principle risks
• In consultation with stakeholders, set and
  publish performance standards and targets
• Measure performance and regularly publish results
• Take account of stakeholders comments about
  standard of service and behaviour of staff
• Effective easily accessible complaints
  procedures

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Nature of Code obligations

• Note Code sets out express due process
  provisions
• - consulting and involving stakeholders
• - achieving consistency and fairness in
  decisions
• - publishing/making available relevant
  information
• - giving reasons for decisions
• - providing complaints procedures
• Help make enforcement regimes transparent, fair
  and accountable. Vital for establishing good
  relations.

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Applying the Compliance Code Scope
of the statutory duty

• Section 22 of LRRA 2006 provides that
• - Any person exercising a specified
  regulatory function must have regard to the Code,
  
• (a) when determining general policy or
  principles by reference to which that person
  exercise of those functions (s. 22(2) or
• (b) exercising the function of setting
  standards or giving general guidance about the
  exercise of other regulatory functions (s.22(3).

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Applying the Code

• Before exploring the nature of the duty to have
  regard to, we should first define its scope.
• S. 22(2)(3) makes it clear that the duty applies
  only
• (a) to specified regulatory functions, and
• (b) to general level functions.
• Specified functions
• - the duties to have regard to the 5
  Principles (s. 21) and the Code (s.22)
• only apply to functions specified in a
  Listing Order (see s.24)

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The Listing Order

• We consulted on Draft Code Listing Order
  together and Parliament approved both instruments
• The Listing Order (SI 2007 No 3544) sets out
  regulators/regulatory functions to which the Code
  and the 5 Principles apply.
• The Order specifies functions exercisable by
• - statutory regulators,
• - Ministers of the Crown, and
• - local authorities and fire authorities
  in England.

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Devolved Administrations

• The Listing Order cannot specify functions
• - devolved to Scotland,
• - transferred to NI, or
• - exercisable only in or as regards Wales
• (see S.24(3)
• So, duties to have regard to the Code the 5
  Principles do not apply to devolved functions.

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Applying the Code General and
individual level functions

• Another restriction on the Codes coverage is
  that it applies only to general level functions .
• This means that it does not apply to decisions of
  a direct kind, which actually affect an
  individual person or group.
• So, for example, the Code does not apply to the
  individual, operational, level activities of
  inspectors, investigators, enforcement officers
  etc

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Applying the Code General
and individual level functions

• But the Code applies to policies, principles,
  standards, guidance etc (of general application)
• When a regulator is
• (a) determining general policies or principles
  under which it exercises regulatory functions, or
• (b) setting standards or giving general
  guidance relating to the functions of others or
  its own,
• it is obliged to consider the Code when doing so.
• (But note that the 5 Principles apply to both
  general and individual level functions)

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Applying the Compliance Code What does it
mean to have regard to the Code?

• The duty does not impose an absolute obligation,
  but it is certainly not trivial.
• A proper reasoning process is required
• (1) You should give express/explicit
  consideration to each of the provisions
• (2) You should give due weight to the
  provision and should follow the provision unless
• (a) it is not relevant to the particular
  policy setting
• (b) it is outweighed by other relevant
  consideration.

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Applying the Compliance Code Meaning
of have regard to

• Any departure from the Code must be
• - properly reasoned and
• - based on material (relevant) evidence
• Any factor influencing a departure must be
  relevant, accurate and up to date.
• The reasoning that informs a decision to depart
  from any provision of the Code is like to be
  flawed if
• - it ignores the following logical or
  rational principles

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Applying the Compliance Code The
meaning of have regard to

• The principles that govern this reasoning process
  are that a body under a duty to have regard to
  the Code
• (1) must not take into account irrelevant
  factors/consideration, and
• (2) must not refuse or fail to take into
  account factors which the law requires it to
  consider
• Recording decisions factors influencing the
  decisions on application of the Code should be
  recorded.
• Given the need for express/explicit
  consideration, the need to record/document
  decisions is self evident.
• Ex post facto rationalisation is bad
  practice/unlawful

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Applying the Code
Exemptions to the Duty

• The duties to have regard to the Code and the 5
  Principles are overridden by
• - other legal requirements affecting the
  exercise of the regulatory functions
• These other legal requirements are
• - a regulators primary statute/legislation
  
• - EC law obligations
• Need to show relevance e.g. that they conflict
  with code provisions or 5 Principles.

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Summary

• Code and 5 Principles to address some weaknesses
  in enforcement regime
• Derive from reviews and legislation
• Drafts widely consulted on and approved by
  Parliament
• Duties not absolute but application requires
  proper reasoning

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Other related BRE initiatives

• Consultation on regulatory guidance
• http//bre.berr.gov.uk/regulation/reviwing5Fregul
  ations/guidance
• Review of Government Consultation Policy
• http//bre.berr.gov.gov.uk/regulation/consultation
  /policy_review/index.asp
• The Regulatory Enforcement and Sanctions Bill
• http//bre.berr.gov.uk/regulation/documents/enforc
  e_sanct/res_draft_bill.pdf

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BRE contacts on compliance code

• Olu Fasan
• olu.fasan_at_berr.gov.uk
• Tel [phone]
• Matthew Cocks
• Matthew.cocks_at_berr.gov.uk
• Tel [phone]
• Visit BRE website http//bre.berr.gov.uk