UK businesses often manage relationships with a multitude of regulators: the HSE, the Environment Agency, local authorities, the FSA, government departments, the DVSA, to name but a few. Managing these relationships can be part of day-to-day operations or it can be an exceptional event, when things go wrong. All the regulators have their own approach to regulation and the individuals working for them often do a difficult job under pressure of limited resources. Sometimes businesses can feel that they are not being dealt with in a fair and proportionate way. However, there is a legal framework for good practice in regulation and understanding this can help to negotiate a way through regulatory problems.
Much of regulatory law attracts what lawyers call ‘strict liability’, where a given set of circumstances constitute an offence, whether or not there is any intention, negligence or recklessness involved. The strict nature of regulatory offences means that prosecution is often under consideration and it makes defending prosecutions challenging. Prosecution success rates vary from year to year but typically range between 80-90 per cent. However, for responsible and conscientious businesses, a successful defence is not impossible and companies that can demonstrate such an approach have a chance of steering regulators away from prosecution, even where an offence has been committed.
In recent years, Lyons Davidson’s regulatory team has turned the statistics on their head, achieving acquittal or no further action rates in a large majority of regulatory investigations. The basis of this success varies from case to case but, if you find yourself under investigation, you should not only reflect on your own organisation’s actions but also critically analyse the conduct of the prosecuting regulator: have they really understood your organisation and enforced the law in a way that is in the public interest? If not, it may be possible to persuade them of another course of action – a win for the regulator and the regulated. If that fails, prosecutions can be formally challenged if they are fundamentally unfair.
Regulatory good practice
The general principles by which all regulators must function are contained in the Legislative and Regulatory Reform Act 2006. These principles require all regulatory activities to be carried out in a transparent, accountable, proportionate and consistent matter and targeted only at cases where action is needed. The 2006 act also provides for a Regulators’ Code to be published, which must be followed by regulators when developing enforcement policies and operational procedures that guide their regulatory activities. These principles, and the statutory code, are therefore fundamental to how regulators should be treating you. The full Regulators’ Code document is worth reading if you are facing regulatory problems.
The courts have a general discretion to stay a prosecution (effectively an indefinite suspension) if it is deemed necessary to protect a defendant from oppression or prejudice. This discretion is primarily focused on the process of how the prosecuting regulator has brought the case and it highlights the importance of reviewing the prosecutor’s conduct to identify potential abuse. If these arguments can be put to the regulator at an early stage, it may persuade them to withdraw enforcement action or to accept a package of reduced sanctions.
If an organisation believes it has been on the receiving end of an abuse of process it can request the matter be transferred to the Crown Prosecution Service (CPS). A defendant can apply to the court pursuant to section 6 of the Prosecution of Offences Act 1985 for the CPS to intervene and potentially discontinue the prosecution. The CPS can discontinue on the basis that a prosecution is not in the public interest and, if an abuse of process has occurred, this will be highly influential.
Public interest considerations will include the seriousness of the offence and the level of culpability of a potential defendant; the level of harm caused and whether there is a broader impact on the community. A defendant’s response to a regulatory breach is therefore an important factor: if they have remedied harm and taken steps to ensure compliance in the future, this will help point a regulator away from the more punitive enforcement responses.
Abuse of process
Abuse of process has been defined as “something so unfair and wrong that the court should not allow a prosecutor to proceed with what is in all other respect a regular proceeding.” It broadly falls into two categories: those cases where it would be impossible to give the accused a fair trial and those cases where it would be unfair for the accused to be tried. There are a number of specific practices that have been deemed an abuse of process by the courts including delay, malpractice, broken promises not to prosecute, decisions which contradict published enforcement policies and more. These practices may be sufficient to halt a prosecution and they may also be relevant to the dialogue with regulators before they have made a decision about what kind of enforcement action, if any, may be appropriate.
It has been successfully argued that a decision taken by a regulator to prosecute, which is contrary to their internal enforcement policy, constitutes an abuse of process. In practice, you should ask a regulator for a copy of their enforcement policy. You would need to show that the prosecutor has clearly breached their own policy and that to prosecute in the circumstances would be oppressive. If this is the case, it is likely the policy would highlight an alternative sanction that may be more appropriate. You should ask further questions about the regulator’s policy: is it clear? Is it published to the public? Is the policy comparable with that of other regulators? Does it meet the principles of good regulation set out in the Regulators’ Code? If the answer to any of these questions is ‘no’, this could be used to persuade the regulator that they should take a more favourable approach. Notably, the postscript to the Regulators’ Code states: “we want businesses, regulated bodies and citizens to challenge regulators who they believe are not acting in accordance with their published policies and standards. It is in the wider public interest that regulators are transparent and proportionate in their approaches to regulation.”
While identifying a potential abuse of process can be a powerful shield against a regulator, a company should not seek to rely on it as their sole means of defending a prosecution: it should be part of a wider strategy to demonstrate a responsible approach to compliance and to ask for fair and proportionate treatment. The best course of action will always be prevention, and there is no substitute for obtaining advice on regulatory obligations and putting into practice the requisite training, supervision, information and systems of work that are necessary to meet these obligations.
If you have any questions about any of the issues raised in this article, please do not hesitate to contact our Regulatory Team on 01179 046 319.