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Lord Borrie: My Lords, the noble Lord, Lord Kingsland, has ranged widely in his closely argued

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submission, and properly so, because he has addressed himself to a range of amendments which are grouped together and he has discussed all of them. I do not propose to do that. I simply want to raise an issue regarding what I believe was a fundamental theme running through his remarks.

He said that the court, right of appeal to which is provided for in Clause 58, cannot review whether or not the amount of the penalty is reasonable. I believe that I quote correctly the noble Lord, Lord Kingsland, in saying that the court will have no right to say that the amount of the penalty is unreasonable. The noble Lord quoted from Clause 58.

However, we should bear in mind that the clause states that the penalty imposed by the authority must be reasonable in all the circumstances of the case; that is, the authority has power only to impose a penalty which is reasonable in all the circumstances of the case. We should also bear in mind the other part of Clause 58 which states that a ground for appeal to the court exists if the imposition of the penalty was not within the power of the authority.

In my submission, if the authority imposes a penalty which is not reasonable in all the circumstances of the case, it will have acted ultra vires (to use the English that we must all use nowadays in this regard) and the penalty will be beyond the powers of the authority. Therefore, the court may turn it down on that basis. I am referring to subsection (4) on page 58 of the Bill which states that:


    "The grounds falling within this subsection are--


    (a) that the imposition of the penalty was not within the power of the Authority under section 27A".

That is a fundamental point in the noble Lord's argument and it does not seem to me that he is entirely right in that regard.

5.30 p.m.

Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Kingsland, for one thing: the concept of twinned amendments. I wish that I had thought of that. It makes it much easier to understand the proliferation of amendments, some of which relate to gas and some of which relate to electricity. Of course, I am familiar with the arguments that he adduced with regard to ECHR compliance. We debated that issue on a number of occasions during discussion on the Financial Services and Markets Act and I am glad that he has not lost his skill in presenting his case.

The amendments deal broadly with the ECHR compatibility of decisions taken by the Secretary of State and/or the gas and electricity markets authority in relation to licences and the appropriateness or otherwise of provisions by which licence holders may challenge those decisions.

Amendments Nos. 180 and 186 seek to ensure that any notice published under the new sections (inserted by Clauses 41 and 86 respectively) of the Electricity Act 1989 or the Gas Act 1986 which sets out the reasons for the key decisions listed in those new sections should contain details of how the Secretary of

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State or the authority have ensured that the decision is proportionate and compliant with the Human Rights Act 1998 and, therefore, with the European convention.

A key point with regard to the amendment is that it would not secure compliance. Under Section 6 of the Human Rights Act, it will be unlawful for any public authority to act in a way which is incompatible with the European convention. However, nothing in the Human Rights Act 1998 requires public authorities to explain how each decision that they take is compliant with the convention. Even if it did so require, an explanation would not ensure that the decisions were compliant. Whatever was asserted by such an authority, ultimately it would be for the courts to decide whether a decision was compliant. Therefore, the amendment does not add anything in that respect.

By requiring the authority and the Secretary of State to give reasons for their key decisions--they are set out in Section 49A, inserted by Clause 41--the Bill helps interested parties to judge for themselves whether decisions are compliant with the European convention and to take appropriate action if they believe that they are not.

Each amendment also requires the notice to contain details of how the decision is proportionate. It does not say what is meant by "proportionate" in this context. The concept of proportionality is, of course, one which applies under the European convention. If the word is used here in the sense that it is used in the human rights context, it is covered by the second limb of the amendment. If it means something else, I must ask what that is. It is hardly to be supposed that the authority or the Secretary of State will say that their decisions are not proportionate in the sense of "reasonable". Therefore, I am afraid that I cannot accept Amendments Nos. 180 or 186.

Amendments Nos. 183, 184, 188 and 189 would make all the decisions taken by the authority and/or the Secretary of State in relation to licence holders--including, but not limited to, those for which reasons must be given under the Bill--appealable to the High Court or, in Scotland, the Court of Session; and/or an appeals tribunal of the Competition Commission. The grounds for appeal to the High Court include material error as to the facts, material procedural error, an error of law and some other material illegality, including unreasonableness or lack of proportionality.

I believe that it is helpful to look at the issues raised by these amendments in order to distinguish the different kinds of decision which can be taken by the Secretary of State or by the authority. Some decisions fall into a category that, broadly speaking, sets the framework for regulation; that is, decisions such as the determination of specific licence conditions. In those cases, it is appropriate that the route of appeal should be to the reporting arm of the Competition Commission, which is well placed to take a view on this type of public interest decision.

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Other decisions, such as those in relation to the granting or revocation of licences, or enforcement, have more to do with the application of the rules as they stand. In such cases, judicial review provides an appropriate right of challenge.

A third category of decision may require grounds for challenge that go beyond that of judicial review; for example, in the case of financial penalties the Government have provided for companies to challenge both the imposition and the amount of a penalty in the courts. In examining whether the amount of a penalty was reasonable in all the circumstances of the case, which it must be if the authority is acting within its powers, we believe that a court would be bound to consider the facts underlying the case. Therefore, those grounds of appeal go beyond judicial review.

The point that I make is that for each of the three types of decision the Government have provided a right of review that is appropriate to the case. By contrast, the amendments seek to impose a blanket provision for all decisions to be subject to exactly the same appeals procedures in the High Court and/or an appeals tribunal of the Competition Commission. We do not believe that that is the right way forward.

The noble Lord, Lord Kingsland, set out in some detail the analogies that he sees between these provisions and those of, first, the Competition Act and, secondly, the telecommunications appeals regulations. We do not believe that those analogies are sound.

I turn first to the Competition Act. In many cases, the nature of the decisions involved under the utilities Acts and under the Competition Act are quite different. Under the utilities statutes, decisions may fall into a range of categories of the kind that I have set out. A number of types of appeal may be appropriate, ranging from a route of appeal to the reporting arm of the Competition Commission, where a public interest-type decision is involved, through judicial review and into cases where something beyond judicial review is provided for, as in the case of financial penalties. The important point is that the right of appeal is appropriate to the type of decision.

A decision under the Competition Act about whether or not one of the prohibitions on anti-competitive behaviour has been breached is a determination as to how the law, which is to be interpreted in accordance with existing jurisprudence, applies to the facts. The appeal is heard by the appeal tribunal of the Competition Commission which is headed by the president, who has status equivalent to that of a High Court judge. Again, the important point is that the right of appeal is appropriate to the decision.

The noble Lord, Lord Kingsland, also referred to the Telecommunications Appeal Regulations 1999. As he rightly said, those were introduced in response to the requirements of the European Commission directives on telecom licensing and ONP, which, among other things, required member states to provide an appeals mechanism against certain

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regulatory decisions in the telecommunications sector. I thought that I heard him recognising that that directive is telecoms-specific and does not apply to the gas and electricity sectors, although he is at liberty to argue that it should apply.

The important point is that the rights of appeal against regulatory decisions in the gas and electricity sectors should be appropriate to those decisions. For example--I am repeating myself to some extent--the Government have provided for electricity companies to challenge the imposition of financial penalties on the following grounds: that the imposition of the penalty was not within the power of the authority under Section 27A; that any of the procedural requirements of subsections (2) to (4) or subsection (6) of Section 27A, which are concerned with the giving of notice, had not been complied with in relation to the imposition of the penalty, and that the interests of the operator had been substantially prejudiced by that non-compliance; or that it was unreasonable of the authority to require the penalty imposed, or any portion of it, to be paid by the date or dates by which it was required to be paid.

The Government believe that the provisions on financial penalties go further than judicial review and allow for appeal on similar grounds to those provided under the Telecommunications (Appeals) Regulations 1999, which include material factual or procedural error, error of law or some other material illegality. A court considering whether the imposition of a penalty was within the authority's powers would have to consider whether the penalty was, as the noble Lord, Lord Borrie, quoted,


    "of such amount as is reasonable in all the circumstances of the case".

The court would therefore have to consider the circumstances or facts of the case.

It is important to stress that a company will be able to challenge the imposition and the amount of any penalty. New Section 27A of the Electricity Act 1989 and new Section 30A of the Gas Act 1986 give the authority the power to impose only such a penalty as is reasonable in all the circumstances of the case. If it is not reasonable in all the circumstances, its imposition will not be within the power of the authority under that section. Accordingly, if a company challenges the amount of a penalty on the grounds that its imposition was not within the authority's power under Section 27A of the Electricity Act or Section 30A of the Gas Act--which the Bill expressly makes a ground of challenge--the court will have to consider whether it was reasonable in all the circumstances. If it does not think so, it may quash or lower the penalty, as it thinks appropriate.

In all those respects, the Bill conforms with the requirements of the European Convention on Human Rights, with the Human Rights Act 1998, and with the objective of ensuring justice in these matters--an objective that I think that the noble Lord, Lord Kingsland, shares.


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