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Brief Counsel

Regulatory Responsibility Bill worth a look

27 July 2010

Feel that the legislative process in New Zealand could be more transparent and that policy-making would benefit from more rigorous scrutiny?

The draft Regulatory Responsibility Bill seeks to address these concerns by imposing new disciplines on the law-makers.

The Government has prepared a set of questions on the Bill and has invited submissions to the Regulatory Quality Team within the Treasury by 27 August 2010.

Background

The Regulatory Responsibility Bill (the Bill) began life in 2007 as an ACT initiative but did not do well in the last Parliament.  It made it to the Commerce Committee but the committee recommended that it be referred to an expert taskforce for further consideration.  ACT was able to use its leverage after the election to get National to commit to a taskforce as part of its Confidence and Supply Agreement, and had Rodney Hide appointed as Minister for Regulatory Reform so that he would be in the saddle to push the legislation along.

The taskforce, led by former Secretary of the Treasury Graham Scott, was duly appointed and delivered its report, and a substantively amended version of the Bill, to Hide in September last year.  But National has made no commitment yet to make the Bill a Government Bill or to give it space on the Government’s legislative programme.  Without the Government’s endorsement, the Bill will have to take its chances in the ballot along with other Private Members’ Bills.

The principles of good legislation

The Bill identifies a number of “principles of responsible regulation”.  These fall into six broad categories and are largely based on the Legislation Advisory Committee (LAC) Guidelines.

Rule of law

Legislation should be clear and accessible, not adversely affect rights or not impose obligations retrospectively, treat people equally before the law and resolve issues of legal right and liability by application of the law rather than through administrative discretion.

Liberties

Legislation should not diminish a person’s liberty, personal security, freedom of choice, or rights to own, use or dispose of property, except as necessary to provide for any such liberty, freedom or right of another person.

Taking of property

Legislation should not take or impair, or authorise the taking or impairment of, property without the consent of the owner unless it is necessary in the public interest and full compensation is provided. 

Taxes and charges

Legislation should not impose or authorise the imposition of taxes except by or under an Act, nor should it impose or authorise charges that exceed the reasonable cost of providing the goods or services, or the benefit that payers are likely to obtain.

Role of the Courts

Legislation should preserve the Court’s role of authoritatively determining the meaning of law and, where legislation authorises a public entity to make decisions that may adversely affect any person or property, it should state appropriate criteria for making those decisions and provide a right of appeal on the merits against those decisions to a Court or other independent body. 

Good law making

Legislation should not be made unless those likely to be affected have been consulted, the need has been carefully evaluated, the benefits outweigh the costs and it is the most effective, efficient and proportionate response to the issue available.

Chapman Tripp comments

The principles seek to introduce new rigour into the legislative process and to ensure those proposing and creating legislation engage in proper consideration of the principles of responsible regulation well before enactment.  A key theme is identifying groups of persons who are adversely affected by a regulation before it is enacted.  Linked to this is a proposed reinforcement of the protections available to ‘intangible’ property rights, such as contractual rights.  The provisions the taskforce quotes from other jurisdictions are the ‘takings clause’ in the Fifth Amendment of the US Constitution which reads “nor shall private property be taken for public use, without just compensation” and the Commonwealth of Australia Constitution Act which states that property may only be acquired “on just terms”.

An example the taskforce uses to demonstrate the inadequacy of current New Zealand law is the Freshwater Fish Farming Regulations 1983, Amendment 3 which prohibited the sale or removal of live marron unless transferred to the Crown.  There was only one licensed fish farm business at the time, and it was destroyed by the change.  Such regulatory action should in principle be compensated as if it were a taking, the taskforce says.

It recommends that further work be done on extending the Public Works Act 1981 regime “to provide compensation for takings and impairments of both real and personal property”.

The reference to providing through the Courts a right of appeal on the merits is also noteworthy and reflects the taskforce’s concern that, increasingly, legislation affecting businesses has very limited or no appeal rights.  This is particularly true of delegated decision-making (for example, decisions on applications for citizenship or residency).  It is very difficult to get such issues before a Court.  And merits review provisions are often deliberately omitted from legislation which is likely to be contentious in its application – a number of submitters sought to have an appeal right inserted into the Commerce Act during the recent review of Parts 4, 4A and 5 but succeeded only in a very limited fashion in relation to input methodologies.

What the Bill does

Certificates of compliance

All legislative or regulatory measures will be accompanied by a signed certificate of compliance certifying that the measure is compliant with the principles of responsible regulation.  Where there is a departure from one or more of these principles, reasons must be provided to demonstrate that the departure is within “such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society”.  (This wording is adapted from the New Zealand Bill of Rights Act).

The Bill covers all mechanisms by which public entities exercise a legislative function and includes Acts of Parliament, regulations, rules and other instruments made by the Executive Council, Ministers, public officials or public bodies.  It would apply to all new legislation and regulation immediately and would be extended to existing statute over a ten year period (inserting as it went a right to merits appeal).

It is not proposed now to cover local government, although the taskforce recommends that this be considered as part of the first five-yearly review. 

Compliance certificates for Government Bills and regulations would need to be signed by both the responsible Minister and the relevant CEO.  This duty cannot be delegated downwards, only across – either by the Minister to another Minister or by the CEO to the acting CEO.  Where there is an incompatibility with the principles, only the Minister must sign as it will be political judgement whether or not the incompatibility is justified.

Non-government Bills would be signed by the sponsoring MP.

Giving the Bill bite

The Bill would provide two courses of action for people who feel that a piece of law is inconsistent with the principles of responsible regulation.  They could go to Parliament’s Regulations Review Committee (RRC) or to the Courts.

The RRC has won a reputation over the years as one of Parliament’s most effective committees, reflecting its relatively non-partisan and constructive approach.  Its role now is to review delegated legislation and delegated legislation-making powers against a set of criteria set out in Standing Orders and to report to the House any incompatibilities together with how they might be remedied.

The taskforce recommends extending the committee’s mandate to cover all Bills and regulations.

The second option is to go to the Court for a Declaration of Incompatibility.  This would represent a new jurisdiction for the Courts but would provide a political check only.  The Courts could not strike down or over-ride laws which were found to be non-compliant with the principles of the Act (as the Supreme Court can in the US if legislation is inconsistent with the US constitution).  Neither would they have the power to make injunctive or compensatory orders or to require the Government to address the non-compliance. 

The most they could do if the complaint succeeded would be to order the Government to pay the complainant’s costs.

Not a lot of bite, you’ll be thinking about now, and you’d be right - but only to a point.  No Government would welcome having to defend the indefensible in the Courts.  And the shape of the Regulatory Responsibility Act will be developed by the Courts over time as cases are brought to them for decision.  There is a significant body of case law from Australia that they will be able to draw on, adding yet another thread to the pattern of trans-Tasman harmonisation.

What the Bill doesn’t do

The Bill does not in any way compromise the sovereignty of Parliament and is likely to have its effect by influencing the culture of legislative decision-making over time rather than in any obvious and immediate changes.  In this regard the Bill (if enacted) will have incremental effect, and its principles appear intended to reinforce existing law-making rules and norms rather than to create new ones.  

This is implicit in the four examples the taskforce provides of “controversial” laws which compromised existing property rights and which might have benefited from more extensive public consideration in light of the Bill’s principles.  These are:

  • the cancellation in 2000 of the 1994 West Coast Accord providing for the sustainable harvesting of rimu (Westco Lagan Ltd had invested in a significant sawmilling business on the back of this Accord and was left out of pocket and uncompensated by the decision)
  • the 2004 Foreshore and Seabed Act which limited the jurisdiction of the Maori Land Court to hear claims for customary rights
  • the forcible unbundling of the local loop owned by Telecom New Zealand and the consequent operational separation provided for in the Telecommunications Amendment Act 2006 (both of which shaved millions off Telecom’s share price), and
  • the addition of a new criterion to maintain “strategically important infrastructure” in New Zealand ownership to frustrate the Canadian Pension Plan’s bid for a 40% stake in Auckland International Airport.

It is worth noting that none of these measures would have been prevented by the Bill, although it is interesting to speculate whether a certification process would have increased the political cost associated with the legislation by forcing the Government to more obviously identify the ‘winners’ and ‘losers’.

Next steps

Chapman Tripp has been closely involved with the taskforce’s work.  Jack Hodder SC was a member of the taskforce and Colin Fife and Tim Smith assisted with the writing of the taskforce’s report (and of this Brief Counsel).

For more information or assistance in preparing a submission, please contact the lawyers featured.

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