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Brief Counsel

Search and Surveillance Bill – invasive new powers for regulators?

07 July 2009

The Search and Surveillance Bill introduced to the House last week radically extends the search and seizure powers of large numbers of regulatory enforcement officers and has the potential to affect many businesses. 

A wide range of regulatory schemes are covered by the Bill, ranging from regulators with broad commercial regulatory functions, such as the Commerce Commission, to industry-specific regulatory bodies, such as the Civil Aviation Authority and the Meat Board. 

This Brief Counsel discusses the Bill in some detail and invites you to consider whether your business will be affected.

Currently the search powers of regulators – for example, the Commerce Commission and the Reserve Bank – are limited to role-appropriate functions and are provided for in regulator-specific legislation.  The Bill, which has its genesis in a Law Commission report, would homogenise these powers, conferring extensive new search powers on many regulators.

The full list of regulatory regimes covered by the extended search powers of the Bill (either partially or wholly) is available here.

What’s new?

The Bill is long (there are 174 substantive provisions), and addresses search and seizure powers and procedures in considerable detail.  But for now you should note the following proposed changes, which would impact significantly on your interaction with regulators.

New covert surveillance and investigative powers

Most regulatory investigative powers are currently limited to compelling the production of documents or information, requiring personnel to answer questions and, in extreme cases, physical searches of property.  If the Bill passes in its present form, regulators will also be able to subject your staff and place of business to covert surveillance.

Surveillance might include installing recording devices to intercept calls or conversations, tracking devices to determine the movements and whereabouts of staff, and cameras.  Regulators would be able to covertly break into your premises to install such devices.  Perhaps more concerning, nothing prevents a regulator from conducting similar surveillance on (or in) the homes of your officers and staff.

If regulators want to use a unique investigative technique not presently covered by the Bill (e.g. remotely and covertly accessing your IT network) they can also obtain “residual” warrants.  There is no limit to the kinds of investigative techniques that could be deployed under cover of a residual warrant.

Regulators would be able to obtain surveillance or residual warrants only if they believe the company or its staff have committed an offence under the relevant Act.  Simple contravention of the relevant Act is not enough.  However, the offence provisions of many regulatory schemes are extensive, and regulators are increasingly inserting offences into their regimes (note, for example, Commerce Minister Simon Power’s indication that he is considering criminalising price fixing).  Expect surveillance, and other invasive and covert investigative techniques, to be a feature of regulatory interaction in the future.

Extensive new ancillary search powers

Regulators would also enjoy a range of ancillary powers that they can exercise in connection with a search or investigative power.  These include powers to:

  • detain any person present at premises that are being searched and, if the enforcement officer thinks they may be holding evidence, conduct a “rub-down” search of the person
  • secure premises and exclude staff from the area, and
  • ask your external IT provider (potentially without notifying you) to assist the regulator in accessing and copying your computer network and data storage.

In addition, if a representative of a regulator attends at your office, even in a non-enforcement capacity (e.g. for a meeting with company personnel), they could seize any document or item they see if they may have obtained a search warrant for that item.  So, for instance, the representative could be perfectly within his or her rights to lean across the table and seize the file you brought into the meeting with you, if he or she thought it would assist the investigation to do so.

Limits on privilege and confidentiality

Finally, the Bill proposes removing or diluting some of the traditional investigative safeguards. 

Legal privilege will not bar the issue of a search warrant if the regulator satisfies the official issuing the warrant that your communications with your lawyers are for a “dishonest purpose” or might aid anyone in doing anything you ought reasonably to have known was an offence.  This is the same proviso as applies under the new Evidence Act but, in that context, you can withhold the material until the privilege claim is determined by a judge.  Under the Bill, regulators can apply for a search warrant to seize privileged material and, crucially, you will not be present to argue against it.

Further, it is up to the regulator when they are conducting covert surveillance or a search in your absence to assess for themselves whether privilege might apply.  You are entitled to take steps to protect privileged information from surveillance or search but, of course, you won’t know until it’s too late.

Finally, the Bill is complex and there are many interlocking powers and authorities and, obviously, there will not yet be any court decisions stating the limits of the new powers.  Thus, when the regulator comes knocking it will be hard to know whether or not they are overstepping their bounds.  Failure to comply is an offence, so it pays to be right when turning the regulator away at the door.

What can I do?

It is early days yet, and there is plenty of scope through the legislative process to deal with the concerns this Bill throws up.  We can help you participate in that process.  The issues will be different depending on the regulatory regime you operate under, but in general we think the following minimum changes are necessary:

  • a more proportionate response – many of these search powers are disproportionately invasive given the nature of the specific regulatory schemes they will be applied to.  This is a function of the “one-size-fits-all” objective of the Bill, and will therefore be difficult to address within the Bill’s current scheme
  • clear expectations about the limits of residual warrants – under the Bill you will have no right to know what devices, techniques and procedures are being used to assist investigations: the residual warrant provisions, as presently drafted, set no limits
  • clarification of the circumstances in which legal privilege will be removed – you rely on privilege to communicate freely with us as to your legal rights and obligations, and there should be no doubt about the security of that privilege.  The present “dishonesty” exception is vague, and we think the fact that you are excluded from defending your position in that assessment is unfair.  There should be better safeguards to preserve privilege, and
  • home should be out of bounds – it is hard to justify covert surveillance of home and family in the context of commercial regulation.  There should be a presumption that surveillance is limited to commercial and/or public premises.

The Bill is an extraordinarily wide proposal, of unprecedented invasiveness.  Its unmediated application to regulatory authorities has all the hallmarks of officials’ wish-fulfilment, without any regard for countervailing social and commercial factors.  The Bill’s required assessment of costs and benefits is significantly lacking in this respect, and a better balancing of commercial interests is required.

Given the legislative commitment to the “one-size-fits-all” approach, the Bill is likely to pass in a form that grants, to certain regulators, powers that significantly exceed those required or appropriate for their roles.  We hope that such regulators will adopt transparent guidelines setting out the circumstances (if any) in which the more draconian powers will be used.  This practice already exists in respect of broad powers of prosecution (for example, the Department of Labour publishes prosecution guidelines, which state that the Department will prosecute individual employees only in cases of egregious behaviour).  Forewarned is, after all, forearmed.

Next steps

For further information, please contact Pheroze Jagose, Grant David or Victoria Heine

Contacts