---

Regulatory Enforcement and Sanctions Bill [HL]

The Committee is grateful to the noble Lord, Lord Goodlad, for coming both in his own right and as chairman of the powerful and important committee that he chairs. I shall deal with his amendments first. The noble Lord’s amendments are unnecessary and I will explain why. It would not be appropriate to add a ““notice of intent”” stage to the process for imposing fixed monetary penalties as this would unnecessarily lengthen the process for imposing such penalties and would undermine one of the key benefits of the notice, which is the swiftness with which the sanction can be imposed. Of course, it can be appealed against once it has been imposed, but for the type of case being considered for fixed monetary penalties there is a strong argument in everyone’s interests for it to happen quickly rather than slowly. I know I am repeating myself, but an important subject has been raised in this debate. Fixed monetary penalties are designed to be used for low-level incidences of non-compliance and the regulator will have no discretion in setting the level of penalty. For example, as the guide makes clear—I appreciate that the guide is not the Bill—it is envisaged that fixed monetary penalties will be used for strict liability offences: cases where liability is satisfied simply by the commission of a particular act without any intent. Fixed monetary penalties may also be used to address simple instances of non-compliance which may or may not involve culpable conduct. Examples could include failure to hold a licence for a particular activity or failure to ensure that food labelling on individual items complies with current legislation. These penalties are not intended to be used for more serious or complex instances of non-compliance. I obviously refer to the safeguards to protect against misuse of these penalties. A regulator will need to set out its case against the person subject to the sanction and be satisfied beyond reasonable doubt that an offence has been committed before it imposes a fixed monetary penalty. That is an important safeguard which has been talked about a lot this afternoon. There remains the need to be satisfied beyond reasonable doubt before a fixed monetary penalty can be imposed. The noble and learned Lord, Lord Lyell, asked about ““the grounds””. That refers both to the fixed monetary penalties and the discretionary penalties in this part of the Bill. It is an important question. The grounds for imposing the discretionary requirements—and this is also true for the fixed monetary penalties—should set out the main facts and matters relied upon by the regulator. It will set out the case against the business. We will discuss this in further detail later on. This may or may not be right—the noble and learned Lord will remember this—but there were cases in criminal courts where the grounds of the case were effectively set out in shorthand. The allegations were in a paragraph. I imagine it will be at that level, rather than anything more detailed, but certainly no less detailed. A business will, of course, have the opportunity to defend itself—as the noble Lord, Lord Goodlad, knows—by internal review of the decision to impose the penalty. Macrory himself said that internal review should be the first stage of the appeal process. The business can make representations and objections as part of this process. The regulator must withdraw the penalty if the business has satisfied the regulator that it has a defence. The regulator must also give reasons for its decision on internal review, ensuring some transparency and accountability of decision making. If the sanction is upheld and the business is still not content, it may appeal to an independent tribunal. I emphasise that that second limb of appeal is of considerable importance in establishing a safeguard for this penalty. I suspect that my next point will be met with a mixed reaction from the Committee. Any money from fixed monetary penalties received by a regulator must be paid into the Consolidated Fund and the regulator will not be able to recover its costs by imposing fixed monetary penalties. This will ensure, among other things, that there is no perverse financial incentive for regulators to impose fixed monetary penalties instead of other sanctions. Introducing a ““notice of intent”” stage—as the amendment does, as the noble Lord said in moving it—would undermine the usefulness of the sanction and add a layer of complexity disproportionate to the nature of the types of non-compliance it is designed to address. It should be remembered that there is an opportunity for business to make objections and representations. Adding a ““notice of intent”” stage is unnecessary given the safeguards that exist and the type of—using the broad phrase—offences that will have been committed. The amendments of the noble Viscount, Lord Colville, would remove the ““notice of intent”” stage from discretionary requirements. Discretionary requirements, unlike fixed monetary penalties, will be imposed following more serious and complex instances of regulatory non-compliance. The regulator will have more significant powers at its disposal and much more discretion in the level of penalty that it can set. In light of that, and as Professor Macrory recognised, the process for imposing these sanctions should be different from the fixed monetary penalty and a business should be given the opportunity to make objections and representations before the final notice is imposed. Following the issue of a notice of intent, the business may, for example, make submissions disputing the facts and evidence relied upon by the regulator. They may also make representations about the nature and detail of the requirement to be imposed upon them. It is also an opportunity for the business to offer enforcement undertakings or to volunteer action to benefit third parties affected by their non-compliance—the point that the noble Viscount was making—such as compensation to victims, so as to mitigate the sanction. It is therefore an integral part of the procedure for discretionary requirements. I make it clear that the ““notice of intent”” stage is not solely to allow business, to use the noble Viscount’s word, negotiate. It is to allow the business to make fundamental objections to the imposition of the sanction by arguing that it has a defence. It may also make representations about the nature of the discretionary requirement. Hopefully, this will allow a more consensual approach to enforcement. We think that there will be a consensual approach to fixed monetary penalties. In the real world, there will in many cases be conversations between the regulator and those who are regulated before a fixed monetary penalty emerges. It is not that the process will somehow become extraordinarily formal, but there is an advantage in swiftness in the kind of cases we are dealing with under fixed monetary penalties. However, the need for a notice of intent is, on balance, appropriate for the other discretionary elements of variable monetary penalties.