Helping you understand Welsh law

Case law on legislative competence

Status of Acts of the devolved legislatures

AXA General Insurance Ltd and others v Lord Advocate and others (Scotland) [2011] UKSC 46

Decision

An Act of the Scottish Parliament is in principle subject to judicial review, but may not be reviewed on the grounds of unreasonableness, irrationality and arbitrariness.

The Damages (Asbestos-related Conditions) (Scotland) Act 2009 (DACS 2009) is compatible with Article 1 to the 1st Protocol of the European Convention on Human Rights (A1P1), and is within the competence of the Scottish Parliament.

Background

The appellants were insurance companies who had underwritten employers’ liability insurance policies. They challenged the legality of DACS 2009, which provided that asymptomatic pleural plaques, pleural thickening, and asbestosis would constitute, and should be treated as having always constituted, actionable harm for which damages could be recovered by a personal injury claim. The Act would expose the appellants to multi-million pound liability. The appellants argued that, because pleural plaques etc. are symptomless and do not signal the onset of any asbestos-related disease:

(1)  the Act was incompatible with their A1P1 rights, and therefore outside the Scottish Parliament’s legislative competence, by virtue of section 29(2)(d) of the Scotland Act 1998; and

(2)  the Act constituted an irrational and arbitrary exercise of the Scottish Parliament’s legislative power, and was therefore sufficiently unreasonable to warrant the Court’s intervention under common law judicial review principles.

The Supreme Court’s approach

Issue (1) – compatibility with A1P1

The Court considered the appellants to be 'victims' and therefore able to challenge the Act’s compatibility with A1P1, as the Scottish Parliament had clearly contemplated, and intended, that they would bear the burden of future claims.

A1P1 was therefore engaged, because the money they would have to pay out was a “possession”. But it was within the national legislature’s margin of appreciation to decide that, on the basis that pleural plaques were generally the fault of an employer and caused considerable worry, the Act was necessary in the public interest.

The Act did not constitute a disproportionate interference with A1P1. Firstly, it was restricted to claims which were new, or which were not yet determined; and preserved all the other defences other than the single question of whether the plaques were actionable. Secondly, the appellants had accepted a risk, in entering into the long-term policies under which they would be liable, that unseen circumstances might occur which increased the burden of liability. Insurers had to “take the rough with the smooth”.

In conclusion, notwithstanding its retrospective effects, the Act struck a reasonable balance between the rights of insurers under A1P1 and the general public interest in compensating people suffering from pleural plaques. It was therefore compatible with A1P1, and within the Scottish Parliament’s legislative competence.

Issue (2) – judicial reviewability

In principle, Acts of the Scottish Parliament are subject to judicial review, as there is nothing in the Scotland Act 1998 which excludes this possibility. But the grounds on which an Act may be reviewed are limited, and do not include unreasonableness or irrationality, because:

“Law-making by a democratically elected legislature is the paradigm of a political activity, and the reasonableness of the resultant decisions is inevitably a matter of political judgment… it would not be constitutionally appropriate for the courts to review such decisions on the ground of irrationality. Such review would fail to recognise that courts and legislatures each have their own particular role to play in our constitution, and that each must be careful to respect the sphere of action of the other.”

The Court would however be prepared to review legislation which abrogated fundamental rights or violated the rule of law. Referring to Lord Hailsham’s concept of “elective dictatorship”, Lord Hope said:

“It is not entirely unthinkable that a government which has that power may seek to use it to abolish judicial review or to diminish the role of the courts in protecting the interests of the individual. Whether this is likely to happen is not the point. It is enough that it might conceivably do so. The rule of law requires that the judges must retain the power to insist that legislation of that extreme kind is not law which the courts will recognise.”

As there was no suggestion that the Scottish Parliament had acted in such a manner, and review on the grounds of irrationality was excluded, the common law challenge failed.

Comment

The case raised, as Lord Hope observed:

“…a matter of very great constitutional importance. It goes to the root of the relationship between the democratically elected legislatures and the judiciary.”

The Counsel General for Wales appeared on behalf of the First Minister, intervening to reject the argument that Acts of the devolved legislatures, including the National Assembly for Wales , could be struck down as unreasonable, irrational or arbitrary in the way that an Act of the Westminster Parliament cannot.

Although the Supreme Court did not deal specifically with the National Assembly’s position, Lord Hope reasoned that:

“The dominant characteristic of the Scottish Parliament is its firm rooting in the traditions of a universal democracy. It draws its strength from the electorate. While the judges, who are not elected, are best placed to protect the rights of the individual, including those who are ignored or despised by the majority, the elected members of a legislature of this kind are best placed to judge what is in the country's best interests as a whole. A sovereign Parliament is, according to the traditional view, immune from judicial scrutiny because it is protected by the principle of sovereignty. But it shares with the devolved legislatures, which are not sovereign, the advantages that flow from the depth and width of the experience of its elected members and the mandate that has been given to them by the electorate. This suggests that the judges should intervene, if at all, only in the most exceptional circumstances. As Lord Bingham of Cornhill said in R (Countryside Alliance) v Attorney General [2008] AC 719 , para 45, the democratic process is liable to be subverted if, on a question of political or moral judgment, opponents of an Act achieve through the courts what they could not achieve through Parliament.”

This reasoning would appear to extend, by implication, to the National Assembly.

The effect of the decision appears to be that an Act of the National Assembly is subject to judicial review only on the grounds that it is either:

(a) outside the Assembly’s legislative competence (including on grounds that it is incompatible with EU law, or with the European Convention on Human Rights); or

(b) that it abrogates fundamental common law rights, or violates the rule of law.

Section 1

Imperial Tobacco Ltd v Lord Advocate [2012] UKSC 61

Decision

Sections 1 and 9 of the Tobacco and Primary Medical Services (Scotland) Act 2010 (TPMS 2010) were within the legislative competence of the Scottish Parliament. They did not relate to 'the sale and supply of goods to consumers' nor to 'product safety', which are reserved (i.e. not devolved) under the Scotland Act 1998 (SA 1998).

Nor were sections 1 and 9 of the Act outside legislative competence on the basis that, by creating new offences which could only be committed in the course of the sale and supply of goods to consumers, they modified rules of Scottish criminal law as it applies to reserved matters.

Background

Section 1 of TPMS 2010 prohibits the display of tobacco products in a place where tobacco products are offered for sale.

Section 9 of TPMS 2010 prohibits vending machines for the sale of tobacco products.

The appellants, Imperial Tobacco, contended that those provisions were outside the Scottish Parliament’s legislative competence, on the grounds that they:

  • related to 'regulation of…the sale and supply of goods and services to consumers', a reserved matter by virtue of paragraph C7(a), Part 2 of Schedule 5 to SA 1998;
  • related to 'product standards, safety and liability', a reserved matter by virtue of paragraph C8, Part 2 of Schedule 5 to SA 1998; and/or
  • contrary to paragraph 2, Part 1 of Schedule 4 to SA 1998, sections 1 and 9 of TPMS 2010 modified rules of Scots criminal law relating to reserved matters, by creating new offences which can only be committed in the course of sale and supply of goods to consumers.

Key provisions of Scotland Act 1998

Section 29(2)(b) of SA 1998 provides that a provision is outside competence if it 'relates to reserved matters'.

That question, by virtue of section 29(3) of SA 1998, is to be determined:

"by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances."

Paragraph 2(1) of Schedule 4 to SA 1998 precludes the Scottish Parliament from modifying, or conferring the power by subordinate legislation to modify, the law on reserved matters. That rule must be read with paragraph 2(3), which states that sub-paragraph (1) applies to a rule of Scots private law or Scots criminal law only to the extent that the rule in question is special to a reserved matter.

The Supreme Court’s approach

Issue 1 – do the provisions relate to the sale and supply of goods to consumers?

Lord Hope considered that 'regulation of…the sale and supply of goods' had to be considered in the context of the 'consumer protection' heading under which it appeared in Schedule 5 to SA 1998.

While noting that the topic of consumer protection is 'ill-defined', the Court approached the interpretation of 'the sale and supply of goods to consumers' in context of what it regards as the common theme of the subjects reserved to the UK Parliament, which is:

"…that matters in which the United Kingdom as a whole has an interest should continue to be the responsibility of the United Kingdom Parliament at Westminster. They include matters which are affected by its treaty obligations and matters that are designed to ensure that there is a single market within the United Kingdom for the free movement of goods and services."

The Court took the view that consumer protection law was essentially about intervening to address inequality of bargaining power between suppliers and consumers, and that the key words in this formulation were 'regulation', 'protection' and 'consumer'. The word 'protection' pointed away from the appellants’ argument that the reserved matter is the regulation, in any way and for any purpose, of the sale and supply of goods to consumers.

In this context, the aim of section 1 of TPMS 2010 was to discourage or eliminate tobacco sales, not to regulate how those sales were conducted so as to protect the consumer from unfair practices. The terms and conditions of any sales that did take place were unaffected. Nor did section 9 of TPMS 2010 regulate anything of that kind, as, by prohibiting tobacco vending machines, there would be no sales from such machines to regulate.

Neither section 1 nor section 9 of TPMS 2010 therefore related to the reserved matter.

Issue 2 – do the provisions relate to product safety?

The Court found that sections 1 and 9 of TPMS 2010 were designed to promote public health, rather than to prohibit the supply of tobacco products generally, or to any particular class of people. Their purposes had nothing to do with the standards of safety to be observed in the production and sale of tobacco products where they are available for sale. Accordingly, sections 1 and 9 did not relate to the reserved matter.

Issue 3 – did the provisions modify Scots criminal law relating to reserved matters?

Sections 1 and 9 did not amend nor otherwise affect existing criminal offences relating to the safety of tobacco products, or information provided in respect of those products, where they remained available for sale. They did not therefore modify Scots criminal law in relation to the reserved matters, as interpreted in the context of issues (1) and (2).

The provisions were therefore within the competence of the Scottish Parliament.

Comment

Lord Hope set out three principles that should be followed when determining whether a provision of an Act of the Scottish Parliament – and, by implication, an Act of the National Assembly for Wales – is outside competence.

The question of competence must be determined according to the particular rules set out in the devolution Act. It is not for the Courts to decide whether legislation on a particular issue is better made by the devolved legislature, or at Westminster. In doing so, the Court must bear in mind that a provision may have a devolved purpose, and yet be outside competence because it contravenes one of the rules.

Those rules must be interpreted in the same way as rules in any other UK statute. The best way of ensuring that a coherent, stable and workable scheme of devolution is achieved is to adopt an approach to interpretation that is constant and predictable, i.e. by construing the legislation according to the ordinary meaning of the words used.

The description of a devolution Act as a constitutional statute cannot, in itself, be taken as a guide to its interpretation. But where help is needed as to what the words used in a devolution Act actually mean, it is proper to have regard to the Act’s purpose, which is to enable the devolved legislature to legislate effectively about those matters which were intended to be devolved, while ensuring that there are adequate safeguards for those matters intended to be reserved.

Lord Hope considered that the fact that section 29 of SA 1998 provides a mechanism for determining whether a provision of an Act of the Scottish Parliament is outside rather than inside competence does not create a presumption in favour of competence, but does demonstrate that SA 1998:

"…was intended, within carefully defined limits, to be a generous settlement of legislative authority."

Given the differences between the reserved powers model of devolution in Scotland and the conferred powers model in Wales, it is unclear to what extent this statement applies to the Government of Wales Act 2006.

Lord Hope said that where a provision is challenged on the basis that it relates to a reserved matter, it was necessary to identify its purpose, the clearest indication of which may be found in a report that gave rise to the legislation, or in a report from one of the legislature’s committees. It may also be clear from the provision’s context. This seems to indicate that such reports will be relevant and admissible evidence in proceedings where legislative competence is disputed.

Lord Hope’s interpretation of 'relates to' as implying 'something more than a loose or consequential connection' is relevant to the test under section 108(4)(a) of the Government of Wales Act 2006 for determining whether a provision is, on the face of it, within the National Assembly’s legislative competence.

Section 2

Attorney General v National Assembly for Wales Commission [2012] UKSC 53

Decision

On a reference made by the Attorney General under section 112 of the Government of Wales Act 2006 (GOWA 2006), the Supreme Court held unanimously that the removal of the Secretary of State’s confirmatory functions in respect of byelaws by sections 6 and 9 of the Local Government (Byelaws) Wales Bill (the Bill) was within the legislative competence of the National Assembly for Wales.

Background

This was the first Bill to be passed by the National Assembly since Part 4 of GOWA 2006 came into force. Its purpose was to simplify procedures for making and enforcing local authority byelaws in Wales. Section 6 of the Bill would remove the need for either the Welsh Ministers or the Secretary of State to confirm byelaws made under specific enactments listed in Part 1 of Schedule 1 to the Bill ('the scheduled enactments'). Section 9 of the Bill would empower the Welsh Ministers to vary the list of scheduled enactments.

Section 236(11) of the Local Government Act 1972 (LGA 1972) provided that, where a statutory provision giving a local authority the power to make a byelaw either so provided, or was silent as to the identity of a confirmatory authority or person, the Secretary of State had to confirm the byelaw in order for it to be effective. The Secretary of State’s functions under that section were exercisable concurrently with the National Assembly, by virtue of the National Assembly for Wales (Transfer of Functions) Order 1999.

While the Secretary of State was prepared to consent to the removal of her confirmatory function in respect of the scheduled enactments, and on that basis to agree to the inclusion of section 6 in the Bill, she was not prepared to consent to the inclusion of section 9. The National Assembly passed the Bill with sections 6 and 9 in their original form. The Attorney General referred to the Supreme Court the question whether sections 6 and 9 were outside the National Assembly’s legislative competence.

GOWA 2006: key provisions

Under section 108(6) of and paragraph 1, Part 2 of Schedule 7 to GOWA 2006, a provision of an Act of the National Assembly is outside legislative competence if it removes or modifies, or confers power by subordinate legislation to remove or modify, any pre-commencement function of a Minister of the Crown.

Paragraph 6(1) of Part 3 of Schedule 7 to GOWA 2006 provides an exception to this rule where the Secretary of State consents to the provision, or if the provision is incidental to, or consequential on, any other provision contained in the Act of the Assembly ('the exception').

The Supreme Court’s approach

On a preliminary point, the Court distinguished a 'concurrent' function from a 'joint' function, holding that the confirmatory function under section 236(11) of LGA 1972 could be exercised by either the Secretary of State or the Welsh Ministers in any particular case (i.e. concurrently).

The Bill sought to remove that function from the Secretary of State (as well as from the Welsh Ministers). The central issue was therefore whether sections 6 and 9 could be said to fall within the National Assembly’s legislative competence on the basis that, pursuant to the exception, they were 'incidental to, or consequential on' any other provision contained in the Bill.

Lord Neuberger approached that issue on the basis that:

“The answer to the question whether a particular provision in an enactment is ‘incidental to, or consequential on’ another provision, obviously turns on the facts of the particular case. The answer may to some extent be a question of fact and degree, and it should turn on substance rather than form, although, of course, in any well drafted Bill, the substance will be reflected in the form, at least in relation to that sort of question”.

In this case, Lord Neuberger considered that the streamlining and modernising purpose of the Bill would be undermined if the Secretary of State’s confirmatory function was retained. The Secretary of State’s function under section 236(11) LGA was really a default function, and therefore not an 'important' function. On the basis that, since the National Assembly for Wales (Transfer of Functions) Order 1999 came into force, it had always been the Welsh Ministers, rather than the Secretary of State, who had exercised that function in relation to the scheduled enactments:

“….it would be positively perverse if the Secretary of State should retain the confirmatory function when the Welsh Ministers have disclaimed their confirmatory function.”

Lord Neuberger also considered it important to reach a conclusion that gave the exception some real effect; and that it would be difficult to think of circumstances in which it would have effect if it did not apply to section 6 of the Bill.

Turning to section 9 of the Bill, the apparently wide discretionary power it gave the Welsh Ministers to add to the list of scheduled enactments had to be interpreted as narrowly as required for it to be within competence, in accordance with section 154(2) of GOWA 2006. The extent to which that power could be used to remove the Secretary of State’s confirmatory function in relation to byelaws made under other enactments was therefore limited to cases falling within the exception; and, on that basis, section 9 was also within the National Assembly’s legislative competence.

Lord Hope concurred with Lord Neuberger, commenting that the 'incidental…or consequential' exception points to an interpretative exercise of comparison:

“If the removal has an end and purpose of its own, that will be one thing. It will be outside competence. If its purpose or effect is merely subsidiary to something else in the Act, and its consequence when it is put into effect can be seen to be minor or unimportant in the context of the Act as a whole, that will be another. It can then be regarded as merely incidental to, or consequential on, the purpose that the Bill seeks to achieve.”

Lord Hope added the following general observation about the Court’s approach to issues about the National Assembly’s legislative competence:

“…the task of the United Kingdom Parliament in relation to Wales was to define the legislative competence of the Assembly, while itself continuing as the sovereign legislature of the United Kingdom. It had to define, necessarily in fairly general and abstract terms, permitted or prohibited areas of legislative activity. The aim was to achieve a constitutional settlement, the terms of which the 2006 Act was designed to set out. Reference was made in the course of argument in the present case to the fact that the 2006 Act was a constitutional enactment…I do not think that this description, in itself, can be taken to be a guide to its interpretation. The rules to which the court must apply in order to give effect to it are those laid down by the statute, and the statute must be interpreted like any other statute. But the purpose of the Act has informed the statutory language, and it is proper to have regard to it if help is needed as to what the words mean.”

On a procedural point, the Court observed that where the Attorney General refers a National Assembly Bill to the Supreme Court, the reference should be served on the Counsel General for Wales, who has an interest in the proceedings, rather than on the National Assembly, which is not a 'relevant officer' within rule 3(2) of the Supreme Court Rules 2009 (SI 2009/1603) and Practice Direction 10.

Comment

Lord Hope referred to the case as a 'significant event in Welsh law', as the Bill was the first to have been passed by the National Assembly.

This was also the first Attorney General’s reference to be considered by the Supreme Court, and as Baroness Hale has remarked , the first case of 'pure constitutional review'  in which the Court has been required to rule upon the validity of an Act of a devolved legislature in the abstract.

Section 3

Re Agricultural Sector (Wales) Bill [2014] UKSC 43

Decision

On a reference made by the Attorney General under section 112(1) of the Government of Wales Act 2006 (GOWA 2006), the Supreme Court held unanimously that the Agricultural Sector (Wales) Bill (the Bill) was within the legislative competence of the National Assembly for Wales.

Under sections 108(4) and (7) of GOWA 2006, the National Assembly would have legislative competence if the Bill fairly and realistically relates to one or more of the subjects listed in Part 1 of Schedule 7 to GOWA 2006, and is not within one of the exceptions. It does not matter whether in principle it might also be capable of being classified as relating to a subject which is not listed in Part 1 of Schedule 7 to GOWA 2006. GOWA 2006 does not require that a provision should only be capable of being characterised as relating to a devolved subject.

Background

The Bill was passed by the National Assembly on 17 July 2013 primarily to establish a scheme for the regulation of wages in the agricultural sector in Wales.

Prior to 2013, the Agricultural Wages Act 1948 had provided a scheme for regulation of agricultural wages in England and Wales by the Agricultural Wages Board. That Board was abolished by section 72 of the Enterprise and Regulatory Reform Act 2013. The National Assembly sought to retain a scheme for the regulation of agricultural wages in Wales, via the Bill’s creation of an Agricultural Advisory Panel.

The Attorney General challenged the legality of the Bill, arguing that the real purpose of the provisions in the Bill about regulation of agricultural wages related to employment, which was not a devolved subject listed in Part 1 of Schedule 7 to GOWA 2006; and that the Bill was therefore outside the National Assembly’s legislative competence.

GOWA 2006: key provisions

Under section 108(4) of GOWA 2006, a provision of an Act of the National Assembly falls within the National Assembly’s legislative competence if:

“(a) it relates to one or more of the subjects listed under any of the headings in Part 1 of Schedule 7 and does not fall within any of the exceptions specified in that Part of that Schedule (whether or not under that heading or any of those headings), and

(b) it neither applies otherwise than in relation to Wales nor confers, imposes, modifies or removes (or gives power to confer, modify or remove) functions exercisable otherwise than in relation to Wales.”

Section 108(7) provides that:

“For the purposes of this section the question whether a provision of an Act of the Assembly relates to one or more of the subjects listed in Part 1 of Schedule 7 (or falls within any of the exceptions specified in that Part of that Schedule) is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.”

The subjects listed in Part 1 of Schedule 7 on which the National Assembly placed reliance for its legislative competence are:

  • Agriculture
  • Horticulture
  • Forestry
  • Fisheries and fishing
  • Animal health and welfare
  • Plant health
  • Plant varieties and seeds
  • Rural development.

The Supreme Court’s approach

The Court’s judgment is set out in a joint opinion of Lord Reed and Lord Thomas (with which Lord Neuberger, Lady Hale and Lord Kerr agreed).

The Court restated the principles it had set out in the Local Government (Byelaws) (Wales) Bill case as to the approach to be adopted to the proper interpretation of GOWA 2006, i.e.:

“i) The question whether a provision is outside the competence of the Assembly must be determined according to the particular rules that s.108 of, and Sch 7 to, [GOWA 2006] have laid down…

ii) The description of [GOWA] as an Act of great constitutional significance cannot be taken, in itself, to be a guide to its interpretation. The statute must be interpreted in the same way as any other statute…

iii) When enacting [GOWA] Parliament had to define, necessarily in fairly general and abstract terms, permitted or prohibited areas of legislative activity. The aim was to achieve a constitutional settlement. It is proper to have regard to that purpose if help is needed as to what the words mean…”

In this particular case, the first issue to determine was the meaning of 'Agriculture' as set out in paragraph 1 of Schedule 7 to GOWA 2006. On that point, the Court found that:

“This is not…a case in which the court has to turn to a dictionary in order to find out the meaning of an unfamiliar word. The problem is to decide what Parliament meant by the subject of “Agriculture” in this specific context: in particular, in the context of other subjects listed in the schedule. Each is intended to designate a subject-matter which is the object of legislative activity. In this context, it is clear to us that agriculture cannot be intended to refer solely to the cultivation of the soil or the rearing of livestock, but should be understood in a broader sense as designating the industry or economic activity of agriculture in all its aspects, including the business or other constituent elements of that industry, as it is to that broader subject matter that legislative activity is directed.”

On that point, the Court noted that the Legislative Competence Order which had inserted Matter 1.1 into the 'Agriculture, fisheries, forestry and rural development' field in Schedule 5 to GOWA 2006, allowing the National Assembly to make Measures about the marketing and provision of services by the red meat industry in Wales, appeared to have been based on a similarly broad understanding of the term 'agriculture'.

The Court next considered whether the Bill 'relates to' agriculture. Its view of section 108(7) of GOWA 2006 was that:

“As the section requires the purpose of the provision to be examined it is necessary to look not merely at what can be discerned from an objective consideration of the effect of its terms. The clearest indication of its purpose may be found in a report that gave rise to the legislation, or in the report of an Assembly committee; or its purpose may be clear from its context…”

"It was clear to the Court from the Welsh Government’s consultation process  that led to the Bill that the Bill’s purpose was to regulate agricultural wages and other terms and conditions of agricultural employment so that the agricultural industry in Wales would be supported and protected. The Court found that the legal and practical effects of the Bill were consistent with that purpose, and that 'the Bill is aptly classified as relating to agriculture." 

In considering whether the Bill also relates to other subjects, the Court accepted the Attorney General’s submissions that the Bill might in principle be characterised as relating to 'employment' and 'industrial relations', neither of which is listed in Part 1 of Schedule 7 to GOWA 2006 as a subject in relation to which the National Assembly has legislative competence.

The Court noted, however, that neither 'employment' nor 'industrial relations' is specified anywhere in GOWA 2006 as a general exception to the National Assembly’s legislative competence. The fact that particular aspects of employment and industrial relations, such as occupational and personal pension schemes (including schemes which make provision for loss of office or employment)  are specified as exceptions suggested to the Court that there was no intention to create a more general limitation on legislative competence.

Acknowledging that there may be more than one way in which the purpose and effect of a Bill may be characterised, the Court concluded that:

“Provided that the Bill fairly and realistically satisfies the test set out in s108(4) and (7) and is not within an exception, it does not matter whether in principle it might also be capable of being classified as relating to a subject which is not listed in Part 1 of Schedule 7 of GOWA. The legislation does not require that a provision should only be capable of being characterised as relating to a devolved subject.”

It followed that, as the Bill relates to agriculture, it is within the legislative competence of the National Assembly.

Comment

In this case, the Attorney General sought to rely on a statement, made by the Parliamentary Under-Secretary of State for Wales in a Parliamentary debate  on the Bill that became GOWA 2006, that the purpose of the Bill was not to 'broaden devolution', but to 'deepen' it. The same phrase was used by the Minister during a debate on the Bill in the House of Lords. The Court did not think that 'such a general and ambiguous phrase can properly be of any assistance in the interpretation of [GOWA 2006]'.

The Attorney General also sought to rely on correspondence between the Wales Office, the Welsh Government and Parliamentary Counsel in October and November 2005, prior to the introduction into Parliament of the Bill that became GOWA 2006.

The Court noted that the correspondence was never referred to in Parliament, nor had it been disclosed to Parliament or made public. The Court therefore took the view that:

“…it would be wholly inconsistent with the transparent and open democratic process under which Parliament enacts legislation to take into account matters that have passed in private between two departments of the Executive or between the Executive of the UK and a devolved Executive. We therefore refused in the hearing of the reference to admit correspondence.”

Section 4

Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3

Decision

On a reference to the Supreme Court made by the Counsel General under section 112 of the Government of Wales Act 2006 (GOWA 2006), the Supreme Court held unanimously that the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill, in its present form, was not within the legislative competence of the National Assembly for Wales.

A majority of the Court (Lord Neuberger, Lord Mance and Lord Hodge) held that provisions of the Bill which sought to do the following, did not relate to a subject in Schedule 7 to GOWA 2006:

  • To require persons compensating victims of asbestos-related diseases to reimburse the Welsh Government for the cost of NHS services provided to the victim (after the date the Bill came into force) as a result of the disease, and
  • To extend compensators’ insurance policies to cover the liability to reimburse the Welsh Government for those NHS costs.

Furthermore, the majority considered the provisions to be incompatible with the rights of compensators and insurers under article 1 of Protocol 1 of the European Convention on Human Rights to the peaceful enjoyment of their possessions (“A1P1”).

Lord Thomas and Lady Hale agreed with the majority that the provision seeking to extend insurance policies, as drafted, was incompatible with A1P1. Its effect was to retrospectively extend or override the provisions of existing insurance policies. This did not strike a fair balance between the property interests of insurers and the benefits to be achieved through the Bill.

However, Lord Thomas and Lady Hale considered that the requirement on compensators to reimburse NHS costs was compatible with A1P1, and that the Bill’s provisions related to a subject in Schedule 7 to GOWA 2006.

Background

The Bill was passed by the National Assembly on 20 November 2013.

Section 2 of the Bill sought to require persons by whom, or on whose behalf, compensation payments are made to victims of asbestos-related diseases (compensators), to reimburse the Welsh Government for the cost of NHS services provided to the victim (after the date the Bill came into force) as a result of the disease.

Where the liability of the compensator toward the victim would be covered to any extent by an insurance policy, section 14 of the Bill sought to extend the insurance policy so that it would also cover the liability under section 2 to reimburse the Welsh Government for the NHS costs.

The liability to reimburse the Welsh Government for NHS costs would apply only in respect of compensation payments made after the coming into force of the Bill.

However, the Bill involved a degree of retrospectivity (ie., it would have had an effect in respect of things done before it came into force).  In many cases, the compensation payment would be made in respect of diseases caused before the Bill came into force, and the insurance policies extended by the Bill would have been entered into before the Bill came into force.

The intention behind the Bill was to make those responsible for asbestos-related diseases also responsible for the NHS costs incurred in treating victims (after the coming into force of the Bill), rather than the treatment being funded out of public money.

Section 15 of the Bill provided that the Welsh Ministers must, in organising  the NHS in Wales, have regard to the desirability of securing that the NHS costs recovered under the Bill be used for,research into, the treatment of or services relating to, asbestos-related diseases. 

GOWA 2006 : Key Provisions

Under section 108(4) of GOWA 2006, a provision of an Act of the National Assembly falls within the National Assembly’s legislative competence if:

“(a) it relates to one or more of the subjects listed under any of the headings in Part 1 of Schedule 7 and does not fall within any of the exceptions specified in that Part of that Schedule (whether or not under that heading or any of those headings), and
(b) it neither applies otherwise than in relation to Wales nor confers, imposes, modifies or removes (or gives power to confer, modify or remove) functions exercisable otherwise than in relation to Wales.”

However, under section 108(6)(c), even if a provision falls within section 108 (4) (or section 108(5)), it is still outside the Assembly's legislative competence if it is incompatible with the rights in the European Convention on Human Rights.

Section 108(7) provides that:

“For the purposes of this section the question whether a provision of an Act of the Assembly relates to one or more of the subjects listed in Part 1 of Schedule 7 (or falls within any of the exceptions specified in that Part of that Schedule) is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.”

The National Assembly relied for legislative competence on subjects which appear in paragraph 9 of Part 1 of Schedule 7 to GOWA 2006, under the heading “Health and Health Services”. In particular these include:

“Prevention, treatment and alleviation of disease, illness, injury, disability and mental disorder”, and “Organisation and funding of national health service”.

The Supreme Court’s approach

Issue 1 : Whether the Bill “related to” a subject in Schedule 7

The majority of the Supreme Court considered that the critical subject was “Organisation and funding of national health service”, but found that the Bill was not sufficiently “related to” that subject to be within competence.

It was common ground that general fiscal powers were not devolved to Wales, but the majority of the Court were prepared to approach the case on the assumption (without deciding) that “Organisation and funding of national health service” was capable of covering, to some extent, the raising of funding for the NHS, for example by imposing charges for services.

However, such charges would have to be more directly connected with the service provided and its funding. The mere purpose and effect of raising money which can or will be used to cover part of the costs of the Welsh NHS could not constitute a sufficiently close connection. “Organisation and funding of national health service cannot permit the Assembly to raise money generally.”

The charges provided for by the Bill were to be imposed on compensators and insurers rather than patients and lack any direct or close connection with the provision of Welsh NHS services. The Bill sought to impose what are in effect new tortious or statutory duties on third parties to pay for NHS treatment.

Lord Thomas and Lady Hale considered that the subject of “Organisation and funding of national health service” had the meaning of raising funds for the Welsh NHS by, for example, charging for the services it provides.
Therefore, it would have been within the Assembly’s legislative competence to charge victims of asbestos-related diseases for NHS services they received. On ordinary principles, victims would then have been able to recover those charges from compensators as damages. That would have achieved the Bill’s aim of making those responsible for causing asbestos-related diseases bear the costs of treating victims, rather than public funds.  
Accordingly, in seeking to recover NHS costs directly from compensators (as opposed to charging victims who would then recover the charges as damages), the Bill was doing no more than providing more effective machinery to recover the costs of medical care from those who had caused asbestos-related diseases. It was within the Assembly’s legislative competence to do that.

Issue 2 : Compatibility with the ECHR

The Court was in agreement on the general principles which should be applied in deciding whether there was a breach of A1P1. Any interference with the peaceful enjoyment of possessions must strike a fair balance between the demands of the public or general interest of the community, and the protection of the individual’s fundamental rights. In the case of legislation which has a retrospective effect on property interests, as this Bill would, “special justification” would be required before the Court would accept that a fair balance had been struck. 

The majority of the Supreme Court decided that the Bill would interfere with the A1P1 rights of compensators and insurers. Both would be affected and potentially deprived of their possessions, in that the Bill would alter their otherwise existing legal liabilities and impose on them potentially increased financial burdens “arising from events long-past and policies made long ago”.

The majority judgment of the Court did not accept that special justification existed for the Bill. Lord Mance said:

“65. Although the Bill would either save the Welsh Ministers money or add to their resources, it is not shown that it would achieve a directly applicable or compelling social or economic interest comparable with those involved in these previous cases. Section 15 of the Bill contains the specific enjoinder that the Ministers should have regard to the “desirability” of equivalent sums being made available for “research into, treatment of or other services relating to asbestos-related diseases”, but it is not shown that any such sums so expended would add to existing sums already being spent in these areas, or resolve any exceptional social or economic problem. It is common knowledge that the funding of the National Health Service is under increasing strain throughout the United Kingdom, and it may be so even more in Wales than elsewhere, but that is a different level of general problem to any shown on the authorities to be relevant in the present context.”

Lord Thomas and Lady Hale considered that the interference of the Bill with the A1P1 rights of compensators struck a fair balance between those rights and the economic and social purpose of funding Welsh NHS services for asbestos victims.

Lord Thomas’ reasoning was that the Assembly’s legislative competence would have allowed the Bill to impose charges for NHS services on victims treated for asbestos- related diseases. If that had been case, victims would have been able to recover those charges from their compensators, and insurers would normally have been liable under the ordinary form of policy to indemnify compensators for the NHS charges reimbursed to the victims. There would have been no need for the legislation to amend any insurance policy as it would have had to indemnify compensators on its existing terms.

The payments would be in respect of a recognised head of damage caused by an asbestos-related disease for which liability under the existing law had been incurred – namely medical treatment and care.

Neither those responsible for asbestos-related diseases, nor their insurers, had any legitimate expectation giving rise to a legal right that medical treatment for victims would always be provided free by the State. The legislature is entitled to change the policy on charging and withdraw free treatment.

In Lord Thomas’ view, in seeking to recover NHS costs directly from compensators, the Bill was doing no more than providing more effective machinery to recover the medical costs for which compensators would have been liable as part of the ordinary measure of damages.

The Assembly had decided that those who were responsible for asbestos-related diseases, rather than public funds, should bear the costs of treating the victims..The assessment of the overall public good in charging for such costs, and the machinery employed, were matters on which it was for the National Assembly to make the choice and judgment.

Lord Thomas considered that there was no excessive burden for compensators to bear as a result of the machinery chosen by the National Assembly of imposing liability directly upon them. He thought that, weighing up the detriment to the property interests of compensators, and the public interest and the benefits to be derived from the Bill, a fair and proper balance had been struck, and the necessary “special justification” had been established. 

As regards the position of insurers, if the effect of the Bill had been to impose charges on victims, which they would have recovered from compensators, who would in turn have been indemnified by their insurers on the existing terms of their policies in the ordinary way, Lord Thomas considered that a fair balance would have been achieved between insurers’ property interests and the benefits to be derived from the Bill.

However, section 14 extended insurance policies beyond the cover they would have had to provide to compensators if the Bill had imposed charges on victims. It had the effect of retrospectively extending policies to cover all NHS costs claimed under the Bill, irrespective of the provisions of the policy, such as policy limits. Lord Thomas did not consider that there was any justification for such a provision; therefore it was incompatible with A1P1.

Comment

There was some discussion in the case about the respective roles of the courts and legislatures in relation to deciding compatibility with A1P1. 

As mentioned above, the Supreme Court agreed unanimously that any interference with the peaceful enjoyment of possessions must strike a fair balance between the demands of the public or general interest of the community, and the protection of the individual’s fundamental rights.

The Court agreed that significant respect may be due to the legislature’s decision on what was in the public or general interest, but it was for the Court to weigh the benefits of the legislation, in terms of the aim it promoted, against the “disbenefits to other interests”.

The Court also agreed unanimously that weight should be given to the judgment of the National Assembly in deciding to pass the Bill, but Lord Mance and Lord Thomas differed as to the degree of weight to be attached.
Lord Mance, giving the majority judgment, questioned whether the National Assembly had fully considered the retrospective implications of the Bill, as it appeared that the Bill had been seen as a mere extension in degree of a principle which had been accepted by the UK Parliament in the Health and Social Care (Community Health and Standards) Act 2003. Lord Mance considered that there was a real and substantial difference between the aim and effect of that Act, and the Bill.

Lord Mance said that if the Bill had been put before and passed by the Assembly on the basis of an analogy or precedent which did not apply, the same assistance could not be obtained from the legislature’s judgment as might otherwise be the case.

However, Lord Mance said he would have arrived at the same conclusion on the fair balance of the general interest and property interests “even if the background to the Bill had consisted of a full presentation and appreciation of its implications by those responsible for promoting and passing the legislation”.

Lord Thomas said that he would attach “great weight” to the judgment of the National Assembly, particularly where the judgment was made on matters of social and economic policy.

Lord Mance had touched briefly on the question of whether, when a Court was attaching weight to a legislative choice for the purposes of carrying out a balancing exercise, a distinction should be made between primary legislation of the UK Parliament and other legislative decisions. This was because Article 9 of the Bill of Rights 1688 provides that proceedings in Parliament must not be impeached or questioned in any Court or place out of Parliament. However, Lord Mance thought it unnecessary to go into this question for the purposes of the case.

Lord Thomas said he would find it difficult to make any logical distinction between the UK Parliament and the devolved legislatures in terms of the weight to be accorded to the judgments they had made. He said he could not see in principle why the UK Parliament in making legislative choices for England on matters such as NHS funding, should be accorded a greater status than was accorded to the devolved legislatures in making choices for Scotland, Northern Ireland or Wales.  

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