UK: The Impact Of The Human Rights Act 1998 On Commercial Practice

The Human Rights Act 1998 ("HRA" and the "Act") came into force across the UK on 2^nd October 2000 and has directly incorporated the European Convention on Human Rights (the "Convention") into domestic law.

As from 2^nd October 2000 individuals (which includes legal entities in most cases) have been able to rely on Convention rights both as a sword (i.e. by bringing an action for breach of Convention rights protected by the Act) and as a shield (i.e. by using Convention issues as a defence to proceedings).

Significantly in the corporate context the HRA:

• Protects companies from misuse of state and public authority power;
• Means taking a case to the European Court of Human Rights in Strasbourg will be a last resort, should the domestic courts fail to provide a remedy, or if they declare a statute to be incompatible with the Convention and the government takes no remedial action to correct this;
• Imposes obligations on companies in a broad range of activities;
• Has vertical effect. This allows individuals to bring proceedings against public authorities;
• May have horizontal effect, allowing individuals and companies to invoke Convention rights against one another as well as against public authorities. The courts have yet to resolve this debate other than in respect of protecting freedom of expression. In the dispute between Hello magazine and Michael Douglas/ Catherine Zeta-Jones it was recognised that the HRA may be relied on by an individual as against another individual to protect freedom of expression in the context of the grant of a court injunction to prevent publication.

• s2 HRA requires domestic courts and tribunals to take into account, although not necessarily to follow, the decisions and opinions of the European Court of Human Rights.
• s3 HRA requires primary and secondary legislation to be interpreted in a way which is compatible with the Convention so far as is possible. Only as a last resort should the courts conclude that legislation is incompatible with the Convention.
• s4 HRA allows the High Court or above to make a declaration of incompatibility where a provision of domestic legislation is found to be incompatible with a Convention right. A declaration will not affect the validity, continued operation or enforcement of the statute in respect of which it is made. Under s10 HRA incompatible legislation can be quickly amended to bring the law into line with the Convention.
• s6 HRA renders it unlawful for a public authority to act in a way which is incompatible with a Convention right. A public authority includes a court or tribunal and any organisation whose functions are of a public nature.
• s7 HRA ensures that only those who are victims may bring an action under the HRA.
• Proceedings commenced under the HRA must be brought within one year of the alleged infringement taking place (s7(5) HRA), although the court or tribunal can exercise its discretion to hear a case after one year if it is regarded as equitable to do so. The one year limitation period is subject to any rule imposing a more restrictive time limit in relation to the relevant procedure, e.g. judicial review cases must be commenced within three months of the act which is the subject of the review.
• Where a court or tribunal finds that an act or proposed act of a public authority infringes a Convention right it may grant any relief, remedy or order which is within its power.

The courts have made one declaration of incompatibility relevant in the commercial context. In Wilson v First County Trust [2001] 2 WLR 302 the Court of Appeal declared that the relevant part of the Consumer Credit Act 1974 which renders unenforceable contracts which do not comply with specifically prescribed conditions was incompatible with the Convention. It represented a disproportionate restriction on a lender’s right to have an agreement enforced by a court such that it was incompatible with Convention fair trial rights and the lender’s property rights under Article 1 of the First Protocol to the Convention which guarantees peaceful enjoyment of possessions.

Regulatory authorities constitute public authorities for the purposes of the HRA and so must act in a manner compatible with the Convention. The HRA has been used to make a series of challenges to the regulatory and disciplinary functions of regulators. These challenges have largely revolved around whether disciplinary measures taken by regulators amount to criminal proceedings such that the right to a fair trial enshrined in the Convention is applicable.

In R v SFA and the Disciplinary Appeal Tribunal of the SFA, ex p Fleurose (unreported, April 2001) city trader Bertrand Fleurose sought judicial review of an SFA finding that he was guilty of misconduct. He claimed that the disciplinary proceedings against him were criminal charges under the HRA and that he was therefore entitled to extra protections, including privilege against self-incrimination and free legal representation. In addition, he claimed that the charges against him were vague and thereby contravened the principle of legal certainty contained in the Convention.

The High Court held that such disciplinary proceedings were a civil matter as they could only be imposed on a particular class of individuals and so rejected the application of Mr. Fleurose. The court did note, however, that procedures in some disciplinary cases may be so similar to criminal proceedings as to require criminal procedural protections.

The major impact of this decision may be to confirm the view that the civil offence of market abuse contained in the new Financial Services and Markets Act 2000 may be classified as criminal for the purposes of the HRA, thereby giving rise to more stringent procedural requirements (e.g. the right to free legal representation, presumption of innocence, privilege against self-incrimination). Although amendments have been made to the legislation to reflect human rights concerns, the market abuse offence has been criticised for being vague and may be subject to challenge on the grounds of being insufficiently certain to meet the requirement of legal certainty required by the Convention.

The Competition Act 1998 may also fall within the ambit of the HRA. The European Court of Human Rights and the European Commission have already found that punishments imposed for breach of regulations concerning price-fixing and competition in tendering for contracts were criminal for the purposes of the Convention.

However it has been held that a regulator’s conduct committee need not fully comply with the fair trial requirements of the Convention provided a right of appeal from its decision exists to a court or tribunal which will or must comply with the fair trial requirement. The House of Lords has found that the privilege against self-incrimination guaranteed by Article 6 does not entitle a person being investigated by a regulator to refuse to provide information. The privilege does, however, still restrict the use of such information in any criminal proceedings which may then arise from the investigation. Thus there is a clear indication that while the courts will not apply the HRA indiscriminately to undermine the initial stages of a regulator’s investigation, subsequent criminal proceedings may be vulnerable to HRA arguments.

There is little relevant case law in this area to date. However, it is expected that employees will bring claims against employers using human rights grounds alleging, for example, violation of the right to respect for private life (Article 8), of the guarantee of thought, conscience and religion (Article 9) and of the right of freedom of expression (Article 10). These claims may arise from the monitoring of e-mails, internet use and telephone calls, dress codes and forced working over religious festivals.

There is substantial scope for conflict with existing domestic laws such as the Telecommunications (Lawful Business Practice) (Interception of Communications) Regulations 2000. These allow businesses to monitor telecommunications for certain purposes, including the detection of unauthorised use of the system, the protection of national security, the prevention or detection of crime and in order to establish compliance with regulatory or self-regulatory procedures. Interception is only authorised where it is effected in the course of business, where the telecommunications system is provided wholly or partly in connection with that business and if the person making the interception has made all reasonable efforts to inform all parties to the communication that it may be intercepted or where he has reasonable grounds to believe that such a person is aware that it may be intercepted. Employees may counter argue that any surveillance or interception is a violation of the right to respect for private life and of the right of freedom of expression.

These actions under the HRA may be brought both where the employer is a public authority and, due to the apparent principle of horizontal effect, also against private employers.

The courts have confirmed that the civil penalties imposed for VAT evasion constitute criminal proceedings under the HRA with the consequence that the defendant is entitled to the protection of the relevant Convention provisions. However, an appeal against the determination process of the Inland Revenue Special Commissioners regarding a decision made under the Taxes Management Act 1970 has been found not to fall within the Article 6 right to a fair trial.

The right to privacy enshrined in Article 8 of the Convention has been applied by the courts with some flexibility to commercial issues.

In Secretary of State for Trade and Industry v Crouch and another (unreported) a director used his right to privacy to obtain a stay of an order requiring production of documents in connection with an alleged sale at an undervalue whilst subject to disqualification proceedings.

It should also be expected that companies will attempt to use the HRA against the powers of regulators, in particular the search and seizure powers of the OFT under the Competition Act 1998, arguing that such process violates the right to respect for private life.

However, the courts are prepared to observe a limit to the application of Article 8. The Court of Appeal recently upheld a decision that the requirement under s20(1) Taxes Management Act 1970 for a company to produce documents that were subject to legal professional privilege did not breach Article 8. Although it was recognised that the requirement interfered with the company’s privacy, it was also found that this interference was justified in the interests of the economic well being of the country.

Communication of commercial information is protected by the Article 10 guarantee of freedom of expression. Claims on this ground may be expected from advertisers and intellectual property rights holders where, for example, advertisements (in whatever medium) are prevented on grounds of public decency. Importantly it has been found that the guarantee of freedom of expression cannot provide a valid defence in a claim for infringement of copyright.

The courts have demonstrated an enthusiasm for interpreting the HRA in a flexible manner in the commercial context and the limits of its application will continue to be tested. As the boundaries of the HRA are explored, it seems certain that the developing body of both domestic and European human rights law will begin to impact further upon commercial practice, in particular as litigants continue to adopt human rights arguments and as the extent of the HRA’s horizontal effect is fully determined.