European law to reform UK business rules

Britain’s new Human Rights Act will change centuries of British legal theory by gradually incorporating into British law the 1949 European Convention on Human Rights (ECHR).

The likely effects on British commercial and corporate law are not yet clear.

The Convention is applied in the European Court of Human Rights, and is resorted to by British or other European applicants when fundamental rights are allegedly infringed and appeals in domestic law have been exhausted.

In 1996 the Court ruled that the British trial of Ernest Saunders, chief executive of Guinness, on financial charges was unfair. The Court’s reason was the use of pre-trial evidence given by Saunders in 1990 to British Board of Trade inspectors without the right of silence.

The Court has no power to impose decisions and can embarrass governments and defendants but not coerce them.

Neither is this system part of the EU. The ECHR and the Court are separate from the EU, and the only connection is an EU agreement which states that the ECHR will be “respected”. This is unenforceable and thus virtually meaningless.

The UN has a similar document to the ECHR called the International Covenant on Civil and Political Rights (ICCPR). This is part of public international law and all nations which have signed it are supposed to abide by it.

In reality, it is unenforceable and only resorted to for political reasons such as the present war crimes tribunals in the former Yugoslavia. It has no place in British law.

The Human Rights Act recently passed by Blair’s government takes the important step of gradually incorporating ECHR into English law.

This means that instead of going to a powerless court staffed by foreign judges in a process that can take up to ten years, UK citizens will be able to ask their own High Court judges to decide if the Convention has been breached.

Although judges will lack the power to contradict parliament’s wishes, they have the power to interpret all laws in line with the ECHR and indicate those Acts of parliament that conflict with it.

The judicial tradition in England suggests that judges will not hesitate to criticise government if they have the authority to do so.

The new Human Rights Act turns centuries of legal theory on its head. Britain has always adhered to “residual rights theory” which essentially means that whatever is not outlawed is acceptable.

Now the idea of a “right” is placed first, and all other legal consequences flow from it, as in most European civil law traditions.

This is quite alien to English legal thinkers who assert that one needs laws before rights in order to know what the rights can be.

Secondly,it will change the structure and content of all UK laws. Existing laws now must be interpreted consistently with the ECHR.

Judges were previously restricted in how they could read legislation, but now they have more scope to challenge Parliament.

New rights will also be introduced. For example, the ECHR includes a right to freedom from religious discrimination, but there was no such right in English law previously.

There is no doubt that the new Act will have important repercussions for business in the UK. Individuals or organisations will not only be able to sue central and local government, but all public bodies will be susceptible to challenge. The interface between business and government or regulation will be a potential arena of conflict.

Various business bodies must abide by the new legislation. These include tribunals and disciplinary panels of various organisations such as the Advertising Standards Authority, the Take-Over Panel, the Department of Trade and Industry (DTI), and privatised utility companies such as British Gas.

It will also affect “mixed enterprises”, the public enterprises in the form of limited companies in which the government owns shares.

One significant impact of the legislation will be on commercial crime investigations.

Presently, executives are obliged to answer questions from the DTI or other investigative bodies during large-scale fraud investigations.

In the past such answers were used in trials. This happened at the trial of Ernest Saunders during the Guinness scandal. The European Court later condemned this practice as an infringement of the right to a fair trial. It is likely that under the new law people will not be obliged to answer questions during such investigations.

Disciplinary proceedings will also be significantly affected. Tribunals regulating the legal profession and other self-regulating organisations in the City will feel the new pressure.

The ECHR guarantees a fair trial and a public hearing by an impartial tribunal. In tribunals there is presently no right to silence, and the burden of proof is often placed on the defendant.

Military Courts Martial have already been declared unfair by the European Court and there is little doubt that other tribunals will follow.

Major city business institutions whose disciplinary proceedings are almost always held in private will probably have to change.

As many individuals may not wish to broadcast their problems, it seems likely that individuals will be given a choice between a private and a public hearing. This will change the way disciplinary proceedings are conducted.

British business will also be affected by several new rights enshrined in the Act. For example, there will be a right to freedom from religious discrimination which might affect employment practices in relation to holy days and religious holidays. More importantly, for the first time in Britain there will be right to privacy, which will be crucial to the media. The main press may be exempt, but the Act would have to be observed by the BBC and other public organisations.

The new right to privacy is long overdue. It may be interpreted to cover non-public media organisations. The press may be brought within the reach of the new law. An individual may invoke a right to privacy. Another possibility is that the courts will be bound to interpret the common law to include a right to privacy.

Thus the new Human Rights Act may not bring a “quiet revolution” in English law, but a noisy one.

Large businesses and public organisations will have to closely watch future developments, because it is by no means clear exactly what the implications of the new Human Rights Act will be for commerce in the UK.