New Zealand: Merits Review: Where does New Zealand fit internationally?

Last Updated: 16 April 2015
Article by Nick Crang

A wide range of approaches to review and appeal rights of regulatory decisions exists internationally, an Australian research paper on regulation has found. The paper's findings are worth considering after the lengthy and intensive High Court decision on merits review of input methodologies decided last year.

A major debate in recent years in New Zealand has been over the need for, and scope of, merits review of regulatory decisions. In the electricity sector there was a strong push for merits review of Commerce Commission decisions under the regulatory control provisions of the Commerce Act, resulting in the merits review provisions currently in part 4 of the Commerce Act 1986.

The paper, from the Australian Competition and Consumer Commission and its energy regulator, surveys the regulation of infrastructure in 17 countries, including New Zealand and the ten largest economies in the OECD. While the paper does not attempt to define best practice, it provides a very helpful summary of the different approaches to regulation across the 17 surveyed countries.

The paper shows that merits review of input methodologies, and the ways in which it is limited, are not unusual. Equally, it shows that broader merits review rights exist in some countries. However, even then, limitations often apply to ensure decisions are made relatively quickly and regulatory certainly is achieved.

The infrastructure areas covered by the paper are energy, telecommunications, postal services, water and wastewater, rail, airport and ports.

Merits review typically involves a review or appeal of not only the process of a decision (as in a judicial review), but also the substantive decision itself. It usually enables the review body to reconsider the entire decision, including whether it was the right or best decision to make.

The Australian paper found that appeal and/or review rights are common across the different countries surveyed, but there are a range of different appeal mechanisms, standards, scope, and other matters. Looking at some of these more closely, the paper found:

  • most countries have at least a base level of judicial review, examining whether the regulator had acted within its powers, acted appropriately, and not otherwise violated relevant laws
  • in many countries, courts will defer on judgment issues to the mandate and expertise of the regulatory body. This has been evident, for example, in some New Zealand judicial review decisions but also occurs overseas
  • some jurisdictions allow substantive review of decisions, but the scope is often limited in order to provide regulatory certainty and timeliness. In New Zealand, for example, merits review of Commerce Commission decisions in the electricity sector is limited to reviewing input methodologies and has other constraints. Merits review is similarly limited in Ireland, but the Netherlands allow substantive review of most regulatory decisions
  • it is reasonably common to restrict merits review by limiting the grounds (this occurs in Canada) or the evidence that can be considered (this occurs in the US and New Zealand, in different ways)
  • the body undertaking the review can differ, from internal reviews within the principal regulatory body, either in full (eg as in the Netherlands) or for some decisions (eg as in the telecommunications sector in New Zealand), to specialist tribunals, to the ordinary courts. In some countries, appeal is to a government minister or the government itself
  • the standard of merits review, or level of scrutiny applied can differ. In New Zealand, input methodologies can only be overturned in favour of a new methodology that is materially better. In the UK, while the Competition Appeals Tribunal has a full-merits review power for some decisions, it tends to defer to the decision-maker
  • it is common to set time limits on taking appeals and reviews, to provide regulatory certainly, and to limit the stages of appeal
  • in some countries the only option is to appeal or review all of a decision, with the risk that the decision could be remade in a way that is even worse for the appellant, while other counties allow cherry-picking of aspects of a decision

Overall, the paper found that the availability of judicial review and merits review enhanced the credibility of regulations. It also noted that decisions on the above matters often had an affect on the incentives on parties to appeal decisions. For example, the risk that a decision could be made again entirely (and thereby become even worse for an appellant) often weighed against taking appeals.

The paper also considered a number of the issues, including the very interesting issue of whether industry regulators should be stand-alone or combined within the general competition regulator.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nick Crang
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