UK: Regulators’ Hearings - Should they be in Private or Public?

Last Updated: 17 October 2002

When the Human Rights Act 1998 became part of UK law commentators sought to examine the way in which those articles of the European Convention on Human Rights incorporated into domestic law might make a difference to regulatory proceedings.

One point was that someone having his or her rights determined is, by virtue of Article 6 of the Convention, entitled to demand a public hearing subject only to certain limited exceptions. However, it is of course much more likely that a respondent to such proceedings would wish to have the proceedings dealt with in private, away from the glare of publicity. Can he or she insist upon a private hearing?

The Civil Procedure Rules (Part 39.2) contain a general rule that a court hearing is to be in public subject to a limited number of exceptions e.g. if publicity would defeat the object of the hearing, national security, the need to protect a child or a patient, or a private hearing is necessary in the interests of justice etc. Regulators, however, are not strictly bound by the CPR in their own hearings and can formulate their own rules.

In Eurolife Assurance Company v. Financial Services Authority, (decision published 26 July 2002) the Financial Services and Markets Tribunal ("the Tribunal") considered the circumstances under which it would hold a hearing under the Financial Services and Markets Act ("FSMA") in private. The Financial Services Authority ("FSA") issued a supervisory notice under s.53(4) of FSMA which, among other things, withdrew the authorisation of Eurolife to conduct new insurance business. Eurolife referred this decision to the Tribunal under s.55 of FSMA, and asked that the substantive hearing take place in private.

The Tribunal’s powers

Under Rule 17 of the Financial Services and Markets Tribunal Rules 2001, the Tribunal may direct that a hearing, or part of a hearing, be held in private if it is satisfied that it is necessary, having regard to:

(i) the interests of morals, public order, national security or the protection of the private lives of the parties; or

(ii) any unfairness to the applicant or prejudice to the interests of consumers that might result from a hearing in public.

(i) and (ii) together were described by the Tribunal as the "unfairness or prejudice condition". The applicant need not prove that unfairness or prejudice would result on the balance of probabilities, but only that they might.

In addition, the Tribunal must be satisfied that a hearing in private would not prejudice the interests of justice. This was described by the Tribunal as the "interests of justice condition".

The restrictions at (i) above reflect the circumstances in which someone whose civil rights are being determined cannot under the Convention demand a public hearing. Reference by the Tribunal to Strasbourg caselaw is of interest because the Strasbourg caselaw tends to deal with cases where someone sought to invoke a right to a public hearing. However, Strasbourg’s starting point is that the holding of hearings in public constitutes a fundamental principle enshrined in Article 6 and "this public character protects litigants against the administration of justice in secret with no public scrutiny; it is also one of the means whereby confidence in the courts can be maintained"  (Diennet v France (1995) 21 EHRR 554 at para 33). There is no Article 6 right to insist upon a private hearing although circumstances may arise where there is effectively a right to a private hearing if there would be unfairness caused by holding a hearing in public (see eg R v Legal Aid Board ex p Kaim Todner [1999] QB 966) or possibly if a public hearing might infringe some other Convention right.

In Eurolife the Tribunal held that generally, if the unfairness or prejudice condition were satisfied, the interests of justice provision would be satisfied too. However, even when satisfied on both conditions, the Tribunal still has discretion to refuse to order that a hearing be held in public, although the normal course, should the first two counts be satisfied, would be to allow the hearing to be held in private.

The Tribunal stated that it may well be the case that in the ordinary run of cases reputational risk will not in itself constitute unfairness but did not conclude that reputational risk can never give rise to unfairness to the applicant. It might be unfair if reputational damage occurring during the progress of the hearing might be such as to destroy the applicant’s business. The suffering of disproportionate damage would be unfair (para 32).

Applying the test

In the present case it was argued that a public hearing would cause irreparable damage to EAC’s reputation whatever the outcome and that consequential damage to EAC’s business would be so disproportionate as to be unfair. On the facts, however, the evidence of unfairness to EAC did not satisfy the Tribunal that a private hearing was necessary. Nor on the facts was a private hearing necessary on account of prejudice to consumers that might result from a hearing in public.

Unfairness to associated companies was irrelevant, save to the extent that it has knock-on effects on the applicant. In Eurolife, no knock-on unfairness was found.

One aspect of unfairness was the possibility of press reporting not succeeding in giving a balanced and accurate account of proceedings at the main hearing. The press may only have heard a robust opening from the FSA before leaving the Tribunal. To overcome the possibility of imbalance the Tribunal ordered that Eurolife could make a statement in rebuttal of the FSA’s allegations on the first day of the full hearing, and also required the FSA to put an explanatory note regarding the proceedings on the FSA website.

Practical Implications

The Tribunal’s decision in Eurolife shows that the starting point will usually be that proceedings be in public and there are only limited circumstances when the discretion should be exercised to order a hearing be held in private. Possible damage to an applicant’s reputation through a public hearing will not of itself suffice.

Clearly any other regulator must take its governing statute or rules as the starting point. However, there appears to be an increasing trend towards openness in regulatory proceedings. Bodies which routinely have hearings in private may run the risk of professionals relying on Article 6 of the Convention to insist that the proceedings be in public. It is more likely, however, that the regulators will have to explain to complainants and the media why matters should be dealt with in private given the approach in Diennet and the analogy of the Civil Procedure Rules. This is particularly so where those regulatory proceedings involve any kind of adversarial hearings – slightly different considerations arise where the matter at hand is, for example, a public inquiry.

© Herbert Smith 2003

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

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