The Parliament of New Zealand has been invited to consider an important proposal for constitutional change – the Regulatory Standards Bill 2011 (“RSB”) – which aims to improve the quality of lawmaking and hence to reduce the regulatory burden on citizens.

The RSB is identical in all save name to the Regulatory Responsibility Bill (“RRB”) drafted and recommended by the Regulatory Responsibility Taskforce  in its Report of September 2009.  The Taskforce’s draft bill was the successor to an earlier Regulatory Responsibility Bill, introduced into Parliament in 2006 by Rodney Hide MP, and eventually rejected by the Commerce Committee.  This in turn was almost identical to that proposed by Dr Bryce Wilkinson in his Constraining Government Regulation, New Zealand Business Roundtable Discussion Paper, 2001, Appendix C, pp. 236-41.  Wilkinson served on the Taskforce.

The RRB (now RSB) has been welcomed by some business groups, most notably Federated Farmers and the  New Zealand Business Roundtable.  It has been trenchantly criticised by some academics (including me; see most recently this paper with Chye-Ching Huang) and rejected byTreasury (the lead agency responsible for advising on the Bill), as well as by almost every other government department or agency.  The Minister for Regulatory Reform, the Hon Rodney Hide, has made a virtue of this universal rejection, arguing it is just what one should expect from a measure that aims to force policymakers to be principled.

Why such opposition to the Bill?  What does it propose?  The RRB/RSB aims to rule out certain statutes and regulations as ‘unconstitutional’ by affirming eleven principles of responsible regulation and by introducing three mechanisms – certification, judicial declarations of incompatibility, and interpretation – to ensure legislation conforms to those principles.  In what follows, I outline the detail of the Bill and comment briefly on its merits.

The principles of responsible regulation

Clause 7(1) of the RSB sets out eleven “principles of responsible regulation” in paragraphs (a)-(k), grouped under six subheadings.

• rule of law;
• liberties;
• taking of property;
• taxes and charges;
• role of courts; and
• good law-making.

Clause 7(2) echoes s 5 of the New Zealand Bill of Rights Act 1990 and states that “Any incompatibility with the principles is justified to the extent that it is reasonable and can be demonstrably justified in a free and democratic society.”  It is these principles, duly limited, that are the focus of the three mechanisms.  Rather than outline them in full detail, let me just note several points of interest.

The bill affirms liberty, paragraph (b) stating that legislation should:

” …not diminish a person’s liberty, personal security, freedom of choice or action, or rights to own, use, and dispose of property, except as is necessary to provide for, or protect, any such liberty, freedom, or right of another person.”

Very many legislative acts diminish a person’s liberty or freedom of choice.  This principle bars the imposition of duties unless those duties are necessary to protect “any such liberty, freedom, or right of another” (the phrase omits “personal security”, although the later discussion, at paragraph 4.53 of the Report, implies that this is an oversight).  Imagine an Act like the Bakeshop Act 1896 (NY) that prohibits any person from employing another to work in a bakery for more than ten hours per day or sixty hours per week.  That Act would depart from paragraph (b), for it restricts the freedom of contract of employer (and employee), and is not necessary to protect any existing liberty or freedom of the employee (or any other person).  The legislators might attempt to justify their act by reference to the health of the worker or the need to protect him from economic exploitation.  It would be open to the courts to consider this rationale and to decide that the legislation is an unjustifiable limit on liberty.  This is of course precisely what took place in the infamous United States Supreme Court decision, Lochner v. New York 198 U.S. 45 (1905).  Enacting this principle opens the policy of almost every statute up to review on Lochner grounds.

The bill also states, in paragraph (c), that legislation should “not take or impair… property” unless this is necessary in the public interest and full compensation is paid, such compensation to be paid if practicable by those who benefit from the taking.  This principle seems plainly to be the main concern of those moving the RSB and its precursors.

The principle conflates takings and impairment.  The effect is that limiting how one uses property attracts full compensation.  The point of the principle is to make it very expensive to limit how property owners may act, for any property owner who suffers loss from regulatory change is entitled to be made whole.  Thus, if Parliament wishes to ban dangerous weapons, it must buy them.  Legislation imposing mandatory closing times on certain pubs would be an impairment attracting compensation.  And legislation criminalising prostitution would arguably be a taking of the goodwill of what would otherwise have been lawful brothels.  This principle smuggles in a doctrine of regulatory takings that is foreign to the New Zealand constitution (and is more radical than other jurisdictions).

The final four paragraphs (h)-(k) set out the principles of “Good law-making”.  Paragraph (h) states that legislation should not be made unless there has been consultation.  Extraordinarily, and quite contrary to the Bill of Rights 1688 (still good law in New Zealand) this subjects the adequacy of the parliamentary process itself to legal argument and judicial ruling.

The remaining three principles amount at best to the truism that one should not make law unless there is good reason to make law.  However, paragraph (j) states that legislation should produce benefits that outweigh its costs, which may wrongly prioritise cost-benefit analysis and lead to quantifiable outputs looming too large in the lawmaking process.

The certification regime

The primary mechanism for ensuring that legislation is compatible with the principles (subject to reasonable limits) is the certification regime.  Clauses 8 and 9 require various persons to certify whether the legislation is compatible with each of the principles and if not how it is incompatible and whether this is justified.  In respect of a Government Bill, the Minister responsible for the bill and the chief executive of the public entity that will be responsible for administering the resulting Act must certify the bill.

The chief executive does not have to state whether or why an incompatibility is justified if a Minister also gives a certificate under clause 8.  The reason for this, the Report states, is that the Minister is the appropriate person to judge whether a departure is justified (paragraph 4.106) and in such cases the chief executive’s role “is best limited to the proposal’s technical compliance with the principles set out in clause 7(1)”.  However, the final two principles require the chief executive to certify whether he or she thinks the benefits outweigh the costs and whether the legislation is the most effective, efficient and proportionate response available.  This means the chief executive must in effect certify whether he or she would enact this law.  The certification regime thus promises to grossly politicise chief executives and to arm them to veto government policy in a way that is flatly inconsistent with our constitutional arrangements.

Declarations of incompatibility

The bill introduces judicial declarations of incompatibility as a mechanism to support certification.  Clause 12 authorises the superior courts to declare that legislation is incompatible with the principles specified in s 7(1)(a)-(h), unless the incompatibility is justified under s 7(2).  Clause 13 of the bill provides that a declaration of incompatibility does not render the relevant legislation invalid.  The supporters of the RSB gesture vaguely towards the experience of the United Kingdom.  However, this this suggests experience to me that the proposed power might be very effective (although the imperative of conformity to international obligations is absent), but also risks illegitimately prioritising judicial analysis of the merits of legislation.

There are strong reasons of democratic principle and institutional competence to refrain from authorising courts to review legislation against these principles.  Interestingly, the Taskforce partly saw the force of these reasons, excluding the final three principles of good law-making from the jurisdiction on the grounds they were “unsuitable for judicial consideration, given the institutional limits of the adversarial process” (paragraph 4.124 of the Report).  This proves too much for determining whether legislation unreasonably limits liberty or property is equally unsuitable for judicial consideration.

The interpretive direction

The third mechanism is the direction in clause 11 that “[w]herever an enactment can be given a meaning that is compatible with the principles (after taking account of section 7(2)), that meaning is to be preferred to any other meaning.”  The Taskforce fails to justify this provision, saying only, in paragraph 1.20 of the Report, that “the existing judicial review jurisdiction would be enlivened by an interpretation provision”.  True, it would embolden litigators to argue that empowering statutes may be read to authorise only reasonable limits on liberty, or to entail compensation for impairment of property, or not to authorise any regulation that fails a cost-benefit analysis.  This would undermine many regulations in a highly uncertain, discretionary fashion.

Oddly, the interpretive direction is not limited to principles (a)-(h).  The courts must prefer a meaning of legislation that is consistent with all four principles of “Good law-making”, three of which the Taskforce elsewhere notes are unsuitable for judicial consideration.  The interpretive direction requires legal argument and judicial decision on these very issues.  This is almost certainly an oversight (I have pointed it out to members of the Taskforce and to Treasury a number of times since late 2009), yet the RSB remains unchanged.

The clause does not apply to legislation that post-dates the bill until ten years after its commencement in order to give lawmakers time to review and update the statute book.  The implication is that after ten years, it is sound for the courts to adopt novel meanings that depart from the understanding and intentions of the relevant lawmaker.  On this approach, clause 11 amends all statutes that pre-date the Act to the extent that the courts can give effect to novel meanings consistent with the principles of responsible regulation (as the courts understand them).  Parliament should not amend legislation in this reckless way.

Conclusion

The RSB is unconstitutional.  Many of the principles it affirms are heterodox and should not be justiciable.  The bill politicises chief executives, enabling them to undermine ministers.  It also authorises courts to review the detail of policy, illegitimately constraining Parliament and calling into question the validity of much secondary legislation.  It will be interesting to see whether New Zealand’s Parliament agrees.

Richard Ekins is a Senior Lecturer at the Faculty of Law, The University of Auckland.