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Administrative Review Council - Admin Review |
Peter Kell[*]
Chief Executive Officer, CHOICE
Administrative law has a key role to play in enhancing and protecting consumer rights. In this context the role of the Administrative Review Council is critical in ensuring that our system of administrative law develops in ways that keep it up to date with community expectations about the role of government.
Choice—the Australian Consumers’ Association—engages with administrative law at a number of levels, and as such we are very interested in the review and reform of administrative law.
There is a wide range of ways in which one could approach the topic of consumers’ interest in administrative review. I propose to identify a number of distinct ways in which consumers relate to government which are relevant for a consideration of administrative law issues. At one level, there is the interplay of individual consumer rights and obligations vis-à-vis government. Second, administrative law may also affect consumer rights in relation to other actors in the marketplace, particularly the suppliers of consumer goods and services. Third, it may also be relevant to the collective rights of consumers in the development of effective market regulation and good public policy. In the spirit of this seminar, my aim is to identify some of the future challenges for administrative law in each of these areas.
What is the scope of administrative law in relation to consumer’s interests? According to the ARC, administrative review plays two roles:
• It improves the quality, efficiency and effectiveness of government decision making.
• It enables the individuals to test the lawfulness and the merits of decisions which affect them.[1]
These two roles identified here by the ARC play out in different ways according to the particular relationship between consumers and government that I have just mentioned.
Perhaps most obviously, consumers are individually subject to specific agency decisions about their entitlements and obligations in relation to matters such as social security and taxation.
Consumers are entitled to use processes established by government to assist them in asserting their rights or resolving disputes. Examples are a consumer’s right to take certain matters involving commercial parties to tribunals such as the Superannuation Complaints Tribunal or to complain to bodies such as the Private Health Insurance Ombudsman.
Consumers also expect that particular government agencies will protect their general or specific interest in the fair and efficient operation of markets. This gives rise to questions of whether government regulatory agencies are operating effectively and the role that administrative law may play in enabling consumers to monitor, hold accountable and/or influence such agencies.
Finally, administrative law has a potential role to play in promoting democracy through facilitating consumer participation in government policy-making processes. This article focuses on the first two areas mentioned—consumers and government and individual decisions.
A primary focus of administrative review is to enable citizens (and others) to seek review of government agency decisions which directly affect them.
Future challenges include developing effective responses to the well-recognised questions around access to administrative review and improving the response to systemic issues that can be identified from individual cases.
Key features of modern administrative law in Australia include the Ombudsman, the right to merits review of many agency decisions, often by specialist tribunals, streamlined judicial review processes, and freedom of information provisions. These innovations, introduced in the 1970s, unquestionably increased access to justice in significant ways.
However, there remain a number of barriers to effective access to many administrative processes, including the tribunals within the merits review system. The importance of increasing access to the administrative review system has been noted by many commentators, including the Sackville Committee’s in its comprehensive review of access to justice in 1994.[2] The rationale for the creation of informal schemes such as the Social Security Appeals Tribunal, as well as the Administrative Appeals Tribunal, was that they would be consumer friendly, non-adversarial, accessible, and free or cheap.
It is important to regularly test whether administrative law bodies meet these objectives. Does the AAT still fit this description? Do we see an inevitable creep towards formalism or legalism? Do the structures and processes for providing information and advice to consumers in fact meet the access needs of all classes of potential users in roughly equal ways?[3]
After all, consumers want not only a remedy but a remedy they can realistically pursue. Potential barriers include:
• finding out about the availability of a remedy in the first place • cost and fee waiver procedures • access to advice and assistance[4] • legal technicalities[5] • the style of proceedings and the rooms in which they are conducted.[6]
A second issue that relates to individual entitlements arises when government decides that a particular function will be transferred from public to private operation. Sometimes this involves the private operator being engaged to perform the service on behalf of the government; the Job Network is an example of such an arrangement. In other cases what was formerly a government activity is fully privatised; at the state level electricity supply is an important example. This is a policy phenomenon which has become increasingly common around the world. It shows little sign of slowing, so it will continue to throw up challenges.
In relation to both forms of privatisation there is a danger that consumers could lose administrative law rights, including a right to merits review, where applicable, as a result. Appropriate responses are available where the legislature is willing to implement them.
Under the former arrangement the ARC’s 1998 report The Contracting Out of Government Services recommended that, where the government contracts out a function, administrative law remedies (including the Ombudsman, freedom of information and merits review) should not be lost. This is an important issue for consumers, as in most cases it is irrelevant to them whether the government or a contractor is providing what is basically a governmental or essential service; this is especially so if it is a monopolistic environment or a market where competition is limited. Consumers want to be able to access the service and to do something if it goes wrong, irrespective of the provider’s underlying ownership structure.
In the latter case, privatisation arrangements have often required the privatised business to subject their retail operations to an appropriate complaints resolution scheme. Whether or not a particular scheme provides adequate consumer review rights depends on the particular industry and market practices. Questions about which kinds of review and complaint rights should apply to what kinds of government, government-like and former government businesses will continue to arise regularly, as more services are contracted out.
I now turn to the role of government in regulating aspects of the relationship between consumers and other market participants. This raises the question of how administrative law affects these relationships and the attendant emerging challenges.
A particular question is how administrative law impacts on the role of industry self-regulation. One of the more interesting developments in recent years has been the growth in self-regulation and co-regulation across many parts of the economy. Self-regulation requires industry participants to regulate the behaviour of members of their own industry or sector. Co-regulation requires industry to play a significant role alongside government agencies regulating members’ conduct, usually within a framework set by legislation or a regulatory instrument.[7]
In Australia there is a growing use of self-regulatory and co-regulatory mechanisms to govern market conduct. It is not in my brief to present a detailed overview of the drivers of this trend. Rather, what I want to argue is that, while most of us are familiar with developments in self-regulation and co-regulation, there is generally less appreciation of the interaction between these forms of regulation and administrative law and the implications of that interaction for consumers and businesses.
The interaction between self-regulation and administrative law is growing, and is increasingly complex. It is also uneven across different self-regulatory schemes. This interaction highlights opportunities and challenges for consumers and businesses, as well as policy makers. It is an area that would very much benefit from a focused review.
A common type of self- or co-regulation is the industry code that sets out rules for market conduct and thereby governs interaction between firms and consumers. Such codes may set standards for information disclosure, product features and service quality. The other major area of self- or co‑regulation is industry-based complaints handling or dispute resolution schemes, often referred to as alternative dispute resolution schemes.
One of the interesting features of the modern regulatory landscape is that there is no clear distinction between, on one hand, government-established complaints handling bodies such as the courts and tribunals and government-established and -operated ombudsman schemes established and operated by government and, on the other hand, the essentially private mechanisms offered by ‘industry-based’ complaints resolution schemes. These alternative dispute resolution schemes include bodies such as the Banking and Financial Services Ombudsman, the Financial Industry Complaints Service, and the Telecommunications Industry Ombudsman.
The financial services sector illustrates the point well. The Superannuation Complaints Tribunal is a government agency that handles complaints from consumers about their superannuation. Decisions may be appealed to the Federal Court. In contrast, the Banking and Financial Services Ombudsman is independent of government and has no statutory basis. However, it operates under the framework for dispute resolution set out under the Corporations Act, along with six other finance sector complaints resolution schemes, including the Financial Industry Complaints Service. Under the Corporations Act, all financial services firms must belong to a complaints resolution scheme approved by the Australian Securities and Investments Commission. No particular schemes are specified in the legislation: it is for industry participants to submit an industry scheme for approval. ASIC has the administrative power to approve schemes against certain standards. This arrangement works well in many parts of the finance sector, although it should be recognised as the result of many years of policy development involving industry, consumers and government.
This arrangement, in other words, involves an important administrative decision by ASIC in relation to an industry-based regulatory body whose primary function is to deal with consumers. ASIC’s discretion to approve such schemes is subject to administrative review.
On the other hand, other complaints resolution arrangements operate outside any regulatory framework. The new scheme in relation to so-called reverse mortgages is one example. Interestingly, several of the schemes, including the Financial Industry Complaints Service, operated in this way for several years before being approved by ASIC under the Corporations Act requirements.
The first issue is that there is a lot at stake for consumers. Alternative dispute resolutions schemes are now a very significant source of access to justice: in 2004–05 alone the Banking and Financial Services Ombudsman and the Telecommunications Industry Ombudsman handled more than 150 000 complaints made by consumers against companies operating in those industries. While the Superannuation Complaints Tribunal does not deal with numbers of this order, it does cover matters where the consumer’s life savings are at stake. Most of these complainants would previously have had nowhere to go, as these classes of complaints could not access the courts and consumer claims tribunals.
There is also much at stake for regulatory agencies. Regulators, in their role as bodies to whom consumers make complaints about market conduct, increasingly rely on these dispute resolution schemes for the referral of individual complaints. Thus the alternative dispute resolution schemes—whether private or statutory—have become important elements of the administrative decision making that occurs within regulatory agencies.
But perhaps from the consumer’s point of view these distinctions are unimportant. After all, is there any a priori reason why consumer dispute resolution schemes should operate within government or outside government? As long as the complaints handler provides an accessible, independent and high-quality service, all is well.
However, the operation of these schemes varies depending on whether the dispute resolution mechanism is a creature of government, recognised in a co-regulatory scheme or completely independent of government. There may be differing standards, remedies and approaches within these schemes, which may have both positive and negative implications for consumers and business. For example, the Superannuation Complaints Tribunal is subject to parliamentary scrutiny; the Financial Industry Complaints Service, which deals with very similar complaints, is not. On the other hand, unlike the SCT, FICS is required to undergo an independent review every three years as a condition of its ASIC approval.
Questions should be asked. Are the complaints schemes of consistent quality to allow regulatory agencies to confidently refer consumer complainants to such bodies in all cases? Who should review the operations of these schemes? And what is the feedback to the regulator about these complaints—are systemic issues identified and reported or not?
The different structures for dispute resolution schemes also matter because these dispute resolution schemes may be subject to judicial review on the basis of administrative law principles. A full discussion of this question is beyond the scope of this paper, but the recent Masu[8] decision—where a financial planning firm sought review of a decision by the Financial Industry Complaints Service—raises some interesting issues. This decision found that the outcomes of these private schemes are judicially reviewable for breach of procedural fairness and on jurisdictional grounds.
Not surprisingly, it has been the more powerful parties who have sought external review to date or, more generally, have sought formal appeal within the schemes. This gives rise to a tension between accessible, cost-effective and timely decisions that are comprehensible by consumers and those that could withstand administrative law principles and reasoning. Alternatively, from an industry perspective, administrative law oversight, or the threat of it, may promote greater attention to procedural fairness by alternative dispute resolution schemes.
ASIC’s approval role for such schemes is also open to administrative review. The Australian Competition and Consumer Commission faces a similar issue in authorising codes that might otherwise be anti-competitive. This is another example of the growing interrelationship between administrative law, self-regulation and consumer outcomes.
As mentioned, ASIC does not set up alternative dispute resolution schemes, but instead awaits proposals from industry, which are then assessed against the standards set out in a policy statement.[9] The approval process itself is interesting. What role should third parties have in providing input into this process? From a consumer perspective this is critical, as the approval of any sub-standard schemes directly affects their interests.
If ASIC rejects this scheme for approval, then the scheme or industry group can appeal to the Administrative Appeals Tribunal. The first such appeal is currently being considered.[10] In this case, an industry self-regulatory complaints resolution scheme uses administrative law mechanisms to make a complaint about the regulator. This is an example of the growing interaction between private consumer dispute resolution schemes, regulatory agencies, and administrative review bodies.
The Australian Competition and Consumer Commission also faces challenges in this area. It is called upon to consider applications for authorisation of prima facie anti-competitive conduct through the establishment of industry codes. The ACCC formally seeks views on these applications. From time to time Choice makes submissions in response to authorisation applications. In the case of the recent application for authorisation of a revised Medicines Australia Code (regulating the marketing of pharmaceuticals), the ACCC authorised it subject to some additional requirements concerning transparency and information disclosure (the substance of these requirements is not the focus of my comments). Medicines Australia has sought review of this decision in the Australian Competition Tribunal.
Given the significance of such a code for the way that drugs are promoted to consumers, organisations like Choice would be interested in having a say in this review process. The relevant questions are how this would occur and, more importantly, how it should occur. Is this possible without becoming involved in expensive legal work and technical fights over standing?
These questions illustrate the point that, for consumers, the interaction between self-regulation and administrative law is increasingly important both at an individual level and for broader policy reasons. The same could be said for businesses as well.
After all, one of the key debates of our time is how to get the balance right between regulatory responses to market failure and social problems in such a way that regulation does not unjustifiably undermine the efficiency of markets in allocating resources. It is therefore reasonable to ask how administrative law can help to ensure that self-regulatory and co-regulatory structures can both be effective in improving market conduct and facilitate industry competition and efficiency.
A key rationale for the above regulatory approaches is that they are faster, quicker and cheaper than black letter law. As discussed, it is often industry participants that are undermining that rationale by seeking additional review processes. If these processes become difficult to use, require resources not available to most consumers or consumer groups, and are one-sided in that they provide rights of review only to the applicants, they will both undermine consumer rights and increase regulatory costs.
The interaction between citizens and consumers and their governments continues to evolve, and expectations of government services and rights accordingly change over time. Administrative law should evolve to deal with this changing climate, and the Administrative Review Council has a critical role to play in considering how and where changes should take place. This article has tried to highlight the importance of underpinning principles such as accessibility in a changing environment and the importance of regularly testing these core ideas against contemporary trends.
The article has also sought to highlight the increasing interaction between administrative law and other regulatory structures, in particular self-regulation. This development has very significant implications for consumers, both for their ability to assert rights and obtain remedies and for their ability to influence regulatory and policy developments in constructive ways. Obviously it has similar implications for businesses in the economy. While there have been reviews of self-regulation in recent years, its relationship with administrative law has not been coherently considered. Given that the move towards self-regulatory and co-regulatory structures of various sorts seems to be increasing, it is perhaps time that this issue was more actively examined.
[*] I am grateful for research information and suggestions from Gordon Renouf of Choice, Jenny Lovric of the National Pro Bono Resource Centre, and Jill Anderson.
[1] Administrative Review Council, Overview, <http://www.ag.gov.au/agd/WWW/arcHome.nsf/Page/Overview_Details_Overview>, viewed 9 September 2006.
[2] Access to Justice Advisory Committee (Sackville Committee) 1994, Access to Justice: an action plan, Commonwealth of Australia, Canberra.
[3] It is of some concern, for example, that there were only three applications to the SSAT in the Northern Territory in 2004–05 from Indigenous clients of Centrelink: Senate Finance and Public Administration Legislation Committee 2005, ‘Supplementary Estimates, Department of Human Services; Answer HS45 to Questions on Notice’, 1 November, <http://wopared.aph.gov.au/Senate/committee/fapa_ctte/estimates/sup_0506/human/hs45.pdf>.
[4] Current access is patchy and varies across jurisdictions and across the country.
[5] For example, overly technical pleadings in tribunal matters can interfere with the required flexibility for applicants when completing their applications and stating grounds of review.
[6] The NSW Welfare Rights Centre reports that its clients have most success in cases conducted in informal rooms, with all participants sitting around a table.
[7] For example, the financial services industry complaints resolution schemes discussed below.
[8] Masu Financial Management Pty Ltd v Financial Industry Complaints Service Limited No 1 [2004] NSWSC 826.
[9] Policy Statement 139.
[10] Timeshare Association v ASIC (V2004/700).
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URL: http://www.austlii.edu.au/au/journals/AdminRw/2007/7.html