Too much red tape? Are there any scissors..?

ALT New Zealand Ltd v Attorney-General (2023) NZHC 3855 provides a useful reminder of the principles and procedure available to the public (including businesses) to challenge legislation, regulation, and other government decision-making by way of judicial review. The judgment was delivered as we wait for further details of the new government's plan to pass a 'Regulatory Standards Act' and to establish a new ministry to assess the quality of both new and existing rules. With increasing opportunities to engage with regulators and public decision-makers, it's important that businesses understand and consider the options available to get the least or the best “red tape”.

 

What is judicial review?

A person or company whose rights, obligations, or interests have been affected by a public authority's action or decision can have the High Court review that action or decision. The Court will check the decision-making process – whether the correct procedure was used, the right matters were taken into account, and whether the law was followed. However, the Court won't stray into questioning the underlying policy or wisdom of the action or decision, unless it was irrational or completely unreasonable.

If there was an error in the public authority's process, the Court can cancel the action or decision and order the authority to reconsider. The Court can also make a declaration to clarify the applicant's rights.

 

ALT New Zealand Ltd v Attorney General, an example of the limits of judicial review

The new government's recent decision not to proceed with some previously planned changes to smoking regulation made big headlines and took many by surprise. But the tobacco industry has long been highly regulated. Legal issues in the field often raise principles of general application to all business regulation.

In ALT New Zealand Ltd v Attorney General, the applicants unsuccessfully applied for judicial review of a decision to amend to the Smokefree Environments and Regulated Products Regulations 2021 which reduced the maximum nicotine strength allowed in vapes. The applicants asserted various grounds of review, including that the Ministry of Health's decision was unreasonable, the Ministry's consultation process was inadequate, and the Ministry failed to base its decision on expert advice and relevant considerations.

In dismissing the claim, the High Court emphasised the long-established legal principle that the courts are concerned only with the process under which a regulation was made, whether it was within the objects and intention of the empowering legislation, and whether the regulation is not completely outside the bounds of what could be considered reasonable. The courts are not able to make a decision on the ultimate merits of a challenged regulation. So, the courts are generally unable to consider matters like whether compliance costs are justified by expected benefits, whether there is a less intrusive way to achieve those benefits, or whether the regulation will be a disincentive to innovation and therefore detrimental for New Zealanders in the long term.

 

So, what's the proposed Regulatory Standards Act?

The government has not yet released details of the proposed Regulatory Standards Act (RSA) or what the new ministry's powers will be. However, the ACT party has tried to introduce similar laws in the past. The first time was in 2006 with the “Regulatory Responsibility Bill” (Roger Douglas' private member's bill). And the most recent attempt was in 2021 when David Seymour reintroduced the “Regulatory Standards Bill” (2021 Bill) also as a private member's bill. Those previous attempts were unsuccessful. Given the history and David Seymour's current role as Minister of Regulation, along with recent public statements, we presume that the 2021 Bill gives a fair indication of what to expect from the currently planned RSA. On that basis:

1. The RSA would set out principles of responsible regulation that all legislation must comply with. The government has indicated that key principles of the RSA will be “good law making and economic efficiency”. The 2021 Bill listed six key principles requiring (in summary) legislation to be consistent with the rule of law, not diminish individual liberties, protect property rights, not impose taxes except under an Act, and preserve the courts' role of authoritatively determining the meaning of legislation.
2. The minister or MP responsible for proposed legislation would have to certify that it is compatible with those principles or otherwise explain any incompatibility and how that incompatibility is justified. Incompatibilities would be justified to the extent that they were reasonable and could be “demonstrably justified in a free and democratic society”.
3. The public, including businesses, would be able to apply to a court for a declaration that any given legislation or regulation is inconsistent with the principles of the RSA. However, the 2021 Bill made clear that potential relief was declaratory only and would not allow the courts to themselves strike down legislation, issue injunctions against Parliament or the Crown, or award damages.
4. The Ministry of Regulation would conduct six-month long inquiries into various regulatory sectors to assess whether existing regulations are consistent with RSA principles. The Ministry would then report its findings to the relevant minister and may recommend removing regulations. Within three months of receiving a report, the minister would be required to respond by either accepting the recommendation to remove the regulations, or explaining to Parliament and the public why the regulations should remain in place.

 

How might the RSA help with challenging red tape?

The proposed RSA could present several opportunities for the public and businesses to influence public decision making.

While a declaration that legislation is incompatible with the RSA's principles might appear to lack “bite”, it could provide an opportunity to support judicial review claims based on policy rationales. Applications under the RSA and for judicial review might therefore affect and/or depend on each other in future.

The RSA's mechanisms look like they could be similar to existing tests under the New Zealand Bill of Rights Act (BORA). Particularly, the test for justified limitation could be identical, and the proposed requirement to justify apparent inconsistencies is markedly similar to a BORA section 7 report.

Declarations of inconsistency under BORA have, to date, had a mixed impact. The most effective related to the ban on prisoner voting, which the previous government modified. In practice, the government and prevailing political climate will effectively trump the view of the court.

During the Ministry of Regulation's inquiries, affected people and businesses might have the opportunity to make submissions or otherwise be consulted. Further, ministers' decisions to accept or decline the Ministry of Regulation's recommendations might themselves be judicially reviewable. It also remains to be seen how the new Ministry will determine what sectors to review and whether there will be a public consultation process that could trigger a Ministry inquiry.

It is unclear how the new Ministry would interact with the Regulations Review Committee, one of Parliament's select committees. The Committee already reviews delegated legislation, and proposed legislation, to ensure consistency with primary legislation, and good legislative practice. Members of the public have the ability to make complaints to the Committee, and the Committee has the power to report to the House and request that a regulation is disallowed. Despite its relatively significant powers and impact, the Committee has generally attracted little media or public attention.

 

Final thoughts

Despite the lack of detail at this early stage, the proposed RSA and consequent regulation of legislation could have a wide-ranging impact. It is likely that many industries, businesses, and the public generally will feel that impact. Though the stated purpose of the RSA is to decrease the amount of regulation, it risks higher compliance costs for businesses and government, and potentially additional litigation costs if it is not carefully and well implemented.

We will be keeping a close eye as these developments unfold. Please get in touch if you have any questions about regulatory developments or the red tape affecting your business, and what you can do about it!