Judicial Review of Contracts - UK Example PDF

Judicial review of contracts - the UK\'s example 1\. Introduction Entities that can perform both private and public functions appear with contracting-out agreements. Contract-based relationships have traditionally been exempted from administrative judicial review. However, in the case of contracti...

Judicial review of contracts - the UK\'s example 1\. Introduction Entities that can perform both private and public functions appear with contracting-out agreements. Contract-based relationships have traditionally been exempted from administrative judicial review. However, in the case of contracting-out agreements, whether a service provider is subject to scrutiny will depend on the presence of a public element in the contract. The concept of a public administration body is a key issue in any legal system. This is because judicial review of administration concerns its actions. Determining what is meant by the concept of a public administration body depends on the possibility of effectively challenging its activities and thus protecting the rights of citizens before the courts. The UK is a good example of how contracting out can negatively affect third parties and how it is sometimes difficult to enforce public administration responsibility for the delivery of public services when they have been outsourced to a private entity. That's because the public authority has not more actively monitored delivery and ensured its legal obligations are being met. Only decisions made by **public bodies** in pursuit of their **public functions** can be judicially reviewed. Plus, a third party has a sufficient interest in compliance with the public procurement regime in that they are **affected** in some identifiable way by the challenged decision. 2\. A public body before and after the Human Rights Act of 1998 I. Previously, in order to determine whether an entity was subject to judicial-administrative control, the source of its competence was the deciding factor. Under the 1981 Supreme Court Act, judicial and administrative control was subject to bodies whose competence was derived from the law. In the case of Council of Civil Service Unions vs. Minister for the Civil Service, the court stated that this could also be a royal prerogative[\[1\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn1). II\. In the 1980s, Margaret Thatcher embarked on a process of constitutional and institutional reform that included privatizing state-owned enterprises, working toward self-regulation of industry, and subjecting government agencies to the competition and market pressures to which private companies were subject. A common goal of these changes was the need to reduce direct government participation in social and economic life[\[2\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn2). As a result of these reforms, the question arose about the role of the courts in controlling the performance of functions that had hitherto been carried out by central and local government bodies, but which were now to be performed by non-government entities subject to a greater or lesser degree of government supervision and regulation. The question was answered by the House of Lords in the GCHQ case, which held that a decision issued by the central government is subject to judicial review regardless of whether the authority to issue it derives from a statute, common law, or is a prerogative.[\[3\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn3) The court said that whether a decision is subject to review depends not on the source of the authority, but on the substance, the nature of the decision. This ruling was an outgrowth of the functional approach to administrative law, as well as the very concept of a public administration body[\[4\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn4). The Takeovers Panel[\[5\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn5) case, in which the subject of dispute was, among other things, whether the City\'s Panel on Takeovers and Mergers should be subject to judicial review, should also be considered important with regard to this problem. This is because the designated entity had neither statutory nor prerogative powers to issue decisions. Nor did its competence derive from the agreement concluded between the Panel and the entrepreneur affected by the decision. Moreover, the Panel was not a government body, as it was established by private financial institutions. Its action had no legal basis but was merely recognized by a financial association. The court ruled that the Panel\'s action was subject to judicial review due to the fact that it performed important regulatory functions of public importance that significantly affected the interests of individuals. In addition, its activities were included in the pattern of statutory regulation of the financial services sector. In the court\'s view, if the Panel had not existed, the government would certainly have created a statutory body in its place to carry out the functions that were the object of the institution[\[6\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn6). Thus, over the course of two decades, the approach to defining judicial review of public administration has changed. It has become important that the implementation of public functions performed by both governmental and post-governmental entities is subject to control[\[7\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn7). III.  The HRA is essential for holding public sector bodies accountable by providing a legal framework for the protection of rights set out in the European Convention on Human Rights ('ECHR') and ensuring that public authorities must act compatibly with those rights.[\[1\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn1) The problem of defining a public authority arose once again with the enactment of the HRA, specifically sec. 6 of that law, entitled Acts of public authorities. Sec. 6(3) reads: In this section "public authority" includes--- (a)   a court or tribunal, and **(b)  any person certain of whose functions are functions of a public nature,** but does not include either House of Parliament or a person exercising functions in connection with proceedings in Parliament. Courts and tribunals are counted among the public authorities that, under sec. 6(1) are obligated to respect the rights of the Convention. Since the HRA does not limit this obligation to cases involving public authorities, the logical conclusion is that courts and tribunals under sec. 6(1) should adjudicate in a manner that is consistent with the rights of the Convention42. [The Human Rights Act does not define or list the bodies that should be considered public bodies. In British law, only the Freedom of Information Act provides a definition and a list of public authorities]. The rationale for this approach is to guarantee individuals under the HRA as [much protection against abuse of power by the state as possible]. Accordingly, it is left to the courts to determine whether there is a "hybrid" authority in a particular case. This is in line with the teleological approach to the definition of a public administration body adopted by the European Court of Human Rights43. It appears, however, that at the outset the UK courts in cases involving the application of sec. 6 of the HRA have adopted a narrow conception of a public administration body under the HRA. In Heather, Ward and Callin vs. Leonard Cheshire Foundation and the Attorney-General[\[1\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn1), the court found that the foundation\'s decision to close a nursing home of which the plaintiff was a resident was not subject to legal challenge because the foundation was not a public administration and did not perform any public functions within the meaning of sec. 6 of the HRA. In its reasoning, the court pointed out that the foundation was established by private individuals and not by local authorities; no financial local authority is in a position to compel a foundation to accept a conceptional person for services; the foundation\'s registration under the Registered Homes Act 1984 did not mean that it would be subject to the type or scope of regulations that apply to social housing owners; no statutory authority had the power to interfere in the organization or operation of the foundation; the foundation did not have a close relationship with, or depend on, the statutory authority. Residents of the homes were managed there by a number of local government authorities, and there were privately financed residents as well as those financed by local health authorities[\[2\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn2). The literature has criticized Heather\'s ruling because of the court\'s conservative approach to understanding public administration authority. It has been pointed out that the intent of the drafters of the HRA was a broad, not a restrictive, interpretation of the concept of public administration body contained in sec. 6(3) the HRA. The court, in denying the foundation\'s character as a hybrid public administration body, also denied legal protection under the HRA to residents whose care was covered by local authorities.[\[3\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn3) Similar comments were made by the UK Parliament\'s Joint Committee on Human Rights, which noted that the criterion used for human rights is highly problematic. Their application leads, in many cases, to a situation where an organization finds itself "in the shoes of the state" while having no obligations under the HRA. This means that the protection of human rights does not depend on the type of competence exercised, nor on the competence to interfere with human rights, but on the relatively arbitrary (in terms of human rights) criterion of administrative ties with state institutions. The Convention does not provide a basis for such a limitation, which raises questions about the HRA\'s ability to realize rights to the full extent envisioned by the drafters and those who discussed and agreed to pass the law as it is[\[4\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn4). In the Commission\'s view, jurisprudence has taken the wrong direction, focusing on the power of the law and institutional proximity to the state, rather than analyzing functions. An authority does not have to derive the basis for its action from a law in order to perform public functions. A state program or policy derived from a law can be transferred by agreement without changing the nature of powers or duties. Institutional ties to a public institution are not necessary to identify a public function. The attribution of the responsibility of public authorities to the private sector is justified by the fact that a private entity acting to relieve the burden on the government may exercise some authority and control over the realization by individuals of Convention rights[\[5\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn5). Contracting-out Entities that can perform both private and public functions often appear with contracting-out agreements. As mentioned earlier, contract-based relationships have traditionally been exempt from administrative judicial review[\[6\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn6). However, in the case of contracting-out agreements, whether a service provider is subject to scrutiny will depend on the presence of the public element mentioned earlier. In R. (Dr. Julian West) vs. Lloyd\'s of Lon- don[\[7\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn7), the court held that under certain circumstances even contractual relationships can be subject to judicial review of administration if the function is sufficiently governmental. Thus, one can conclude from this that the focus should be on the function and not on the entity performing it[\[8\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn8). [The court ruled that the decision of a private psychiatric hospital to change the category of ward to which a patient is to be referred is a matter of public interest. In addition, the court noted that patients who were placed on the basis of statutory compulsion were not admitted to the hospital according to their own choice][[\[9\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn9).] Similarly, the court ruled with regard to a utility company and stated that the decisions of a water supply company are subject to judicial review because it performs functions that could freely be called "public." However, these should be distinguished from functions that are not performed in the public interest[\[10\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn10). The most common problem with regard to hybrid bodies arises in the case of social welfare homes. The leading settlements concerning these entities are: Johnson and others vs London Borough of Havering and YL vs Birmingham City Council and others. They were issued on the grounds of the National Assistance Act 1948, which provides for the obligation of local authorities to take measures to provide housing for old, sick or disabled people. Local authorities can either carry out this duty themselves or ensure that it is carried out by another entity, including private nursing homes. **In the Johnson** case, the applicant wanted to prevent the nursing home in which she resided and which was owned by the local government from passing to private sector control. This was because she believed that doing so would restrict her rights under the HRA. The court rejected these claims, as it found that the nursing home would be subject to strict standards under other laws and thus the resident would not be deprived of any rights[\[11\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn11). **In the YL** case, the applicant was placed in a private nursing home as a result of an agreement by the City of Birmingham. The nursing home sought her removal. She filed a complaint under the HRA because she believed that the nursing home was performing a function of a public nature and was subject to the provisions of the HRA. However, the House of Lords held that the nursing home was not performing a function of a public nature and was not subject to judicial review. According to the court, the nursing home did not perform functions that could be described as "governmental" and had no specific statutory powers over those for whom it provided care and housing. According to him, the nursing home, nor any aspect of its operation other than the costs associated with YL and others in her situation, was not funded by the city. According to the court, the resulting dispute arose under a private contract. The ruling is another one that unfortunately indicates that claiming protection of rights against private parties under the HRA will be very difficult[\[12\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn12). The Joint Commission on Human Rights once again expressed concern about the courts\' restrictive interpretation of the meaning of "public body" and thus depriving many vulnerable people of protection under the HRA. It also considered the possibility of resolving this problem through legislation. However, amending the HRA was considered a last resort. Consideration was given to enacting an additional, supplementary and interpretive law that would clarify that "function of a public nature" also means functions performed under private contracts with public administrations from which the obligation to perform them arises. The possibility of naming specific private entities that would be treated as "functionally public bodies" was also pointed out[\[13\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn13). The doctrine also criticized the above ruling. The rationale for the ruling pointed out that the nursing home was a for-profit enterprise, contracted with residents and treated the applicant in the same way as residents who ended up there without the involvement of the local authority, and thus did not perform a public function, although its operation concerned the care of the elderly and sick. Lord Pannick noted that the court ignored the fact that the applicant had been placed in the home on the basis of a statutory task of the local authority and that the nursing home was funded with public money to perform tasks on behalf of the local authority. The court\'s reasoning also stated that a public task is not performed by any person with whom the local authority has entered into contracts to perform the administration\'s statutory tasks. Lord Pannick pointed out that two situations should be distinguished from each other. One of them, is, for example, when a minister contracts for the supply of toilet paper. A private contractor will certainly not be performing public functions here. However, when the minister is required by law to place prisoners in custody and performs these functions through a private contractor, it would be difficult to seriously dispute that he is performing public functions. In YL\'s case, the nursing home was fulfilling as much as possible the statutory task imposed on the local government - providing care for the elderly - and it was not something collateral or irrelevant to that task[\[14\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn14). Recent court rulings unfortunately confirm the courts\' narrow understanding of public administrations. Their analysis can be found in a report on outsourcing in the UK. Recent examples have also shown that the legal position remains unsettled and in need of clarification. A Scottish Inner House of the Court of Session case, Ali v Serco[\[15\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn15) considered whether Serco (a private company) was a public authority under the HRA as a provider of temporary asylum accommodation for asylum-seekers. In 2018, Serco announced a new policy of evicting asylum seekers who they considered had no entitlement for asylum accommodation (locks were changed without a court process).[\[16\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn16) The Court made a distinction between the Home Secretary, who was charged with the public law responsibility for providing accommodation for asylum seekers, and Serco who was 'merely subject to a private law contract with the Home Office to provide the necessary services. The fact that those services are ultimately intended to fulfill a public law responsibility is immaterial; they are still provided on a private law basis. The case set out there was no 'single test of universal application' for a public function.[\[17\]](https://elearning.unito.it/scuolacle/mod/book/view.php?id=227634&chapterid=3260#_ftn17)