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The past few decades the UK have seen increasing expansion of public functions and services being transferred to the private sector, notably since the Thatcher government, altering the method of which public functions are provided. The growth in policies such as outsourcing, privitasation, and Private Finance Initiative (PFI) has allowed private entities to carry-out functions traditionally delivered by public establishments. The development of transferring or “contracting-out” of public services is generally justified by supposedly greater efficiency, flexibility and diversity, aiming for greater responsiveness and overall efficacy. This public and private partnership trend has led to the contracting-out of provisions such as infrastructure services, management of prisons, roads, transport, schools, benefit administration, care services and schools being run and/or built by private establishments, demonstrating the utilization of private capabilities for public purposes. However, such arrangements do carry along with it significant drawbacks, and a potential to undermine the rule of law.
In discussing the contracting out of public functions to be carried out by private bodies, it is imperative for the distinction of private and public values to be understood. In definition, Private law concerns the activities of private individuals, such contractual arrangement between parties. As such, private bodies are entitled to act in accordance with self-interests, so long as laws are adhered. Public law on the other hand serves the public’s interests, regulating the relationship between the state and individuals, and conducted by the legislature. Public authorities are thus subject to high levels of accountability, and are to be held responsible for their actions, namely due to the power held over people within a state. Although the public/private distinction appears straightforward theoretically, the development of public/private contracts has blurred the line between what is public and what is private, leading to undesirable confusion on multiple occasions. This has led to much controversy, with divided opinions on possible solutions.
With the trend of this new approach in governance, by far the most significant issue in contracting out government functions is that of accountability. Given that the state are to be held on higher standards of accountability and scrutiny, the question to ask is should private entities, acting on behalf of the state carrying out government functions, be subject to similar standards of accountability and duties as public entities? Through the evaluation of case development and academic material, this paper aims to discuss the law surrounding this area,
clarifying the issues presented by the contracting-out of government functions, namely concerns involving public accountability.
MECHANISMS OF REVIEW: JUDICIAL REVIEW & THE HUMAN RIGHTS ACT
The application for judicial review is governed by the Supreme Courts Act 1897, and Order 53 of the Rule of the Supreme Court. In recent decades, there has been substantial developments of judicial review in the UK, widening the courts’ authority to monitor the government’s use of power and hold the state accountable if such action is needed. The ambit of judicial review has always faced constraints, in that it is traditionally only available when it comes to the use of statutory power. This power to hold government accountable for their actions was later supplemented by the introduction of the Human Rights Act1, which enables individuals to assert their convention rights in domestic UK courts, without resorting to Strasburg. Despite both being crucial instruments in protecting rights, the concurrent growth of contracting out public functions would mean that it is necessary to determine whether a certain body falls within a public or private authority. If it is found to be the latter, the body will not be subjected to the same legal constraints as the former. Although it may seem that the HRA offers an alternative route to ensure accountability, its practical application is also significantly limited. Both mechanisms will be separately discussed below.
THE ACCOUNTABILITY ISSUE In essence, the bodies carrying out public obligations through private law arrangements cannot be held accountable legally through judicial review, hence seemingly have no political accountability through parliamentary scrutiny, nor does it have an administrative responsibility such as in the public sectors. This leaves an obvious gap in protection of the public, leaving huge potential for abuse of power. This often leaves victims turning to private law remedies, which are often inappropriate in abuse of power circumstances. In the absence of judicial intervention, victims tend to be left without appropriate remedy.
Public law allows individuals to enforce rights to challenge decisions of public body via judicial review. Whereas private law generally relates to areas of enforcing contracts or damages. Thus, if victims are left with no option but to turn towards private law, the dispute would likely be resolved through enforcement of an agreement, notwithstanding the legality
1 Human Rights Act 1998
contracts, slowly moving away from its previous restrictions to the use of scrutiny of statutory power.
Case development had indicated a change of attitude towards the court’s traditional unwillingness to subject non-statutory prerogative powers to judicial review. In GCHQ , the prime minister banned trade union membership without consulting the union. It was held that the union had a legitimate expectation to be consulted, but the prime minister’s actions was not found to be unfair. The action taken was on grounds of national security, courts decided the issue was non-judiciable. The case was an important one, confirming the availability of judicial review of delegated powers flowing from a prerogative power. An attempt was made my Lord Diplock to clarify the grounds of review, that is “irrationality”, “illegality” and “procedural impropriety”. It was established here that whether a body is amenable to judicial review depends on the nature of the government power, that is the subject matter, and not their source.
This idea was taken further in the leading decision of Datafin 5, which again rejected the ‘source of power’ being the only test for purposes of review. It involved Datafin’s challenge to the panel’s decision in the course of competing over a takeover with another firm. The powers held by the panel does not derive from prerogative, and is not backed by statute, described by Lord Donaldson MR as ‘ without visible means of legal support’. 6Nevertheless, the court considered it to be exercising a public duty when performing its obligations. It was clear that the panel exercised monopolistic powers, and ‘but for’ the Panel, the state would have taken a central role in the field. Accompanied by the fact that no other options were available to mediate the legality of its actions, the panel was subjected to judicial review, provided by Order 53. The Master of Rolls pointed out that it was:
‘clear from the expressed willingness of the secretary of state for trade and Industry to limis legislation in the field of take-overs and mergers and to use the panel as the centerpiece of his regulation of the market’ 7
This decision was a radical departure from previous approaches, sweeping aside the conventional notion that only governmental bodies are susceptible to judicial review. Lord
4 Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 5 R v Panel on Take-overs and Mergers, Ex parte Datafin plc [1987] QB 815 6 Ibid, p 7 Ibid, p
Donaldson MR took the view that courts should not only be looking at whether or not a power is statutory, but taking into account the location of power in a practical, functional manner. In short, the ambit of judicial review had been extended to bodies “exercising public law functions, or if the exercise of its functions have public law consequences”.
These cases are significant turning points in the development of judicial review. Following Datafin , similar bodies have been subjected to review, such as the British pharmaceutical company code of practice committee9 and the Bar Council.10 Suggesting a growing willingness to push back boundaries of judicial review.
However, multiple cases post datafin seems to have retreated from the flexible approach suggested, again turning towards a more rigid public and private divide. In R v Football Association Ltd 11, despite ‘monopolistic’ powers being exercised, it was held to not be a public body. The courts here used the ‘but for’ test, which asks the question: ‘but for’ its existence, would the government take over and create a similar body? This application approach however seems to cause uncertainty, in that it places a burden to the courts to determine whether a particular function will be undertaken by the state, and it is unclear what would be considered governmental. In the similar case of Ex Parte Aga Khan 12, it was held that the Jockey Club’s power derived from a contractual source(931)instead of statute, and not governmental. Hoffman LJ advocated that activities under private law should remain in the private sphere, thus members are bound by their contract with the club. These cases appear to downplay the datafin approach, emphasizing on the source of power rather than the nature of power. Indeed, the unwillingness to apply datafin was made clear in Ex parte Aegon Life assurance Ltd 13, where despite stark factual similarities, the functionality test was not applied, and the authority was held not to be subjected to judicial review as its powers derive from contract. The case was decided from the source of power, and continues to leave private bodies exercising public functions outside the ambit of judicial review.
Despite substantive developments in judicial review, due to the rapid concurrent increase of public/private partnerships, judicial review has not fully extended to address such public
8 Ibid, p 9 R v Code of Practice Committee of the British Pharmaceutical Industry, Ex parte Professional Counselling Aids Ltd (1990) Times, 7 November 10 R v General Council of the Bar, Ex parte Percival [1990] 3 All ER 137 11 R v Football Association Ltd, ex parte Football League Ltd [1993] 2 All ER 833 12 R v Disciplinary committee of the Jockey Club, Ex parte Aga Khan [1993] 1 WLR 909 13 R v Insurance Ombudsman Bureau, Ex parte Aegon Life Assurance Ltd [1995] LRLR 101
jurisprudence has shown that a state can be held responsible for actions of private bodies who carry out responsibilities under the Convention. Nonetheless, as previously mentioned, the changing of social structure and shrinking of public sectors has not allowed for the public/ private distinction to be easy.
The Human Rights Act states that public authorities are to act in compatibility with convention rights, and is unlawful to do otherwise.20A comprehensive definition of what is a ‘public authority’ is not offered by the Act itself, but section 6(3) gives that this includes “any person certain of whose functions are functions of a public nature”, and 6(5) gives “a person is not a public authority by virtue only of subsection 3(b) if the nature of the act is private”. This sets out two categories of public bodies. The first is known as “core” or “pure” public authorities, comprising of local authorities and governmental departments. The second category refers to bodies who are only to be bound when exercising functions of ‘a public nature. These bodies are known as hybrid or functional public authorities.
Earlier decisions concerning the reach of section 6 duty has adopted a narrow approach, placing emphasis on institutional factors such as source of power or legal personalities, instead of a functional test, to determine whether responsibilities were of public nature. The approach was criticized by The Joint Committee of Human Rights.21In Poplar Housing 22 , courts rejected the functionality approach, and found that the housing association fell within ambit of HRA due to the proximity of relationship between the private entity and the delegating public authority. It was followed by Leonard Cheshire 23, which concluded that residential care provided by a charity for patience placed there by local health authorities was not a public body under HRA.
In the case of Re YL 24, courts were given an opportunity to re-evaluate the issue. The case concerns an elderly claimant, who resides in a care home via arrangements made with local authorities under the National Assistance Act 1948. It was held that the care home was not performing functions of a public nature, and does not fall under s6(3)(b) of the HRA. The care home was privately owned and running on a profit-making basis, some claimants are
20 Section 6(1) HRA 21 The Joint Committee on Human Rights, HL 39/HC382, the meaning of “public authority” under the Human Rights Act (2003-04), para [39] 22 Poplar Housing v Donoghue [2001] EWCA Civ 595 23 R (Heather) v Leonard Cheshire Foundation [2002] EWCA Civ 366
24 YL v Birmingham City Council and Others [2007] UKHL 27
publicly funded to stay, and some are funded privately. The same conclusion was reached as Cheshire, which was factually similar.
Section 6 (3) (b) appears to give effect to the functional test in datafin , yet in YL , the court’s fcus was placed on the nature of the institution (private profit-making), the reason for the actions of the care home (a commercial motivation), and the contractual source behind the arrangement.25Lord Mance’s conclusion that the source was “essentially contractual” and differs from any “function of a public nature”26 indicates a falling back to previous judicial review cases. The courts pointed out that imposing human right obligations on the private company does not fit well with private law right to carry out services under contractual arrangements, highlighting the tension and firm distinction between private and public law in this context. The decision contributes to the conceptual difficulties in defining a ‘hybrid body’. In the minority, both Lord Bingham and Baroness Hale gave strong dissenting opinions. Lord Bingham felt that the the nature of the relevant function was was provision of care and residential accommodation to those in need, and ‘not otherwise available to them’.27This suggests that Lord Mance’s distinction was irrelevant, that the actual provision of care and the arranging of it, should not be differentiated. The distinction was said to be “artificial and legalistic” by Baroness Hale, who felt the state has assumed both the responsibility for arranging the care, and meeting needs.28 Hale thus took a purposive approach, and argues that the services in question are made ‘ pursuant to statutory arrangements, at public expense and in the public interest ’, and as such was of a public nature, which is opposite to the majority conclusion.
Furthermore, The Secretary of State for Constitutional Affairs intervened in YL, arguing that private and voluntary care homes providing care through contract with a local authority should be bound by the Act, and that there is an immediate link between the services and Convention rights, such that State responsibility might be engaged by their performance. A publication by the Joint Committee on Human Rights has recently highlighted the undesirable treatment of some elderly people, despite regulatory framework.30They pointed out that they are “convinced that existing legislation does not sufficiently protect and
25 Stephanie palmer, “public functions and private services: a gap in human rights protection” 26 YL v Birmingham City Council and Others [2007] UKHL 27, [120] 27 ibid, [14] 28 ibid, [66] 29 YL v Birmingham City Council and Others [2007] UKHL 27, para 83 30 “The Human Rights of Older People in Healthcare”, Joint committee on Human Rights, (2006-7), para [161]
BIBLIOGRAPHY
BOOKS
Loveland I, Constitutional Law, Administrative Law, And Human Rights (Oxford University Press 2012) Ryan M and Foster S, Unlocking Constitutional and Administrative Law (Routledge 2014) CASES R v Code of Practice Committee of the British Pharmaceutical Industry, Ex parte Professional Counselling Aids Ltd [1990] Times, 7 November Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 R v Disciplinary committee of the Jockey Club, Ex parte Aga Khan [1993] 1 WLR 909 R v Football Association Ltd, ex parte Football League Ltd [1993] 2 All ER 833 R v General Council of the Bar, Ex parte Percival [1990] 3 All ER 13 7 R (Heather) v Leonard Cheshire Foundation [2002] EWCA Civ 366 R v Headmaster of Fernhill Manor School and Another, Ex pate Brown (1992) Times, 5 June R v Insurance Ombudsman Bureau, Ex parte Aegon Life Assurance Ltd [1995] LRLR 101 R (on the application of Transport for London) v London Underground Ltd and another [2002] EWCH (admin) 637 R v Panel on Take-overs and Mergers, Ex parte Datafin plc [1987] QB 815 Poplar Housing v Donoghue [2001] EWCA Civ 595 R v Servite Houses and the London Borough of Wandsworth Council, Ex parte Goldsmith and Chatting [2002] LGR X and Y v The Netherlands (1985) 8 E.H.R.R Z v United Kingdom (2001) 34 E.H.R.R. 97 YL v Birmingham City Council and Others [2007] UKHL 27 STATUTES AND STATUTORY INSTRUMENTS Human Rights Act 1998 National Assistance Act 1948 JOURNAL ARTICLES Stephanie Palmer, “Public Functions and Private Services: A gap in human rights protection” [2008] 6 International Journal of Constitutional Law 585 Stephanie Palmer, “Public, Private and the Human Rights Act 1998: An Ideological Divide” [2007] 66(3) CLJ CONTRIBUTIONS IN EDITED BOOKS Williams, Alexander, “Public authorities: what is a hybrid public authority under the HRA?” In The Impact of the UK Human Rights Act on Private Law, (Cambridge University Press
GOVERNMENT PUBLICATION The Joint Committee on Human Rights, HL 39/HC382, the meaning of “public authority” under the Human Rights Act (2003-04)
