Wednesday, 31 July 2013

I contract, therefore I am: the Third Source Powers of Government Entities: Part One

Over at Public Law for Everyone, Mark Elliott has an excellent post on the UK Supreme Court's recent decision in R. (New London College Ltd.) v. Home Secretary, [2013] UKSC 51. The decision features a slight divergence of views between Lords Sumption and Carnwath on the scope of governmental powers. I am going to break my comments down across at least two posts. In this post, I consider the relationship between express, implied and "third source" powers.

The salient facts can be relatively briefly stated. Some third-level educational institutions are approved by the Home Secretary such that students they sponsor can (if otherwise admissible) stay in the United Kingdom for the duration of their studies. Two institutions lost sponsorship status when the sponsor guidance was changed by the Home Secretary. The lawfulness of the guidance was at issue (based on a pair of previous cases, which I discussed here).

As to the law, let us start with first principles. Government action should have a legal basis. We know this since at least Entick v. Carrington. But this should not be taken to mean that government action need always be expressly provided for by statute. Government entities -- just like natural or legal persons -- can do certain things by virtue of their very existence. "I contract, therefore I am"! These powers have been described as springing from the "third source". It seems that the prevailing view in England and Wales is that these powers inhere in the central government by virtue of the nature of the Crown as a corporation sole (see e.g. Richards L.J. here).

Any tension between the principle that government action should have a legal basis and that which recognizes third source governmental powers is resolved by insisting that any government action that is coercive must have a legal basis. If powers are used in such a way as to infringe upon rights or liabilities, some statutory or prerogative source must be identified, as Mark observes:
However, the third source is circumscribed in constitutionally significant ways.  In particular, third-source action is unlawful if contravenes an existing law or interferes with extant legal rights. For example, non-consensual entry upon private property could not be lawfully accomplished under the third source: such action would contravene the law of trespass unless statutory authority could be shown. The third-source analysis is, then, no threat to the principle articulated in Entick v Carrington. It must also be the case that, just as the prerogative is placed in abeyance by legislation, so third-source authority must be displaced to the extent that a statutory scheme exists governing the area in question.
Moreover, as a practical matter, it is undeniable that government entities do an awful lot of contracting and other things (such as issuing guidelines) that are not expressly provided for by statute or the prerogative. Lawyers and legal systems must come to terms with this.

Very simply, either one says that all government action (including contracting, etc) must be expressly or impliedly authorized by statute, in which case powers expressly granted or implicit in a statutory scheme can be used to coercive effect. Alternatively, one says that there are three categories of authority under legislation and the prerogative: express, implicit and third source, the last of which cannot be used to coercive effect. In respect of both options one and two, nothing -- no matter how one classifies the powers at issue -- can lawfully done which contravenes the purposes of legislation.

On its face, option one seems more respectful of the rule of law by limiting the powers that can be used to coercive effect. Probing further, however, casts doubt on the prima facie appeal of option one.

The key question is the identification of implied powers. Does the test for an implied power require that the power should be necessary to give effect to express statutory provisions, or simply reasonably incidental to the express provisions? 

From a rule of law perspective a test of necessity rather than reasonableness is more appropriate because it makes coercive action harder to justify. But if one takes the first option and insists that coercive action must be expressly or implicitly authorized, one will often have to strain to imply a power to carry out a wide range of activities not expressly provided for in statute. Put simply, one who chooses option one will find herself drawn in practice to a test of reasonably incidental rather than necessary. If the test for implied powers is that they merely be reasonably incidental, a great deal of coercive action becomes possible. Casting the net of implied powers wide will legitimate a broad range of governmental action that infringes individuals' rights and interests. A test of necessity would constrain coercive government action.

Rather than straining to shoehorn the many varieties of administrative action into the categories of express and implied powers, judges and jurists would be better to recognize that there are express powers, accompanied by powers necessarily implicit in the statutory scheme, and also a residue of third source powers which can be used to write contracts, hire staff, issue guidelines and so on.

The New London College case juxtaposes options one and two quite nicely. Lord Carnwath goes with option one and, predictably, a test of reasonably incidental (at para. 33). He tied the issuing of mandatory guidance as to the criteria for becoming a sponsor to a specific provision in the Immigration Act, 1971; it was an "adjunct" to the statutory power to regulate admissions for the purposes of study (at para. 37). Perhaps notably, Lord Carnwath's reliance on a test of reasonableness allowed him to imply a power to revoke any licences granted (at para. 38); a more robust test of necessity might have required an express power to grant and revoke given the obvious detriment caused by revoking licences.

By contrast, Lord Sumption was more adventurous. For him, the issuing of guidelines could be understood as flowing from the Home Secretary's general power under the legislation:
the statutory power of the Secretary of State to administer the system of immigration control must necessarily extend to a range of ancillary and incidental administrative powers not expressly spelt out in the Act, including the vetting of sponsors...
With an important caveat that I will explain in my next post, this is in line with option two. The Home Secretary has third source powers, just as an "Educational Institutions Immigration Agency" or some similar creature of Parliament would have third source powers. Beyond those powers that are express or implied, there are other ancillary and incidental powers available to the Home Secretary in the discharge of her statutory functions.

Quite properly, however, the last category of powers is not "unlimited" (at para. 29) and cannot be used in a coercive fashion:
The Secretary of State cannot adopt measures for identifying suitable sponsors which are inconsistent with the Act or the Immigration Rules. Without specific statutory authority, she cannot adopt measures which are coercive; or which infringe the legal rights of others (including their rights under the Human Rights Convention); or which are irrational or unfair or otherwise conflict with the general constraints on administrative action imposed by public law. However, she has not transgressed any of these limitations by operating a system of approved Tier 4 sponsors. It is not coercive. There are substantial advantages for sponsors in participating, but they are not obliged to do so. The rules contained in the Tier 4 Guidance for determining whether applicants are suitable to be sponsoring institutions, are in reality conditions of participation, and sponsors seeking the advantages of a licence cannot complain if they are required to adhere to them.
One can argue that Lord Sumption dismisses too quickly the possibility that the scheme at issue was coercive (especially given the ability to revoke licences) but he at least had to demonstrate that the scheme was not coercive, something Lord Carnwath did not have to do because under option one coercion is justifiable once a power has been implied. It is possible that Lord Sumption's approach is "muddled", as Mark Elliott argues, but I will leave that discussion to my next post.

Option one is perfectly coherent and perhaps in theory is more respectful of the Entick v. Carrington principle. In practice, however, the need for judges to respond to the realities of modern governance counsels choosing option two.

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