Administrative penalties: Questions that need to be answered

The views expressed in this article are the author's own

One issue that has impacted effective regulatory compliance in certain sectors for at least the last decade is the imposition of so-called administrative penalties by various public authorities. The courts presided by different judges have on various occasions questioned the legality of the powers under ordinary law afforded to different public authorities to impose administrative penalties.

In the landmark judgment the Federation of Estate Agents vs Director General (Competition) et decided by the Constitutional Court on 3 May 2016, the court held that the infringements of competition law that the federation allegedly may have breached were ultimately offences of a criminal nature even though the penalties that the Director General (Competition) could then have imposed were described as administrative.

Accordingly, Article 39(1) of the Constitution applied, whereby any person accused of a criminal offence must be given a fair hearing before an independent and impartial court. Subsequently, various constitutional court cases have been decided in the same vein against other public authorities notably the FIAU and the MFSA. The main argument accepted by the courts is that once such ‘administrative penalties’ are meant to punish the non-compliant person then such administrative penalties are of a criminal nature and should be treated accordingly, leading to a situation where time and again the courts have questioned the legality of certain provisions under ordinary law whereby public authorities are empowered to impose administrative penalties more so where these penalties involve substantial financial penalties.

This situation has now been on-going for some years and obviously needs to be addressed in short order. In doing so however certain questions need to be asked:

Question 1: What is an administrative penalty and what distinguishes such a penalty from a criminal penalty? There appears to be lack of clarity as to what constitutes an administrative penalty. In some court judgments the fact that the envisaged administrative penalty that may be imposed is deemed considerable implies that the imposition of the penalty is meant to punish the non-compliant person. This in turn has been interpreted in some court rulings as a sign that the administrative penalty is of a criminal nature and should be treated accordingly.

Question 2: Who should be empowered to impose an administrative penalty? In the light of the interpretation that has been given in some court judgments, should then administrative penalties, more so where the amount of the penalties are substantial, be imposed only by a court? Or conversely should public authorities also be empowered to impose such penalties?

Question 3: If the courts are to be empowered to impose administrative penalties, should this power relate to all administrative penalties? Or should recourse to the courts apply only where the envisaged penalty exceeds a prescribed minimum amount? If so, what criteria should be used to determine that amount?

Question 4: Should there be some degree of uniformity applicable to all sectors in relation to the imposition of administrative penalties? Various regulatory authorities—the MFSA, FIAU, the Competition Office within MCCAA and so on—have their own regime and procedures how administrative penalties are imposed. Significantly, in some instances the regulator in relation to all administrative penalties is required to apply to a court for a decision to impose penalties. Conversely, in other instances it is the regulator who determines the administrative penalty, though this can then be contested before a court.

Question 5: Irrespective of whether an administrative penalty is imposed by a court or by a public authority, should the right of appeal from any such decision to an Appeals Court be on points of law or also on points of fact? And how should the Court of Appeal be composed—should it be the Court of Appeal in its inferior jurisdiction, composed of a single judge, or in its superior jurisdiction, composed of three judges? Again, the approach across the various sectors differs substantially and for no apparent reason. One practical issue here is the Court of Appeal Superior will need more time simply because it is composed of three judges.

This list of questions is not exhaustive. It is merely an attempt  to identify some key questions that need to be addressed and answered. Certainly, we cannot persist with a situation where the powers of some public authorities to impose administrative penalties are being successfully challenged in court and where many sectoral regulatory regimes have their own unique procedure as to how administrative penalties are imposed.

A first step would be for government to launch a public consultation listing the various options with its proposals for reform. In doing so the questions mentioned above need to be asked and equally important, addressed.