White Paper Series: Regulatory Panel changes – Fair or unfair?
In this blog, we consider the Gambling Commission’s most recent proposals to the Regulatory Panel.
It will not come as a surprise to readers that, as gambling lawyers, we have serious concerns about the proposals to:
- use Adjudicators with only a minimum of five years’ post qualification experience (“PQE”); and
- change the default from oral hearings to paper-based decisions subject to a fairness test.
Regulatory Panel and its importance
The Regulatory Panel provides an important opportunity for applicants and licensees to attend an oral hearing to challenge decisions made by Gambling Commission staff. It is the only avenue of recourse, outside the expensive options of the First-tier Tribunal and judicial review, when the Gambling Commission is going against you. Whilst we accept it is still, in fact, the Gambling Commission, it is an important accountability mechanism for Gambling Commission employees making decisions under delegated powers. This narrow and non-independent avenue of recourse should not be further eroded.
On 18 May 2020, the Gambling Commission announced planned changes to its Regulatory Panel, which included: (1) the recruitment and appointment of legally-qualified Adjudicators, solely for the purpose of sitting on the Regulatory Panel with the “presumption” they will also provide legal advice; and (2) reconstituting the quorum as follows: (a) for operating licences: one Commissioner and one Adjudicator; and (b) for personal licences: one Adjudicator.
At the time, we were so concerned by the proposals and that the duty to act fairly was being compromised that we submitted a response to the 2020 consultation and shared it on our blog to assist others in preparing responses.
More than 14 months later, on 21 July 2021, the Gambling Commission published its consultation response which summarised the 22 written responses received from gambling operators, trade associations and others, including Harris Hagan. As explained in our August 2021 blog, The overwhelming majority of respondents disagreed with each of the Gambling Commission’s proposals, with a key concern being that “the independence and impartiality of the Panel would be adversely affected by the proposal to use adjudicators” as outlined in my May 2020 blog.
The two main proposed changes are:
- Quorum and composition
The Regulatory Panel will no longer comprise up to two to three Commissioners, advised by an independent legal adviser. Instead, it will be chaired by a legally qualified Adjudicator sitting alongside one Commissioner and one senior Gambling Commission employee. The Adjudicator would sit alone on case management matters and personal licensing cases.
The main reasons for the proposed change are to improve availability, improve governance and accountability and provide an enhanced skillset for decision making.
Our main concerns are:
- Adjudicators will, as proposed in 2020, be employed by the Gambling Commission. In a small feat of victory, we note from the draft Governance Framework (published this time as part of the consultation) the Gambling Commission has acknowledged some of our previous concerns by indicating that Adjudicators’ will be home-based and appraisals will be run by a Commissioner.
- Adjudicators will only need a minimum of five years’ PQE. The idea that someone with potentially as little as five years’ PQE would be adjudicating on a £20m fine, suspension or revocation of a licence is frightening. Where is the Gambling Commission’s evidence to support that five years’ PQE is appropriate? How is this a sufficient level of experience, bearing in mind they are likely to have absolutely no experience of gambling and, given their lack of seniority, very minimal experience making unsupervised decisions?
- Unlike the 2020 consultation which failed to specifically mention other adjudication frameworks, this time, the Gambling Commission has made fleeting mention to the General Medical Council (regulates medical doctors), Ofqual (regulates qualifications, examinations and assessments) and Solicitors’ Regulation Authority (regulates law firms and solicitors) to support the move to a mixed model of decision-making. We remain wholly unconvinced by the Gambling Commission’s rationale. There are about 90 statutory regulators in the UK and yet the consultation includes no details, or evaluation, of the different models of adjudication and relative advantages and disadvantages (including appeal rates) of each model. Nor is there any reference to the determining factors for the chosen mixed model or the appropriateness of application to the regulation of commercial gambling. As with the 2020 consultation, we are left to assume this is deliberate given many of the other models appear impartial, independent and robust. By way of example, approximately half of the Financial Conduct Authority’s Regulatory Decisions Committee’s 18 members come from finance or financial services backgrounds. The other half have esteemed legal, governance, policy or academic backgrounds. Independence is further emphasised by the FCA handbook stipulation that: (i) none of the members are employees; and (ii) the committee has its own legal advisers and support staff.
- The Principles of inspection and enforcement, as set out in Philip Hampton’s Reducing administrative burdens: effective inspection and enforcement report state: “[r]egulators should be accountable for the efficiency and effectiveness of their activities, while remaining independent in the decisions they take setting out a number of core principles of effective regulation – the standard against which all regulators’ performance should be judged.” At a minimum, the Gambling Commission must publish its research into each adjudication model and its evaluation criteria for monitoring the “efficiency and effectiveness” of each model, together with the impact on applicants/licensees.
- There is no mention of a trial period of using Adjudicators.
- Default of paper decisions
Another proposal is to change the default from oral hearings to paper-based decisions. An oral hearing can be requested by the applicant/licensee; alternatively, the Panel itself may decide it is “required” – using a test of “fairness”, for example, where there are “material and significant disputes of fact”.
The main reasons for this proposed change are to reduce the burden on applicants/licensees particularly where they have unrepresented and find it difficult to navigate, and to increase the promptness of decision making.
Our main concern is that applicants and licensees will be denied the opportunity to bring their arguments to life. What is the test of fairness and why do we need one?
The requirements of fairness are flexible and fact specific. Legal history places huge importance on oral argument and, in our view, with good reason. Over 20 years ago, Lord Justice Laws recognised “oral argument is perhaps the most powerful force there is, in our legal process, to promote a change of mind.” Further, in R (H) v Secretary of State for Justice  EWHC 2590 (Admin), Cranston J summarised the legal position in respect of oral hearings as follows:
Procedural fairness sometimes demands an oral hearing. There can be greater confidence with an oral hearing that the relevant standards have been properly applied and that the facts on which the decision is based are accurate. The oral hearing also gives the person affected by the decision the opportunity to tailor the arguments to the concerns of the decision maker.
Another concern is the matter of mutual respect for the Gambling Commission and the applicant/licensee with the latter’s perception of the process being central, as acknowledged in Osborn v Parole Board  UKSC 61, in which Lord Reid referred to the principle that:
…justice is intuitively understood to require a procedure which pays due respect to persons whose rights are significantly affected by decisions taken in the exercise of administrative or judicial functions. Respect entails that such persons ought to be able to participate in the procedure by which the decision is made, provided they have something to say which is relevant to the decision to be taken.
We feel strongly that the Gambling Commission’s proposals do not conform to the necessary standards of fairness. The proposed barrier should therefore be removed, and the policy should simply say that an oral hearing can be chosen on request. This will address the Gambling Commission’s main reason for the proposed change whilst still enabling those who want one, a fair hearing.
The consultation cites the stress that the unrepresented applicants/licensees experience in attending hearings as a reason for changing the default to paper decisions. However, there is no mention of how many of the 12 requests, to the Regulatory Panel, last year were unrepresented. The Consultation is silent (no doubt, intentionally) on the introduction of a policy dealing with unrepresented parties.
It is undeniable that the Gambling Commission is a very powerful regulator. How many other UK regulatory authorities can impose limitless fines, commence criminal proceedings and decide to close multi-million pound businesses?
It appears that the Gambling Commission’s primary focus is to cut costs. Inevitably, good decisions will not be made in the public interest, nor will those decisions be made following a fair process. The new proposals will have a far bigger negative impact than announced changes in 2021, which will be implemented at the same time (as amended). The only possible – dim – glimmer of hope is that decisions will or should be quicker. However, if those decisions are of poor quality and unfair, it means that they will be more routinely appealed to the First-tier Tribunal, which will be lengthy, uncertain and expensive. Therefore, any possible benefit gained from quicker decisions will be more than outweighed by the drawbacks.
If we look at the regulatory landscape, the Gambling Commission is proposing to make these significant changes at the same time as it is escalating fines and sanctions.
Effective regulation requires effective accountability, and it seems to us that the Gambling Commission is removing a weakening mechanism which holds the regulator to account for its own policies and procedures and the law.
In conclusion, and repeating the final words from my May 2020 blog, the proposed changes do not offer a practical vision for adjudication that is consistent with good regulatory and legal practice. There is nothing to suggest that fairness has been a consideration. The only consideration appears to be about saving cost, time for the Gambling Commission and Commissioners, and speeding up the process. In doing so, the duty to act fairly has been compromised.
Respond to the consultation
We strongly encourage industry and its stakeholders to respond to the consultation, which closes on 18 October 2023.