JustResearch Edition no. 9

Research in Profile

• Experiences with the Development and Use of Alternatives to Litigation in Support of Regulation

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Research in Profile

EXPERIENCES WITH THE DEVELOPMENT AND USE OF ALTERNATIVES TO LITIGATION IN SUPPORT OF REGULATION

By Valerie Howe, Senior Research Officer, Research and Statistics Division, Department of Justice Canada

One of the core functions of the Department of Justice Canada, is to provide high-quality legal services and counsel to the government and to client departments and agencies. The Department of Justice Canada establishes Legal Services Units (LSUs) located on site within regulating departments or agencies to provide continuous legal advice. The Federal Prosecution Service (FPS) is responsible for the conduct of all regulatory prosecutions on behalf of the Government of Canada. Recently, FPS set itself the goal of better understanding and promoting the use of alternatives to prosecution for both criminal and regulatory law. The study discussed here examined the use of alternative instruments in regulation. Regulations are used to prevent future harm by setting standards in noncriminal law areas.

Methodology

The Research and Statistics Division (RSD) of the Department of Justice Canada interviewed those engaged in drafting and ensuring compliance with regulations to better understand best practices. In-depth, in-person interviews were conducted with Justice legal counsel at Departmental Legal Services Units and with enforcement officers and other key players from the regulating departments. The interviews focused on the alternatives being used, the process for deciding how to achieve compliance, the information and resource factors involved, and lessons learned. Additional background information came from the Justice Conference on Alternatives to Prosecution, several meetings with the Federal Prosecution Service Renewal Group, earlier reading and study in the field, and materials provided by those interviewed.

Results

The Department of Justice Canada acted in over 5,000 regulatory prosecutions in 2000-2001, most deriving from Canada Customs and Revenue Agency (CCRA), Fisheries and Oceans, and Citizenship and Immigration Canada. Overwhelmingly, departments and Justice legal advisors are very actively engaged in developing and exploring the use of alternatives to prosecution and strive to use prosecution cautiously and strategically.

Of the departments for which the FPS conducts prosecutions, approximately half have "stand alone" enforcement and compliance policies, while the rest use more informal enforcement protocols. Those with formal compliance and/or enforcement policies include Industry Canada, Environment Canada, Health Canada, the Canadian Food Inspection Agency, Human Resources Development Canada, Natural Resources Canada, and Transport Canada. Some, such as that of Industry Canada's Competition Bureau and Environment Canada's Canadian Environmental Protection legislation, are very detailed as to compliance options, while others include only a few enforcement methods.

Departments increasingly use various preventative approaches to promote compliance. These include: consultations with stakeholders, communicating and information sharing, working with industry associations and supporting vol-untary compliance, as well as monitoring. Common methods of enforcement are warnings, administrative monetary penalties, tickets, stop work or stop production (injunction-like orders) and prosecution. Some departments have developed enforcement methods particular to the specific activities they regulate. For example, Citizenship and Immigration Canada may order foreign nationals to leave the country; Environment Canada may detain ships used in environmental offences; Health Canada may request recalls on dangerous products; National Resources Canada may stop the importation of non-compliant products; and Industry Canada may seize non-compliant television satellite equipment.

Optimally, the options include a range or continuum from promoting or persuasive approaches, through mid-range instruments to more serious enforcement activities with penalties. Departments face serious challenges if they do not have a full spectrum of choices. For example, this is the case if regulations and policies only allow for a choice between soft, voluntary compliance options with warnings or directions and the serious measure of prosecution or cancellation of a licence to operate. Voluntary compliance may not be forthcoming and decisions to prosecute leading to successful prosecution and meaningful penalties were not common. Most departments and legal service units would very much like to have this full range of options. They see a particularly important role for easily administered, but persuasive, pressures such as monetary administrative penalties or injunction-like orders such as orders to comply, to stop work, or to recall or change offending products or practices. Departments tend to work systematically through whatever continuum of options (from softer to harder) at their disposal.

As an example, Health Canada's Product and Food Branch lists the following:

1. voluntary disposal of a non-compliant product;
2. detention of a non-compliant product;
3. recall of a non-compliant product;
4. negotiated compliance;
5. warning letters;
6. stop sale orders;
7. customs alert;
8. request to CCRA to refuse importation;
9. suspension or cancelling of marketing authorisation or product licence;
10. suspension or amendment of establishment licence;
11. formal hearing;
12. seizure and detention (including evidentiary);
13. prosecution;
14. injunction;
15. public warning; and,
16. public advisory/letters to associations (where distributor is difficult to reach).

For some regulated industries, publication of names-blaming and shaming-is gaining ground as an instrument. This, of course, is facilitated by information technologies and the ability to post publicly available information about court decisions or departmental decisions on departmental Website. Some departments are looking at "creative" penalties-penalties that would contribute to safety in a significant way. Such penalties could include fines that direct the funds to safety research or information, management strategies, monetary incentives for early compliance or registration. It is not always easy to interest courts in imposing such penalties.

The enforcing department is largely responsible for investigating and laying charges. In most cases, enforcement officers (whether they are CCRA auditors, immigration inspectors, park wardens) are the key decision-makers.

Five pillars for achieving compliance were identified:

1. the framework to put into place an appropriate spectrum of alternative methods to achieve compliance including legislative and regulatory authority, case law, and implementation;
2. adequacy of monitoring and of knowledge of regulatees and of the factors which lead to compliance or non-compliance;
3. adequacy of information about risks, trends, public concerns, industry structure and support, and political support, etc.;
4. resources to educate, research, monitor, persuade, and, where necessary, to enforce compliance, and then to conduct follow-ups as often as needed to ensure compliance; and,
5. relationships all along the chain of interaction from regulatees to the courts or ultimate enforcer; these in turn are shaped by the availability and flow of information, cultures, frequency of contact, inter-dependence, level of conflict or dispute, and availability of alternative dispute resolution approaches or separation strategies (rotating) where needed.

Challenges

A range of challenges in institutionalising various incentives to compliance were identified. The main challenges were:

1. inadequate legislative or regulatory authority to use a full range of instruments;
2. inadequate resources to assess what would work, to work with regulatees to educate, inform, persuade them to comply, and to investigate, audit, follow-up, and ensure compliance;
3. inadequate information about the regulatees, why some do not comply, the market and social factors which encourage non-compliance. While some may have that knowledge, it may not be shared among all of those who are involved in decision making about the use of alternatives in order to achieve compliance; and,
4. issues around the decentralization and fragmentation of decision making and the need for strong working relationships to be developed among all the players including:
   • those regulated;
     
   • reporters (public, business, auditors, other countries, etc., who may identify a problem);
   • field inspectors;
   • regional Justice prosecutors;
   • regional departmental managers, where they exist;
   • agents engaged to prosecute;
   • RCMP, provincial, and other police who may be involved;
   • LSU;
   • department managers at headquarters;
   • finance; and
   • FPS.

In some cases, the legislative or regulatory authority is a constraining factor. Some legislation is not up-to-date in allowing for a range of penalties, some is not clear enough, and some is too detailed with mandatory penalties or zero tolerance policies that constrain the use of alternatives. Regulations under several Acts have been challenged as not authorized under the legislation. Even where regulations have not been found ultra vires, there may exist a lack of clarity as to how the courts might interpret the adequacy of the legislative authority for newer alternatives. Issues with stop-work orders or similar orders include the possible effect on the local or national economy or workers, the possibility that a company can avoid the order by changing its name, and the fact that procedure rules mean the process is not quick or easy.

Conclusion

The interviews revealed the importance of understanding the utility and practicality of different instruments in context. Almost all the relevant factors (legislative and regulatory tools, the level of organization of the industry or population, the available opportunities and knowledge) vary from one area of regulation to another. For this reason, the effectiveness of different approaches to compliance also depends significantly on the nature of the product or service being regulated (for example, whether it is a trans-Atlantic shipment, sale of a baby soother, or fishing). Regular monitoring is often not practicable. In areas where millions of producers, business owners, and student clerks handle a product, such as cigarettes, the incidence of sales or traffic which is non-compliant may be very difficult to monitor. Information management and tools such as surveys of businesses to identify the factors which correlate with risk of non-compliance can be very useful. Active industry or workers associations can play an important role in getting information out, where they exist. CCRA relies upon analysis of a database on normal finances for different businesses to identify the factors which correlate with a higher likelihood of non-compliance. While information is not generally considered a tool on the compliance continuum, it can be very useful in managing the process of achieving compliance and targeting resources.

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