Human rights and corporate risk

The Human Rights Act is now law. And it is not only public bodies that are affected writes Tony Cherry.
On 2 October, the UK Human Rights Act 1998 (HRA) came into force. Human rights, which are embodied in the European Convention of Human Rights (ECHR), are now directly enforceable within the United Kingdom. This means that it has now become unlawful for public authorities (including the National Health Service, local authorities, schools, prisons and the courts), or any person or organisation carrying out a public function, to interfere with an individual's human rights without justification.

Impact on corporate "public" bodies
The direct impact of the HRA on corporate bodies depends on the concepts of "public authorities" and "public functions". These are central to the legislation. It is no great surprise that public authorities include government departments (but not Parliament itself), the police, and, crucially, the courts. However, some essentially private concerns in the UK's corporate sector become public authorities under the HRA, to the extent to which their functions are of a public nature.

Under what circumstances will a private corporation be deemed to be a corporate public authority? This is a grey area in the legislation. Inevitably, it will produce anomalies. The privatised monopoly, Railtrack, is one of the most often quoted examples of a corporate public authority. It is likely that other privatised utilities will also be caught by the Act and be directly liable for any HRA breaches.

Businesses that hitherto have never been in the public sector may also be affected by the HRA, in so far as they perform public functions. Companies running prisons, or healthcare, social and environmental services for local authorities, such as waste disposal businesses, nursing homes, and private suppliers of agency staff, may be included. A key indicator will probably be whether the organisation concerned has entered into some sort of contract with a public body.

Other organisations or people not normally in either the classic, corporate "profit-making" sector, or in the public sector, may find themselves caught by the HRA when carrying out some of their functions. These include charities, housing associations and industry regulators.

Liability of hybrid corporates
In the case of public-private hybrids, liability is strictly limited to the exercise of public functions. There will always be circumstances where it is unclear whether a company is performing a private or public function. These kinds of cases are bound to reach the courts.

Should liability be established, the court can award whatever remedy seems just and appropriate. When setting damages, the court will take into account the Strasbourg norm, which tends to be modest. Recently, the Law Commissions of England and Wales and Scotland issued a report compiling relevant Strasbourg case law on damages awards as an aid to courts here in awarding damages. The guiding principle is to return the claimant to the position he or she was in before the breach of human rights.

Indirect effects on corporates
Even if a private company is not directly affected by the HRA because it does not perform any public functions and is not a public-private "hybrid", it could be indirectly affected in one of several ways.

• Extension of existing corporate liabilities: The HRA requires the courts to interpret all legislation and common law in accordance with the ECHR and, in so doing, to take account of existing decisions of the European Court of Justice in Strasbourg. It is this requirement which has the greatest potential for extending existing private companies' liabilities. However, the HRA is likely to enlarge existing liabilities, rather than to create entirely new ones. Many areas of liability are already so strictly regulated that it is hard to imagine how much more these could be expanded. Other areas, such as public liability, have more obvious potential for growth.

• Joint liability with a public body: Private companies might be affected "by association" with any HRA breaches by public bodies. In assessing the liability of both defendants, will the courts "round up" to the higher level of HRA duties imposed on the public body defendant? If not, how will the courts justify applying different standards to . two jointly-liable defendants?

• Pre-emptive action taken by public bodies: Both hybrid corporate bodies and other private companies may be affected by the actions of public bodies themselves taking pre-emptive action to comply with the HRA. Public bodies may want to cover their own potential HRA liabilities by imposing stricter regulations. This could have a knock-on effect on corporate liabilities if stricter regulation resulted in restriction of some commercial activity. Companies could incur contractual liabilities if they were unable to supply goods or services as a result.

• Corporate litigants and the right to a fair trial: Another indirect effect lies in the duty of the courts, as public bodies, to comply with the HRA. There has been considerable speculation as to how litigants may seek to use Article 6 of the ECHR, the right to a fair trial, to their tactical advantage to overcome the requirements and sanctions of the Civil Procedure Rules (CPR). Defendant companies could face a rougher ride in court as claimants, facing summary dismissal of their claim or sanctions for failure to comply with court orders, might plead Article 6.
• However, corporate bodies should not necessarily fear the worst. Article 6 ingredients are already present in the CPR case management decision-making framework, as set out in the "Overriding Objective", Part 1 of the CPR. This is designed to enable courts to deal with cases justly. It includes principles such as ensuring that the parties are on an equal footing (mirroring the "equality of arms" ECHR concept). Arguably, if the courts are dealing with cases according to the CPR Overriding Objective, they will not be breaching anybody's rights.
• A crystal ball exercise?
• It is difficult to predict the impact of the HRA on the corporate sector, even by looking at the case law coming out of Strasbourg. One of the principles of the ECHR is that it should be regarded as a "living instrument" which must be interpreted in the light of "present day conditions". We will not be easily able to predict HRA liabilities on the strength of case precedent. Only the most recent will give any reliable guidance.
• One thing is certain. Human rights are flavour of the month. At the beginning of October, the UK government welcomed the final text of the European Union's Charter of Fundamental Rights. And so the story begins again ...
• --
• Tony Cherry is an insurance partner with national law firm Beachcroft Wansbroughs, Tel: 0207 894 6022, E-mail: acherry@bwlaw.co.uk
• Minimise your human rights risk

• Appoint appropriate people with relevant expertise to take responsibility for carrying out an HRA risk audit
• Prioritise - you need to identify potential areas of direct HRA liability quickly by asking if your company
• - Performs any public functions
• - Has contracts with any public bodies
• - Works within any public sector or domain
• - Does any work of public significance
• - Does any work that normally a government or local authority would do? (This list of key indicators is not exhaustive)
• Review current practices associated with these discrete areas of work. You need to agree best practice. Trade associations may be able to help with HRA guidance and examples of industry HRA best practice
• Talk to your legal advisers and insurers if you still feel there are potential areas of liability exposure,
• After addressing direct HRA liability, carry out a wider-ranging audit to assess potential indirect areas
• Make sure that you are already strictly complying with existing UK law and regulations in connection with employment, environmental and product liabilities
• Make a further assessment to ensure that you are addressing HRA-sensitive areas of liability.
• HRA guidance
• You can get guidance on the HRA from the Home Office's Human Rights Task Force at www.homeoffice.gov.uk/hract/tasklist.htm. Answers to questions are provided at www.homeoffice.gov.uk/hract/hrafaqs.htm .