Deciding whether a given consultation process conducted prior to some administrative decision was or was not sufficiently unfair to warrant challenge is not an easy task. Three connected problems commonly arise:
(1) did the public body provide adequate information to enable properly informed consultation
(2) was the consultation at a formative stage of the decision-making process, so it was a real rather than sham process?
(3) did the consultation encompass sufficient alternatives?
In this case, the judge said (see my post here) that consultees were missing important information under (1), and, on the particular facts of the case ,it should have consulted on an option which it had rejected, and so found a breach of (3).
The Court of Appeal disagreed. Both findings were wrong. The consultation process was not unfair.
This public law challenge arose in the rather unlikely commercial setting of the London Metal Exchange. It operates futures and options markets. Under the Financial Services & Markets Act 2000 (FSMA), the LME has a responsibility to uphold standards on its exchange, including setting rules and procedures to provide for fair and orderly trading. Hence, it was a public authority and its decisions needed to confirm to public law standards.
I gave rather more details in my earlier post, but the proposed change was a change in the rules to reduce queuing for LME-approved warehouse space (called the LILO rule in the judgments). The queues arose from the 2008 crash, and the accumulation of stocks. The queues affected pricing.
The solution proposed by the LME, however, would, it was agreed, lead to an immediate, if short-term, fall in the price of aluminium, potentially causing hardship to metal producers such as Rusal.
LME only consulted on the new LILO rule. It did not consult on an option to ban or cap rent for metal in a long queue, which it had considered and rejected before it started its formal consultation process.
As it happened, 10 of the 33 consultation responses invited the LME to consider a rent ban/cap instead of the LILO rule.
At ff, the Court of Appeal set out the law on consultation. Though the LME was operating within a statutory setting imposed by FSMA and regulations thereunder, the requirements of the duty was set by the common law. Consultation had to be early enough so as to be at the formative stage, and consultees had to be provided with enough information and enough time to respond, and the authority must conscientiously take into account consultation responses.
Constitutionally, it is a matter for the court to decide whether the consultation was fair or unfair, but the court should only intervene if there is a clear reason for finding unfairness.
Now to options. The authority has a wide discretion as to the options on which to consult. There was authority (cited at ) for the proposition that consultation did not require an authority
to give focus to proposals which it no longer had under consideration. In any event, the process of consultation did not, and designedly could not, preclude outright opposition to the one proposed, which opposition might prompt the authority to reconsider it and/or any of its discarded six options and/or to consider any new ones.
As Arden LJ summarised things at 
In other words, there is in general no obligation on a public body to consult on options it has discarded. The statement in De Smith’s Judicial Review that there should be consultation on “every viable option”, taken on its own, is not supported by the authorities (7th ed, paragraph 7-054).
There were however exceptional cases where the courts had found that consultation had been unfair because alternative options had not been set out: . The judge, the CA said, had misinterpreted one of these (Madden) at . Other cases (see ) turned on their facts.
The CA was unpersuaded that this case was an exceptional one. There was no unfairness about not consulting on the rejected option, because information about it (including competition law issues with the rejected options) was generally known in this specialised field. The adequacy of consultation depends on the sufficiency of information in the given field.
Therefore the court cannot ignore information which was well known to the consultees even if it was not set out or referred to in the consultation document. Any other conclusion would lead to cumbrous and potentially self-defeating consultation exercises where the real issue is obscured by common knowledge.
Similarly, there was no broad duty to consider alternatives to LILO which might be less damaging to producers even though they were not supported by the LME: , and see the summary at .
The CA also rejected a criticism by the judge (ff) that the LME was privately considering a further option without raising it in the formal consultation. Properly understood, this proposal was being considered as an adjunct to LILO, not as a replacement.
Was the scope of the duty to consult affected by the commercial context? It was argued that the standard of fairness should not be diluted simply because this was the case. But, as Arden LJ pointed out at , delay in such a context itself had commercial implications, and the court needed to act with considerable care in case the integrity of the market was prejudiced by an unsustainable legal challenge.
The real policy reasons underlying this rowing back from the consultation duty imposed by the judge are well set out by the CA at 
Leaving aside commercial considerations, the judge’s conclusions represented a considerable extension in the duty of fairness in consultation. In particular, it would considerably increase the burden for consultant bodies if they had to consult on all the options which they were not advancing.
The CA felt that the judge extended the principles beyond the limits to which they can properly be stretched. The judge’s analysis placed onerous obligations on any public body conducting a consultation on complex issues in a politically sensitive area.
So courts should tread warily in imposing too high, and hence potentially counterproductive, standards of consultation.
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