Supreme Court says Welsh NHS charges Bill in breach of A1P1

11 February 2015 by David Hart KC

Recovery of Medical Costs for Asbestos Diseases (Wales) Bill: reference by Counsel General for Wales [2015] UKSC 3, 9 February 2015 – read judgment here

Sounds like a rather abstruse case, but the Supreme Court has had some important things to say about how the courts should approach an argument that Article 1 of Protocol 1 to ECHR (the right to peaceful enjoyment of possessions) is breached by a legislative decision. The clash is always between public benefit and private impairment, and this is a good example. 

The Welsh Bill in issue seeks to fix those responsible for compensating asbestos victims (say, employers) with a liability to pay the costs incurred by the Welsh NHS in treating those victims. It also places the liability to make such payments on the insurers of those employers.

In short, the Supreme Court found the Bill to be in breach of A1P1, as well as lying outside the legislative competence of the Welsh Assembly.  Let’s see how they got there, and compare the conclusion with the failed A1P1 challenge brought in the AXA case (see [2011] UKSC 46, and my post here) concerning Scottish legislative changes about respiratory disease.

The pure devolution point turned on whether the Bill related to the “organisation and funding” of the NHS as defined in the Government of Wales Act 2006. The Supreme Court decided that it did not, and strictly speaking, what followed on A1P1 proceeded on the hypothetical basis that the Bill was otherwise within the competence of the Welsh Assembly.

The A1P1 point arose because Welsh Bills must also be human-rights compliant to be within the scope of the 2006 Act.

To understand the A1P1 point, we need a little bit more detail as to what the Bill did. The NHS payments to be reimbursed were future, not past, and this additional liability to reimburse the NHS only attaches to compensation payments which are agreed or made after the Bill comes into force. But that liability attached to all actual or potential wrongs, whenever committed. So if an employer negligently allowed its employees to be exposed to asbestos dust in the 1970s, and the trial of the case happened this year, this was an additional liability which would attach to the employer and to its insurers. That would be irrespective of when the policy of insurance may have been entered into. And the example is not fanciful – these claims may not manifest themselves until many years after exposure to the asbestos.

So you can see that the Bill is part prospective and part retrospective.

The Association of British Insurers, who intervened in the Supreme Court, argued that the Bill offended A1P1.

The Court held that A1P1 was engaged both in respect of compensators (typically, but not only, employers) and insurers. To be engaged, the alleged victim had to be subject to a risk of being “directly affected” by the legislation, rather than this being a purely hypothetical risk.

The law

Lord Mance, giving the judgment of the majority, summarised the four stages which arise in an A1P1 case at [45], which involved asking

(i) whether there is a legitimate aim which could justify a restriction of the relevant protected right,

(ii) whether the measure adopted is rationally connected to that aim,

(iii) whether the aim could have been achieved by a less intrusive measure and

(iv) whether, on a fair balance, the benefits of achieving the aim by the measure outweigh the disbenefits resulting from the restriction of the relevant protected right.

The issue was with what intensity a court should review the Bill in the course of that analysis, and what deference is due, or what weight attaches, to the legislature’s views of the Bill: [44].

The Welsh Ministers (founding on James  at (1986) 8 EHRR 123, argued that at all four stages the court should respect the legislature’s judgment as to the public interest, unless that judgment was “manifestly without reasonable foundation”.

Lord Mance disagreed, founding on later cases such as  Pressos (1996) 21 EHRR 301, and Bäck v Finland (2005) 40 EHRR 48, which were both retrospective interference cases. A special justification was required in such circumstances.

Lord Mance drew things together at [52]

I conclude that there is Strasbourg authority testing the aim and the public interest by asking whether it was manifestly unreasonable, but the approach in Strasbourg to at least the fourth stage involves asking simply whether, weighing all relevant factors, the measure adopted achieves a fair or proportionate balance between the public interest being promoted and the other interests involved. The court will in this context weigh the benefits of the measure in terms of the aim being promoted against the disbenefits to other interests.

And then, critically:

Significant respect may be due to the legislature’s decision, as one aspect of the margin of appreciation, but the hurdle to intervention will not be expressed at the high level of “manifest unreasonableness”. In this connection, it is important that, at the fourth stage of the Convention analysis, all relevant interests fall to be weighed and balanced. That means not merely public, but also all relevant private interests.

Hence:

The court may be especially well placed itself to evaluate the latter interests, which may not always have been fully or appropriately taken into account by the primary decision-maker.

This underlines the fact that the courts do have an important and “especially significant” role when evaluating all relevant interests: [54].

Lord Thomas (with whom Lady Hale agreed) agreed this statement of the law, and “the development in the increase in the jurisdiction [of the court] under A1P1 to  review the judgement of the [legislature]”: [105]

Its application 

Here the reasoning differed significantly between the majority of 3 and the minority of 2.

The Welsh Ministers (in reliance upon AXA) said that insurers run a considerable risk of unforeseen exposure anyway, particularly so in relation to asbestos-related diseases. But, said Lord Mance, there was no justification for the retrospective imposition of further exposure, which they could legitimately expect could not and would not fall upon them, both when issuing the policies and when considering from time to time the reserves to be held in respect of those policies.

The mere fact that legislation changes the pre-existing law retrospectively does not make it incompatible with A1P1. But special justification is necessary where changes are retrospective and upset “legitimate expectations”: [61]. That justification was present in AXA where there was a perceived injustice directly affecting the victims of asbestos diseases, and absent here, where the aim was simply to transfer the cost burden from the Welsh Ministers to compensators and insurers.

Lord Mance added that the Bill sought to introduce a new right of recourse which has never previously existed in the history of the NHS. The liability of compensators was dependent simply on the payment of compensation, even if made without admission of liability. And the liability of insurers followed on from this.

Lord Thomas (with Lady Hale) was considerably more sympathetic to the aims of the Bill. It sought to redress the long history of serious industrial diseases caused by negligence or breach of statutory duty, in the light of the escalation of the cost to the Welsh NHS which followed. The central aim of making the tortfeasor pay was entirely reasonable, and was pre-eminently a political judgment which was a matter for the legislature. That could have been achieved without any objection of retrospectivity, and indeed the retrospectivity in fact imposed by the Bill was limited. He attached great weight to the view of the Welsh Assembly on the measure. There was no excessive burden on employers. To a limited extent, however, the burden on insurers went further than could be justified, because the indemnity sought to be imposed by the Bill went beyond that which the insurers were contractually bound to provide to employers. So there was an A1P1 breach, but a very limited one.

Conclusion

The line between the AXA case (helping direct victims of asbestos diseases) and the present (the more general cost of those diseases to society) may seem to be somewhat tenuous. But the importance of the case is rather more in the Court’s carrying out a more intense analysis of societal benefit and individual burden than had been evident from the James case. And remember that the context of both decisions is retrospective burdens – things may be very different when the change in the rules applies only prospectively. That said, A1P1 has certainly been on the move – look at my reading list of cases below, in which the Supreme Court has been instrumental in making findings of breach in many different circumstances.

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