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Jersey costs law breaches human rights – a stitch-up for the State?

William Redgrave

What's happened?

The Court of Appeal of Jersey has held that a Jersey statutory provision is not compatible with a human right protected by the European Convention on Human Rights.

The law in question is the International Cooperation (Protection from Liability) (Jersey) Law 2018 (the 2018 Law). Under it Jersey public authorities that give international assistance to overseas authorities are not liable to pay compensation or legal costs to anyone who wins a court case against them in relation to that assistance.

How did this happen?

Imperium Trustees (Jersey) Limited (Imperium) sought a judicial review of the decision of the Jersey Competent Authority (JCA) to issue a notice ordering Imperium to provide information for an overseas tax investigation into a third party. Imperium successfully appealed the Royal Court’s decision to refuse leave to apply for judicial review. It applied for its legal costs of the appeal to be paid by the JCA if it wins the judicial review. But the court made no costs order, because of the 2018 Law.

The Court of Appeal of Jersey has now ruled, in Imperium Trustees (Jersey) Limited v Jersey Competent Authority [2024] JCA014, that the 2018 Law is incompatible with Article 6 of the ECHR (which protects the right to a fair hearing), because it infringes the principles of access to courts and equality of arms.

What does this mean?

This decision does not mean the 2018 Law has been struck down, or disapplied. The law is still in effect, so the JCA was still not ordered to pay Imperium’s costs. But the declaration of incompatibility, made under Article 5 of the Human Rights (Jersey) Law 2000, sends a message to the States that it has passed a law that places Jersey in breach of the ECHR. It is now a matter for the States whether it repeals or amends the law, or leaves it in place.

What's in the judgment?

The judgment is long (over 250 paragraphs) and detailed. The Court began by noting that in Jersey civil disputes the court has a wide discretion to make whatever order as to costs it thinks is just. Typically the loser pays the winner’s costs, but not always. In the case of public bodies, the caselaw in Jersey and England recognises the principle that making costs orders routinely against public authorities may inhibit them from defending or enforcing their decisions in court. This “chilling effect” may be a good reason not to order costs against public bodies acting reasonably in litigation, though there must be an evidential basis for the chilling effect in the particular case. There is no across-the-board presumption that public bodies are protected from costs orders.

The 2018 Law cut across this approach by giving public authorities complete protection from cost risk in litigation concerning assistance to an overseas authority. The effect of the 2018 Law is that the rival litigants are always treated unequally. The State never pays the other party’s costs, no matter how unreasonable the State’s case was; whereas an unsuccessful applicant is always at risk of having to pay the State’s costs, no matter how reasonable their case against the State was. If the 2018 Law had not existed, it seems likely that a cost order would have been made in Imperium’s favour.

Imperium argued that being unable to recover costs under any circumstances inhibited access to a court, and that under the principle of “equality of arms” it is not a fair fight when the State can easily afford to fight and lose a judicial review, yet the applicant is left out of pocket even when they win.

"margin of appreciation"

The ECHR allows a “margin of appreciation” to member states which permits limited interference in some Convention rights, including Article 6. This is permitted only if the national legislation has a legitimate aim, and the interference in the right is proportionate to that aim. Where the legislature can be shown to have identified a legitimate aim and given careful thought to proportionality (i.e. not going too far), it will be easier to show that the law falls within the margin of appreciation.

Reviewing the evidence

The Court reviewed evidence of preparatory documents and debate in the States of Jersey (Jersey’s parliament) during the passage of the legislation, to see whether the States had identified a legitimate aim, and had considered proportionality.

Unfortunately the evidence was that the States had given no proper consideration to the Human Rights implications of the 2018 Law at all. The proponents of the law referred to Jersey’s reputation as a Global Citizen, saying “Our law officers and other bodies … must be able to go about their business without threat of being taken to court, or threat of being sued by individuals and businesses, who have vast means, that the Island really cannot match.” There was no mention of any countervailing impact on the rights of those who have a valid case against the State, whatever their means might be.

The Law Officers Department provided an assessment of the human rights impact of the proposed law, which concluded that “there are no human rights issues.” The Court of Appeal’s view on that was blunt:

“… that is not a correct statement of the legal position. In the circumstances, it is hardly surprising that there was no debate on those issues.” [paragraph 58]

How is Article 6 engaged?

The Court noted that Imperium itself was not short of funds to pursue the litigation, but agreed that every pound it spends on the case is “dead money”, i.e. it has no chance of recovering any of it, no matter how strong its case is or how successful it is. This gave Imperium the status of “victim” in relation to the Article 6 right of access to a court, even though the legal costs had not in fact prevented Imperium from proceeding with the case.

The JCA argued that, following Strasbourg caselaw, Article 6 was not engaged because it does not apply in tax disputes, as they do not determine “civil rights and obligations”. The Court of Appeal rejected this argument, noting that this was not a case about liability to pay tax; rather, it concerned the rights of confidentiality in private documents held by a trustee. Disputes about the lawfulness of coercive investigative steps which involve an interference with property rights or rights of privacy are not excluded from the scope of Article 6.

Imperium relied upon Strasbourg decisions on legislation brought in by other countries (mainly Croatia, it seems) that removed the right to costs against the State in judicial reviews. The European Court of Human Rights had consistently held in such cases that

In such disputes, for the State to shift the expense of remedying its own errors on [to] the individuals concerned, with a view to protecting its own financial interests, is contrary to the well-established principle that the risk of any mistake made by the State authority must be borne by the State itself and that errors must not be remedied at the expense of the individuals concerned.”

The Court’s conclusions

The Court of Appeal concluded that insulating a public authority from costs may be a legitimate aim in some instances, but that the principle of the State bearing the cost of remedying its own mistakes is relevant to assessing the proportionality of the interference in the Article 6 right. It noted that the Strasbourg cases that had been relied upon by the Law Officers Department, in asserting that there were “no human rights issues”, were irrelevant because they dealt with a different point, i.e. the presumption of innocence.

Two members of the Court concluded that the legislation did not have a legitimate aim because it was intended to save public funds: there was insufficient evidence to hold that its aim had been to protect the authorities from the “chilling effect” of the threat of litigation. The other member concluded that the aim was indeed to avoid the chilling effect, and that that was legitimate.

However the Court unanimously concluded that, even assuming the aim was to avoid the chilling effect, the interference was “plainly disproportionate” to that aim. It was a blanket ban on recovering costs from the State, which would inevitably inhibit people with limited means from pursuing their case, placing them at a disadvantage to the State. It created a structural imbalance which “necessarily (and indeed deliberately) benefits a public authority which has acted unlawfully.” [paragraph 252]. Thus the 2018 Law infringed the rights of access to a court and equality of arm.

What's next?

The Court of Appeal has refused the Attorney General’s application for leave to appeal to the Privy Council, in a decision that can be read here. If the Privy Council grants leave then it is possible this decision will be overturned.
If the decision survives, we shall see whether the States draw the conclusion that they should revisit the 2018 Law. The Court has declared that the States Assembly did not take into account the relevant caselaw and principles when considering the human rights impact of the Law. As the Court noted, there are other less draconian ways of dealing with the “chilling effect” question.

If it had had the benefit of the analysis performed by the Court of Appeal before the Law was passed, it must be questioned whether the States would have passed the Law in its present form at all. If it was a mistake, will it be remedied?