Since history, there had been many notable cases where protests demonstrations were done. United States which had always been known as a model democracy, every person is given the right for free speech and activity as long as it “doesn’t severely affect the rights of others.” However, recently there has been cases where the police force would use aggressive tactics to evict these protesters despite the protestors did not break any regulation. Some examples are the following: Baruch students who protested about tuition hike get arrested as well as beaten and injured by police, a vast amount of property were confiscated from the Occupy Wall Street sleeping demonstrators, Oakland Police Department fired tear gas, smoke grenades and bean-bag rounds which seriously injured an old Iraq veteran, police force evicted and arrested hundreds of protesters in Philadelphia and Los Angeles, campus police officer pepper sprayed sit-in demonstrators at University of California, police force  also pepper sprayed protesters despite that they were legally standing in the sidewalk in New York.

Indeed, the police force is responsible for maintaining the public safety. If protesters did indeed break any regulation or in any way severely harm another individual’s safety or right, then that is when the police may perform their duties and exercise their power. But Occupy movements protesters have only used peaceful means, thus, it really questions the legitimacy of the violent and force tactics the police have been using lately. In the article U.N. Envoy: U.S. Isn’t Protecting Occupy Protesters’ Rights, Frank La Rue, a longtime Guatemalan human right activist who serves in the U.N wrote a letter concerning the violation of human and constitutional rights of these protesters. He also touch upon the principle of proportionality which I also agree with.

“One of the principles is proportionality,” La Rue said. “The use of police force is legitimate to maintain public order — but there has to be a danger of real harm, a clear and present danger. And second, there has to be a proportionality of the force employed to prevent a real danger.”

“And history suggests that harsh tactics against social movements don’t work anyway, he said. In Occupy’s case, he said, “disbanding them by force won’t change that attitude of indignation.”

In the history, there has also been such forceful tactics against social movements but they only fail to solve any problem.  Likewise, similar aggressive tactics were also being used lately. It is absolutely unjustified that these protesters were being treated as if they were criminals. As a result, many protesters end up being injured and I feel like the police force is indeed abusing these protesters’ rights.

“We’re seeing widespread violations of fundamental First Amendment and Fourth Amendment rights,” said Mara Verheyden-Hilliard, co-chair of a National Lawyers Guild Committee, which has sent hundreds of volunteers to provide legal representation to Occupations across the nation.

“The demonstrations are treated as if they’re presumptively criminal,” she said. “Instead of looking at free speech activity as an honored and cherished right that should be supported and facilitated, the reaction of local authorities and police is very frequently to look at it as a crime scene.”

Every person has the right to dissent with the authorities. I feel like the police force went beyond overboard to “fulfill” their duties. Especially living in the democratic-based country, it is disappointing to see these kinds of violations to happen.

“I think it’s a dangerous spot in the sense of a precedent,” La Rue said, expressing concern that the United States risks losing its credibility as a model democracy, particularly if the excessive use of force against peaceful protests continues.

Like what La Rue said, U.S. will only lose its reputation and credibility if such forceful tactics continue to be use against these peace demonstrations. Such tactic is not going to rid any dissensions but will only cause more uproar and resentment. What happened to the country that used to believe in peace and democracy? The government is not helping the situation by continuing to use this kind of tactic. The way how the police force reacted to the Occupy movement lately only showed violation of every individual’s fundamental rights.

For more information, please refer to the following links of the articles:

• 15 Arrested During Baruch College Tuition Protest: http://www.dnainfo.com/20111121/murray-hill-gramercy/15-arrested-during-baruch-college-tuition-protest
• U.N. Envoy: U.S. Isn’t Protecting Occupy Protesters’ Rights: http://www.huffingtonpost.com/2011/12/02/occupy-wall-street-un-envoy_n_1125860.html

• Directly proportional and inversely proportional (17.03)
• Determining proportionality from a table (5.33) – you don’t need to know about joint variation
• Graphing proportional variables TO BE CREATED
• Directly proportional example (1.44)
• Directly proportional application (2.01)
• Inversely proportional application (4.42)

Proportionality to a power

TO BE CREATED

Figure 1: Illustration of Kepler's three laws with two planetary orbits. (1) The orbits are ellipses, with focal points ƒ1 and ƒ2 for the first planet and ƒ1 and ƒ3 for the second planet. The Sun is placed in focal point ƒ1. (2) The two shaded sectors A1 and A2 have the same surface area and the time for planet 1 to cover segment A1 is equal to the time to cover segment A2. (3) The total orbit times for planet 1 and planet 2 have a ratio a13/2 : a23/2.

In astronomy, Kepler’s laws give a description of the motion of planets around theSun.

Kepler’s laws are:

1. The orbit of every planet is an ellipse with the Sun at one of the two foci.
2. A line joining a planet and the Sun sweeps out equal areas during equal intervals of time.
3. The square of the orbital period of a planet is directly proportional to the cube of the semi-major axis of its orbit.

Books:

http://www.bailii.org/ew/cases/EWCA/Civ/2011/1150.html

Some of the decisions:-

1) ‘Funding Costs’ not recoverable

2) ATE Premium allowed - £9,677,554 . A very good day for First Assist! Although one must consider what they would have been forking out had the claim been lost

3) The 2 stage test in relation to proportionality (Lownds v Home Office [2002]) is considered and clarified. This was required as Master Hurst decided that the Court did not have to apply the ‘necessity’ test to each item in the bill of costs on detailed assessment (even though he decided that the costs claimed appeared disproportionate). Personally i think Master Hurst was simply trying to save time and costs at the detailed assessment hearing. The Costs Judge is now going to have to apply the 2 stage approach to each and every item at the assessment hearing – it will be a long hearing!

4) Vetting costs – In theory they are recoverable in the case save for the ’necessity’ and reasonableness test.  

5) Abandoned claims - Subject to the requirement of necessity in relation to the respective items the costs in respect of the “abandoned claims” are recoverable (in so far as it was reasonable and proportionate to plead, investigate and pursue them)

6)  Success fee - allowed at 58% uplift for both Leigh Day and counsel

I recommend reading the Judgement as the above is only a basic summary of some of the decisions made.

One thing is for sure – Defendants will be citing this case as their new authority for the refusal to pay ‘funding costs’. Another victory for Defendants!

*fundamental requirement of proportionality, put less eloquently, is the idea that “the punishment fits the crime”. It can also encompass the idea that a penalty should be proportional to the “aims” or desired outcome of the penalty, and not excessive.

Christopher Brown

On 17 June 2011 the Court of Appeal gave judgment in an interesting case concerning the legality of a measure prohibiting the use of cigarette vending machines, commonly seen in pubs and bars: R (Sinclair Collis and Another) v Secretary of State for Health [2011] EWCA Civ 437.  It raised the now frequently encountered doctrine of proportionality under EU law. It was common ground that the measure, contained in secondary legislation, was caught by Article 34 TFEU (ex Article 28 EC) on the free movement of goods – most if not all machines are imported from continental Europe – and that the Government’s pleaded justification, namely that the measure pursued the objective of protecting public health, was prima facie a good one (see Article 36 TFEU).  The debate concerned the issue of whether the ban was proportionate.

For those who have not read the judgment, it may come as a surprise to hear that it is some 76 pages long and contains long reasoned judgments from all 3 members of the Court. Why so? The simple answer is that they all approached the matter differently. The majority – the Master of the Rolls (MR) and Arden LJ – came to the same conclusion (just about) but by different means, whilst Laws LJ issued a long dissenting judgment.

The facts are not easy to summarise shortly. The Government started to look at what if anything to do about vending machines back in 2008. Its primary (arguably sole) concern was that they were being used by the under 18s, which was something which the Government naturally wished to prevent as part of its attempt to combat underage smoking. Three options were considered: maintain the status quo; regulate machines by mandating the use of “age restriction mechanisms” (ARMs) such as electronic ID card age verification; or prohibit such machines outright. Initially, and indeed until a late stage in the legislative process, the Government was in favour of regulation which, if unsuccessful, might lead to a ban. The Bill introduced by the Government would have given the Secretary of State the power either to prohibit or to regulate. However, an amendment to the Bill was moved by a backbench MP such that the SoS would only have the power to prohibit cigarette vending machines.  That amendment was adopted and made its way into the Health Act 2009.  Secondary legislation was adopted soon after the Act entered into force providing for the prohibition of such machines.  The focus was on the under 18s, although the Government also pointed to potential benefits to adults, on the basis that cigarettes would be slightly more difficult to acquire.

The essence of the appellants’ challenge was that the prohibition fell foul of the proportionality principle. It was submitted that there were less restrictive ways of achieving the policy goal of the protection of human health, namely by statutory regulation or even voluntary action on the part of the industry with a threat of prohibition if results were not forthcoming. The appellants pointed to the fact that the SoS had initially supported the idea of statutory regulation as an appropriate means of combating under-age smoking.

All three judges relied on two particular cases: the well-known judgment of the Court of Justice in FEDESA [1990] ECR I-4023 and the Court of Appeal’s judgment in Eastside Cheese [1999] 3 CLMR 123, but they all drew different conclusions from them.  Given their importance, it is worth quoting the salient passages from each:

In FEDESA, the Court of Justice held as follows at para 13:

“The Court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.”

Eastside Cheese concerned an emergency control order, made following a case of E. coli infection, which prohibited the carrying on of any commercial operation in relation to cheese originating from a particular dairy.  The issue was the order’s justification under Article 36 TFEU.  Lord Bingham CJ said this at paras 41-48:

“41 The principle of proportionality is one of the basic principles of Community law. It has been expressed by the European Court of Justice in [FEDESA]… Because the principle is so general (and may affect a range of issues from the validity of primary legislation such as the Shops Act 1950 to much narrower points such as the quantum of penalties for customs infringements) it must be related to the particular situation in which it is invoked…

43. However the test is formulated, it is clear that in the application of Article 36 the maintenance of public health must be regarded as a very important objective and must carry great weight in the balancing exercise. In De Peijper [1976] ECR 613, 635 (paragraph 15) the Court of Justice said that health and the life of humans rank first among the interests protected by Article 36, and it is for member states to decide (within the limits imposed by the Treaty) what degree of protection to provide…

45. In principle the decision on proportionality has to be taken by the national court which is seised of an issue on Article 36, subject of course to any possible reference to the Court of Justice … But in the case of a legislative measure the national court must not simply accept the view of the national legislature or confine itself to deciding whether what the legislature has enacted is reasonable.

46. Nevertheless it is clear that the national legislature has a considerable margin of appreciation, especially in legislating on matters which raise complex economic issues connected with the Community’s fundamental policies.

48. …The margin of appreciation for a decision-maker (which includes, in this context, a national legislature) may be broad or narrow. The margin is broadest when the national court is concerned with primary legislation enacted by its own legislature in an area where a general policy of the Community must be given effect in the particular economic and social circumstances of the member state in question. The margin narrows gradually rather than abruptly with changes in the character of the decision-maker and the scope of what has to be decided (not, as the secretary of state submits, only with the latter)…”

Laws LJ gave the first judgment. He noted that the doctrine of proportionality applies differentially depending on the case, the engine of the differences being the scope of the margin of discretion or appreciation accorded to the decision-maker (in Arden LJ’s words, the intensity of review). He said that two factors in particular affected the scope of such margin – the identity of the decision-maker and the subject-matter of the decision. As for the former, his view was that acts of the primary legislator attracted a broader margin and acts of the secondary legislator a narrower one; as for the latter factor, general policies of the EU and the promotion of a benefit of great general importance, such as the protection of health, attracted a broad margin of appreciation (§23).

Importantly for his judgment, Laws LJ considered that the real decision-maker here was the Secretary of State. This augured in favour of a stricter approach to proportionality. He took issue with the High Court’s conclusion that the ban was to be treated as if contained in primary legislation, saying that that had “constitutional implications” (§28). The fact that Parliament had given the SoS the power to prohibit vending machines could not be construed as meaning that a ban should be put into effect.  The relevant provision of the Act did nothing more than confer a discretion (§30). The legislators’ subjective intention could not condition the rule-maker’s discretion to make regulations pursuant to the Act or broaden the margin of appreciation to be accorded to the rule-maker.

Laws LJ came to the conclusion that the ban was disproportionate, although he rejected a submission by the appellants that the Act itself, properly construed, permitted the SoS to ban vending machines which were not fitted with ARM.  He held (at §76) that:

“[The Act] on what I would hold is its true construction does no more than empower the Secretary of State, at his discretion, to impose the ban. The bare conferment of the power cannot offend TFEU Article 36 or ECHR A1P1. Accordingly the burden of the judicial review must fall on the Regulations, under which the Secretary of State had to decide whether to use the power conferred. Faced with s.3A as enacted he might have decided to do so albeit after considering ARM, if he concluded for sound reasons that ARM would be insufficiently effective to achieve the legitimate aim in hand and only the ban would do. If on the other hand his conclusion was that ARM would suffice and the ban would be disproportionate, no doubt the ban would not be imposed. However he could not impose ARM; and in those circumstances the government might ask Parliament to reconsider the legislation. But the effective decision for the purpose of these proceedings would be that of the Secretary of State, whatever the realpolitik. He would enjoy the margin of appreciation appropriate to him. And he cannot, as I have said, find solace in the fact that the enabling statute on its proper construction did not allow him (or the Minister) to impose ARM as a policy choice.”

And at §79 Laws LJ said:

“What has, I think, made this case elusive is that while s.3A as enacted did not empower the Secretary of State to impose ARM, on the view I take he was nevertheless obliged to consider ARM’s merits before exercising the power to impose a ban. If he did not, the imposition of the ban would be (and in my judgment is) disproportionate. I reiterate: the Minister cannot find solace in the fact that the enabling statute on its proper construction did not allow her to impose ARM as a policy choice. The point is important because, as it seems to me, any other view involves treating the 2009 Act as conferring on the Secretary of State a discretionary power which he might exercise free of the discipline and constraint of proportionality. But there is nothing in the statute, and certainly not in the general law, to justify such a position. This approach moreover preserves the constitutional divide between the power of Parliament and the power of the Secretary of State.”

Laws LJ’s approach may be constitutionally pure, but it does have a whiff of the unreal about it: Parliament had spoken in clear terms, notwithstanding the SoS’s express preference for regulation in the first instance. The judge’s approach also begs the question as to what the SoS would be permitted to do if Parliament said – as might readily be expected – that it would not reconsider the Act.  Would that lead to EU law stalemate? Or would a future decision of the SoS to ban machines then be more immune to challenge?

Arden LJ took a rather different view: whilst ordinarily the secondary legislator attracts a higher level of scrutiny, that was not inevitably the case once other factors were taken into account; there was no “bright line rule” (§137).  She considered that Parliament had made positive decisions both to give the SoS the power to ban vending machines and to rule out the possibility of statutory regulation by the SoS. Parliament had also acted “in the confident expectation” that the SoS would not leave the matter to be regulated by a voluntary code (§168). The intensity of review of decisions of Parliament was that of “manifest error”; the concept of “least intrusive means” was not applicable or applied with a much lower level of intensity.  The same intensity of review applied to decisions of the SoS authorised by Parliament.  For Arden LJ, Parliament and the SoS were “engaged on a common enterprise” here (§151), and so this case was rather different from other cases, such as Eastman Cheese, where the SoS’s role was independent of Parliament: in such cases, the margin of discretion was narrower.  In her view (§174):

“If the powers of the Secretary of State are to be adjudged by some different standard from that applying to Parliament in those areas where their powers overlap, the measure of discretion given by European Union law to the national legislature is undermined and made useless, and the decision of Parliament is also undermined.”

She concluded that no manifest error had been made by either Parliament in conferring the power to ban vending machines or by the SoS in exercising it. In particular, the SoS’s decision to impose a ban was not on its face manifestly inappropriate; the SoS did not have to go further and show that (in this case) a voluntary code would not be a better means of achieving a reduction in underage smoking.  Instead, the burden of adducing evidence that a less intrusive means of achieving the same goal passed to the appellants; and the appellants had not discharged the burden of proving that there were other equally suitable ways of achieving the same legitimate aim pursued by the SoS. Indeed, the evidence on the effectiveness of the installation of ARM in combating underage purchases was weak (§165).

The MR, giving the final judgment, confessed to having changed his mind more than once before settling in favour of the Government. He did not, however, agree with Arden LJ’s views that Parliament and the SoS were acting in “partnership” (§212) and that the margin of appreciation was the same for acts of both of them in this case.  For him, the breadth of the margin in relation to any decision depended on the circumstances of the case and in particular on the identity of the decision-maker, the nature of the decision, the reasons for it and its effect (§200).  He said (§213):

 “While the decision to impose the ban must, therefore, be assessed on the basis that it was made by the executive arm of the Government of a single member state, when deciding on the margin of appreciation to be afforded to the Government in relation to the Regulations, it seems to me that (i) the involvement of the legislature is a factor favouring a broader margin than would be appropriate to a purely executive decision, and (ii) the fact that the Regulations are concerned with health and the prevention of premature death supports a relatively broad margin, as does (iii) the fact that the Regulations are based, in part, on complex assessments of the public interest.

 However, I do not consider that the margin is as broad as it would be if the decision had been that of the democratically elected national legislature. Even less do I consider that the margin is as broad as it would be if the decision had applied across all EU member states.”

In other words, the MR’s approach falls somewhere between those of Laws LJ and Arden LJ: the margin of appreciation in this case is broader than it would be if the decision were ‘purely executive’, but not as broad as that accorded to decisions of the democratically elected legislature.

Contrary to Arden LJ, he acknowledged that there was an obligation to opt for the least restrictive way of achieving a particular objective, but (§203):

“that factor should not be applied by a court in such a way as to usurp the role of the primary decision-maker. So, where there is an alternative possible measure, there may be a difference of view as to which measure would be less onerous, and, unless the view of the Member State’s government that its measure is the more appropriate is manifestly wrong, the court should not substitute its own view for that of the government.”

Whilst the MR could see some force in the appellants’ criticisms of the ban, the justification was not “so weak or illogical” as to justify the Court interfering (§237). Nor could the decision to impose the ban be required to be supported by a net cost-benefit figure in a quantitative analysis – such a mechanistic approach was not part of the case law or supported by principle or common sense.  So, although such an analysis had been performed by the Government, and although the Court was sympathetic to criticisms of it, that was by-the-by.  After referring to various possible disadvantages of a voluntary code over a ban, the MR concluded that it was not irrational for the SoS to have decided to proceed with a ban, even in the light of the possibility of a voluntary code (§248).  And although there was some force in the criticism that the SoS had not directly considered a voluntary code as an alternative, the Court had to “concentrative on the substantive merits rather than on the procedural aspects” (§250).  In his view:

“It would be taking the law further than it has been taken by the Court of Justice if we were to hold that a Government measure infringed proportionality simply because another, less onerous, alternative was not considered, in circumstances where it is apparent that the Government reasonably took the view that that alternative would significantly fall short of the measure in terms of achieving the aim sought to be achieved.”

Comment

The judgments display a clear divergence of views as to how to assess the proportionality of measures where the executive is exercising powers conferred on it by the legislature. Should the executive be given greater leeway in such circumstances? This distinction is not one drawn by the case law of the Court of Justice, at any rate explicitly, but has frequently been relied on by the domestic courts.

In any event, the fact that there may be a certain margin of manoeuvre for the decision-maker where complex policy decisions are concerned does not obviate the need to consider whether less restrictive ways of achieving the same legitimate objective exist; with respect, the MR’s view is to be preferred to that of Arden LJ. Indeed, it is a cornerstone of the proportionality principle that the least restrictive measure be taken, and it must be for the decision-maker to address its mind to the issue.

The critical question, therefore, is how far the decision-maker needs go in considering alternatives.  It is here that the MR and Arden LJ converge, both taking a hands-off approach. The MR frames the issue in terms of the reasonableness of the SoS’s view as to the alternative; for Arden LJ, it was more that the appellant had not discharged the burden of proving the adequacy of the alternative. Of course, the “alternative” for them was a voluntary code – statutory regulation had been removed from the equation by Parliament. Laws LJ, on the other hand, considered that the SoS had to give consideration to regulation through ARM even though he had no power under the primary legislation to impose it and even though he may ultimately reject it. This was rejected by the majority: the focus should be on the substantive merits rather than on process (for once, perhaps, the more searching scrutiny of EU judicial review came to the rescue of the decision-maker).

On one point, however, all members of the Court agreed: there was certainly no obligation on the SoS to engage in respective financial cost/benefit analyses of the various alternatives: as Arden LJ put it, “It is surely difficult to put a price on human health, just as it is on human happiness. The benefits of health policy include changes in behaviour and lifestyle, which enable people to lead longer and more fulfilling lives” (§178).

In the end, it is difficult to determine the exact ratio of the judgment in Sinclair Collis.  But what can be said with confidence is that whilst the proportionality doctrine has now, thanks to both EU and ECHR law, been part of domestic law for decades, its precise meaning and application in individual cases is often very difficult to determine.

(As a concluding footnote, it might be noted that in May 2011 the Scottish Court of Session (Outer House) came to a similar conclusion to that of the Court of Appeal in respect of the ban in Scotland of vending machines: see [2011] CSOH 80.)

Justice consists in doing what is fair and right and in accordance with law; proportionality is a key element of just punishment.

Fanatics, whether religious or ideological, care nothing about truth, only about what they believe is The Truth. That is why they are impervious to any rendition of facts, the evidence of the senses, or logic.

It is not rational to seek the answers to current problems in so-called ‘Holy Scriptures’ (whether Torah, Bible or Quran) written thousands of years ago.

Heroes are persons who perform actions beyond the call of duty. Just putting on a military uniform or those of a police officer or firefighter does not make one a hero. Nor does doing what a dangerous job entails make one, ipso facto, a hero.

The debasement of our language goes hand in hand with the corporate media’s abandonment of investigative journalism.

The corporate media’s operating principle in regard to the government nowadays is:  See no evil – Hear no evil – Speak no evil.

If American exceptionalism ever existed, then the fabric of our Constitution and adherence to its principles and goals and the rule of law were the crux of any such exceptionalism. Our governments over the past 45 years have done their utmost to destroy that American exceptionalism.

It is universally recognized that the United States-led invasion and occupation of Iraq in 2003 was an unnecessary, illegal and immoral war that put the nation, and the world, in further danger.

There were almost 3,000 victims slaughtered by the terrorist attacks on the WTC, the Pentagon, and on the thwarted attack plane that crashed in Pennsylvania. The United States-led wars in Afghanistan and Iraq have resulted, by conservative estimate, in the deaths of more than 120,000 victims. But, of course, our forces are fighting for peace, justice, democracy and freedom. All those dead are unfortunate but beside the point. What hubris!

Torture is always a crime, despite what former military service dodger and former VP Dick Cheney may say or write in his self-serving book and interviews.

After George W. Bush, Ronald Reagan will one day be seen to have been the second worst president this nation has ever had, replacing Richard Nixon. Mr. Obama is working diligently on being number four, nudging out Bill Clinton, who in turn eclipsed George H. W. Bush, followed by LBJ. Almost all of our present economic and foreign policy imbroglios can be found to have originated or been exacerbated as a result of one or another of these so-called leaders’ policies or lack of forthrightness.

The United States is an imperial power, wrapped in the delusions of de facto abandonment of its ideals, and mocked by the contravention of its own principles, while mouthing what are now mere shibboleths: democracy, freedom, and justice.

The calamitous problems of our democracy can be laid at the feet of both the Democrats and the Republicans – the two wings of the Corporate Party.

To rational people, being opposed to particular policies of the Israeli government does not make one anti-Semitic, just as being opposed to particular policies of the U. S. government does not make one anti-American.

Perhaps one day our government will declare its independence from the State of Israel.

If Washington, Franklin, Jefferson, Madison, and Tom Paine were alive today, they’d be organizing the people against the Powers That Be. I think even John Adams and Hamilton would join the effort.

* * *

(c) Gregory V Driscoll 2011

What is the point of a criminal justice system? This may seem to be a rhetorical question, but Australians are clearly divided over the answer.

On 27 July this year, Victorian Attorney-General Robert Clark announced a survey in which “all Victorians are invited to have their say on sentencing.” The Attorney-General says the survey fulfils a pre-election promise to “seek the views of the community about key issues affecting the future of sentencing in our state.” The survey is being run on MyViews, hosted by the Victorian Justice Department, and is “supported by a number of Victorian media outlets.” These outlets are not specified in the Attorney-General’s media release, but a brief Google search seems to suggest that the Herald Sun is chief among them.  The paper’s editorial on 27 July called the initiative a “significant contribution to democracy.” Despite the Attorney‑General’s carefully inclusive language, an accompanying article on the same day modestly explained: “Herald Sun readers’ views will be used to help set new baseline jail terms that judges will be expected to impose in the most sweeping reforms to Victoria’s justice system in more than 20 years.”

The Herald Sun, along with sister publications the Courier-Mail and Daily Telegraph, have made their own views on the ‘softness’ of sentencing throughout Australia plain, and the comments and letters they publish suggest their readers support their continual calls for tougher penalties across the board.  It is said a politician should never initiate a public inquiry or survey without knowing the result in advance, and this one appears to be a textbook example.

The MyViews site set up by the Department of Justice actually mirrors similar surveys abroad, and public consultation is certainly not a negative thing in itself.  However, this particular survey falls short of the kind of rigorous consultation which should inform any amendment to the law. More able commentators than I have already explained why it does not conform to basic requirements for normal political polls (let alone the sorts of serious studies undertaken by the Law Reform Commission whose job it is to evaluate the appropriateness of sentencing laws). As such, the survey should not be used to decide the future of law relating to sentencing in Victoria as the Herald Sun would have it.

Rather than reiterate the arguments put by others against this survey idea, I would like to focus on why we have an independent criminal justice system in the first place, and what international law has to say about sentencing. The principal goals of any system of criminal law are to prevent and punish crime. Effective protection of the community, which is what the Attorney‑General says he wants to achieve, requires the justice system to strike a balance between these two imperatives. However, international experience has shown repeatedly that a solely reactive approach to crime is undesirable and that tough sentencing does not necessarily make for a safer community.

For the punishment of serious crime, the system we have adopted in Australia is imprisonment. Instinctively, most people would probably agree that a significant gaol term is the appropriate punishment for violent offenders. However, opinion differs markedly over how long these sentences should be. In considering their position on the appropriateness of penalties, Australian governments at all levels ought to consider Australia’s relevant treaty obligations (which apply to all Australian laws – not just federal ones). Article 10(3) of the International Covenant on Civil and Political Rights provides:

The penitentiary system shall comprise treatment of prisoners the essential aim of which shall be their reformation and social rehabilitation. Juvenile offenders shall be segregated from adults and be accorded treatment appropriate to their age and legal status.

Australia actually has a reservation to article 10 which says it will only accept the obligation to separate juveniles and adult prisoners “to the extent that such segregation is considered by the responsible authorities to be beneficial to the juveniles or adults concerned,” but we have accepted the first sentence above as binding on us at international law. Contrary to the assertions of the critics, human rights norms such as these do not aim to protect convicted criminals from the sentences they deserve.  Article 10(3) reflects a fundamental notion that prisons exist to reform criminals and rehabilitate them to be able to participate positively in society.  Even in jurisdictions with harsh sentencing regimes, most prisoners will be released into the community eventually. The only exceptions are those sentenced to life without parole or the death penalty – and such sentences are in decline internationally. So if the prison system is not focused on rehabilitation, community safety will inevitably suffer.

Naturally, some crimes are more heinous than others, and some criminals are difficult to reform. This brings us to the subject of proportionality, which is central to an approach to sentencing which is compatible with human rights. In relation to the particularly controversial issue of sentencing children and teenagers, the UN’s Standard Minimum Rules for the Administration of Juvenile Justice emphasise that the

…response to young offenders should be based on the consideration not only of the gravity of the offence but also of personal circumstances. The individual circumstances of the offender (for example social status, family situation, the harm caused by the offence or other factors affecting personal circumstances) should influence the proportionality of the reaction (for example by having regard to the offender’s endeavour to indemnify the victim or to her or his willingness to turn to a wholesome and useful life).

The requirement to deal with juvenile offenders in a manner which is “proportionate to their circumstances and the offence” is also reflected in article 40(4) of the Convention on the Rights of the Child, which is binding on Australia.

This proportionality principle (as it applies to both children and adults) has been accepted as fundamental to Australian criminal law too – a majority of the High Court said in the 1988 case of Veen v R that “[t]he principle of proportionality is now firmly established in this country.” In a more recent (2005) case, Markarian v R, the Court called the principle of proportionality “one of the fundamental principles of sentencing law.” This principle isn’t just some obscure piece of criminal jurisprudence either – it’s what ensures we receive fines for minor infractions such as petty theft or littering in Australia, rather than a long prison sentence or indeed even corporal punishment such as 50 lashes, amputation or stoning.

This is the routine work of Australian criminal courts – after a conviction (whether of a juvenile or an adult), they assess all the circumstances and arrive at an appropriate sentence. There are dozens of factors to be taken into account (called aggravating and mitigating factors) in determining the right sentence in each case – far more than can be captured in a brief media article or survey question. In fairness, the MyViews survey attempts to deal with these factors by asking whether/how some of them would affect ‘your’ sentencing decision, but the questions where respondents are asked to choose a sentence (which are apparently based on aspects of actual cases) provide two scant paragraphs to summarise cases in which the real evidence would doubtless run to hundreds if not thousands of pages.

Even before the survey results are known, the Attorney-General says his government is moving to abolish suspended sentences and end home detention. What if these sentences are the only appropriate option – for example in a case where the offender is suffering from serious health issues and incarceration would be too cruel? This and anticipated further ‘strengthening’ of Victorian sentencing law should be opposed because it short‑circuits the process of imposing the fairest possible sentence based on consideration of all the circumstances of each case.

In 2002, the NSW Government introduced a Standard Minimum Sentencing law which placed the emphasis firmly on “adequate punishment,” “accountability” and “recognition of the harm done.” It introduced a requirement for courts imposing non-custodial sentences to explain themselves, in stark contrast to the sensible approach in the current Victorian Sentencing Act 1991, which provides relevantly:

5(3): A court must not impose a sentence that is more severe than that which is necessary to achieve the purpose or purposes for which the sentence is imposed.

5(4): A court must not impose a sentence that involves the confinement of the offender unless it considers that the purpose or purposes for which the sentence is imposed cannot be achieved by a sentence that does not involve the confinement of the offender.

The NSW Act also set minimum non-parole periods for a whole range of offences, again requiring any court wishing to impose a lesser sentence to explain itself.  Admittedly the Victorian legislation requires courts to place a higher priority on protection of the community when it comes to serious offences, but it still leaves it up to the court to decide whether to impose a longer sentence than would normally be “proportionate to the gravity of the offence considered in the light of its objective circumstances.”   Essentially, the Victorian legislation respects the principle of proportionality but the revised NSW legislation does not.  The 2002 NSW amendments shifted the emphasis away from rehabilitation and dealt a blow to the careful balance developed over many years by the courts and reflected in the international treaties mentioned above. If this is a glimpse into Victoria’s future, it is a worrying one.

A Tasmanian study by the Australian Institute of Criminology on public (jury) attitudes to sentencing recently showed that many of those who had the impression that such a balancing process was often unfair to the victim and/or the community changed their minds when presented with all the facts a judge has to consider. The Tasmanian study concluded:

The results show that a substantial majority of jurors with firsthand experience of judges consider that sentences are appropriate and that judges are in touch with public opinion. By surveying members of the public who have engaged directly with the criminal justice system in a much more meaningful way than those who form their perceptions secondhand via the mass media, the study has shown that the jury survey methodology provides a better approach to finding a reliable source of informed public judgment of judicial sentencing.

A Melbourne University study conducted in 2004-06 came to a similar conclusion. These studies highlight the danger of the Victorian proposal, which risks basing criminal law reform on a skewed sample of the public who may well have learned everything they know about the adequacy of Australian sentencing practices through just one media source.

If the Herald Sun’s editorial of 30 July 2011 is correct, the respondents will be “tens of thousands of our readers,” providing “the Government with an in-depth indication of their opinions.” In defence of the process, the editorial points out that a previous survey, conducted in a joint effort between the newspaper and the Kennett government, produced more moderate results than critics expected. This misses the point – regardless of the results, the critics were (and are) right to warn of the dangers of using such a poll as a basis for amendments to legislation with potentially grave consequences, both for offenders and for Victorian society as a whole.

Poster for the movie "Crime and Punishment" (Russian: Преступление и наказание), a 1970 Soviet film directed by Lev Kulidzhanov, based on the eponymous novel by Fyodor Dostoevsky

Criminal punishment, even in our non-medieval and so-called Enlightened societies, is the deliberate, intentional and organized imposition of harm on those we believe to be guilty of a crime. That remains the case even if we assume that those who are punished are in general guilty and that all necessary preconditions for criminal punishment are present (for example, that people are punished only after a fair trial, conducted by those authorized to conduct it; or that only those people aware of the moral significance of their actions are punished).

Given this imposition of harm, it’s important to be able to justify our systems of criminal punishment. Usually, but not always, the justifications people offer invoke the need to protect the rights of victims – actual or potential – but it’s far from certain that any justification can withstand even superficial criticism. Let’s look at the different justifications in turn. I think we can distinguish at least 5 common types of justification:

1. Internalization
2. Deterrence
3. Rehabilitation
4. Incapacitation
5. Retribution

I’ll first offer a more or less neutral description of these different justifications, before criticizing them.

Justifications of criminal punishment

1. Internalization

The system of criminal punishment is justified because it is an expressive affirmation of shared values within a community (in other words, it’s a form of signaling). This affirmation serves to internalize shared values. When the members of the community have successfully internalized the shared values of the community, it’s assumed that crime will occur less frequently.

2. Deterrence

According to this second type of justification, criminal punishment is justified when it can be shown that the threat and practice of punishment is necessary for the prevention of future crimes, not through internalization of the norms expressed in punishment, but through fear of punishment. Punishment is supposed to reduce the prevalence of crime because it works as a threat. It’s assumed that most rational people who perceive this threat engage in risk analysis, weigh the possible costs and benefits of an intended crime, and conclude that the costs outweigh the benefits (the cost evaluation is a combination of likelihood of the threat – i.e. enforcement – plus severity of the threat). As a result, people reduce their willingness to carry out the crime.

(source)

3. Rehabilitation

Unlike internalization (1) and deterrence (2), this third type of justification does not aim at a general prevention or decrease in crime. Criminal punishment is justified because it prevents a particular criminal from engaging in future crimes. Prevention occurs because it’s believed to be possible to change the criminal’s propensity for crime through rehabilitative efforts within the penal system.

4. Incapacitation

This fourth type of justification also doesn’t aim at a general prevention or decrease of crime. Punishment is justified because it prevents a particular criminal from engaging in future crimes, not by way of rehabilitation but by way of incapacitation, which means either incarceration or execution.

5. Retribution

Criminal punishment is justified because criminals deserve to be punished in a certain way.

Consequentialism and deontology

Justifications 1 to 4 are consequentialist in nature: punishment is justified because of the good consequences that result from it, or because of the bad consequence that would result from our failure to punish. They all assume that punishment can prevent crime and hence protect victims – real or possible victims. Justification 5 is of a more deontological nature: punishment is a good in itself in the sense that it is required by justice irrespective of the likely consequences.

Contradictions between justifications

Notice how these different justifications may be incompatible.

Contradiction between (3) and (5)

Rehabilitation (3) means, by definition, flexible sentencing. Penal officials and judges need to have discretion, otherwise they can’t differentiate between successfully rehabilitated prisoners and others. Such discretion typically invokes anger among those who adopt a retributivist justification (5). Retributivism focuses on just desert in sentencing: a criminal should get the sentence he or she deserves, and usually this means a sentence that is in some way proportional to the gravity of the crime and to the harm done to the victim and to society. That is why retributivists demand uniformity in sentencing, and sometimes even mandatory sentencing. The discretion inherent in rehabilitation provokes feelings of unfairness among retributivists.

Contradiction between (4) and (5)

But also incapacitation (4) is often at odds with retributivism (5). For example, incapacitation in the form of incarceration may be less than what the criminal is supposed to deserve. Perhaps the criminal deserves to die according to the retributivist.

Contradiction between (2) and (5)

Retribution (5) can be incompatible with deterrence (2) because effective deterrence may require punishment that is more severe than the punishment that the criminal deserves. For example, there’s no reason why those who believe in deterrence should reject capital punishment for petty theft if it can be shown that such a punishment effectively deters this crime and that the benefits of deterrence outweigh the harm done by the execution. Something more is required to reject such a punishment, and that’s where retribution comes in. Retributivists would claim that petty thieves don’t deserve to die.

Contradiction between (3) and (4)

And a last example of a contradiction between different types of justification of criminal punishment: incapacitation (4) may make rehabilitation (3) more difficult. After all, it’s not obvious that prison is the best locus for rehabilitation. On the contrary, it’s often argued that prison is a school for criminals. Rehabilitation may then require a sentence such as a fine or GPS tracking.

A scale of decreasing ambition

We can view justifications 1 to 5 as being on a scale from most to least ambitious.

1. Internalization

Internalization (1) is obviously the most ambitious since it promises moral education of the citizenry and moral compliance with the law. The obvious problem here is that the desired outcome is highly uncertain, perhaps even utopian. It’s not sure that this uncertain objective justifies the very real harm imposed by criminal punishment.

2. Deterrence

Deterrence (2) is somewhat less ambitious since it discards the educational function of punishment as highly unlikely and aims instead at grudging compliance based on fear (as opposed to moral compliance based on conviction). Still, it’s relatively ambitious since it expects a society wide reduction in crime resulting from fear and rational risk analysis on the part of potential criminals. The data have shown that deterrence as well is overambitious.

3. Rehabilitation

Rehabilitation (3) in turn discards some of the unrealistic assumptions of deterrence (2), such as rationality on the part of future criminals and strict enforcement of the law, and tries to avoid some of the counterintuitive consequences of deterrence (2), such as the tendency to increase the severity of punishments resulting from the need to tip the scale in the risk analysis of criminals. It also tries to avoid the immoral instrumentalization inherent in deterrence. Moreover, it’s not clear that deterrence works, empirically.

Screenshot from A Clockwork Orange

Rehabilitation (3) is less ambitious than internalization or deterrence because it focuses on preventing only certain particular criminals from engaging in further crimes. There’s no society wide ambition anymore. However, the success of rehabilitative efforts during the past decades, as measured by reductions in recidivism, is mixed, to say the least. It’s correct to say that most criminologists have become somewhat disenchanted with rehabilitation. And there’s also some doubt about the morality of some rehabilitation techniques (especially those that have been lampooned in A Clockwork Orange). Which is why many have scaled back their ambitions even more and now focus on incapacitation (4).

4. Incapacitation

Let’s limit our discussion of incapacitation (4) to incarceration, since capital punishment is fraught with many other problems that have been widely discussed before on this blog. The problem with incapacitation is that it doesn’t have a clear boundary. Taken by itself, incapacitation theory could justify life imprisonment for petty crimes. In fact, the whole tough on crime philosophy can be seen as an exaggeration of incapacitation theory following the perceived failure of rehabilitation.

5. Retribution

This lack of a boundary in incapacitation theory (4) has led people to fall back on perhaps the oldest and least ambitious justification of criminal punishment, namely retribution (5). Retribution can be seen as a type of justification of criminal punishment that is entirely without ambition: punishment is inflicted for its own sake, not for the possible benefits it can produce. Criminals should be punished because it’s the right thing to do and because they deserve it, not because some aim or purpose can be served by it. This element of desert allows us to avoid both punishment that is viewed as being too severe – as in incapacitation (4) and deterrence (2) – and punishment that is viewed as being too lenient – as in rehabilitation (3).

Retributivism in fact abandons the pretense that punishment has a purpose, that it can achieve a desired objective and that no other, less severe means are available for this objective. However, retributivism isn’t a solid justification of criminal punishment either. It has proven to be impossible to know what exactly it is that the guilty deserve. Lex talionis is the easy answer, but it’s no longer a convincing one in modern societies. Proportionality is the difficult answer: severity in punishment should be proportional to the gravity of the offense. That’s the difficult answer because it leaves us with a system that is inherently imprecise and arbitrary. An infinite number of punishments are consistent with this justification. Hence it’s not really a justification at all.

No justification?

Michel Foucault

So, where does this leave us? It seems like criminal punishment is not justifiable. And indeed, there’s a long tradition in philosophy that views punishment as nothing more than rationalized anger, revenge and domination. Michel Foucault for example has analyzed criminal punishment as a cogwheel in the continuation of social power relations. The fact that there are so many African Americans in U.S. prisons and in execution statistics can be viewed as a symptom of continued racist domination. Nietzsche has described criminal punishment as being motivated solely by a deep natural desire to punish, subordinate and coerce. And indeed, if you want to punish someone for a crime, you first need to establish control over the would-be punishee. All systems of criminal punishment seems to be doomed to failure if there isn’t a prior system of control. This would indicate that there is already a prior system of control operating in society before criminal punishment takes effect, which in turn seems to indicate that systems of criminal punishment are merely the strong arm of deeper systems of control.

On the other hand, it seems difficult for anyone who’s serious about human rights to simply abandon criminal punishment. Without criminal punishment, we in fact expect victims of crime to either fend for themselves or undergo their suffering and rights violations. Neither outcome would be just.

“Reasonable practicability” as a concept causes much confusion, particularly when it comes to its practical application. However, it is a cornerstone of the UK’s approach to regulation of work-related risk, which has proportionality at its heart.

As is widely recognised, the principle was originally established in the now famous common law judgement of Edwards versus the National Coal Board in 1949. Lord Justice Asquith said at the time:

“Reasonably practicable is a narrower term than ‘physically possible’ and implies that a computation must be made… in which the quantum of risk is placed in one scale and the sacrifice involved in the measures necessary for averting the risk (whether in time, trouble or money) is placed in the other and that, if it be shown that there is a great disproportion between them – the risk being insignificant in relation to the sacrifice – the person upon whom the obligation is imposed discharges the onus which is upon him.”

In other words, for things to be considered safe so far as is reasonably practicable you have to go on trying to make them safer until you reach a point where it is not worth doing more (a point of diminishing safety returns) – AND the risks which still remain must not be too great.

Making such safety judgements with confidence is often quite difficult. If the efficacy of safety measures is uncertain in reducing the likelihood of failure, particularly when the consequences of failure are serious, the result is more likely to be a precautionary “belt and braces” approach.

Critics say the concept of reasonable practicability allows too much flexibility and leads to weak or inadequate precautions being taken. Evidence suggests that, properly applied, reasonable practicability guarantees a high standard of safety. Investigations tend to confirm that few accidents occur where reasonably practicable safety measures have been taken.

The real importance of the concept is that it allows proportionality of response to risk, taking account of different variables. The alternative to this might be a rising scale of specific solutions laid down in law, but this would be cumbersome and might lead to both “under-hitting” and “over-hitting”. Reasonable practicability allows for fine tuning.

Making sound judgements about such risk/cost optimisation can pose real challenges for those firms lacking the necessary skills or access to professional expertise, particularly where options must be chosen from a range of solutions. For example, to take a case related to public safety, reasonably practicable water edge treatments to prevent drowning can vary from little or no action, to shelving and/or planting edges and erecting signage, through to extensive physical barriers at the extreme.

Factors such as population density and foreseeable behaviours can influence the scale of control measures. Those not in the know sometimes find it difficult to understand why maximum measures have been taken in one setting but not in another.

What is useful about reasonable practicability is that it provides a constant reminder to risk creators, risk takers and regulators that safety is not an absolute but always a matter of judgement. At RoSPA we try to express this simply by saying that things need to be as safe as necessary, not necessarily as safe as possible.

On the other hand the concept can give rise to conflicting responses. Firms tend to welcome the flexibility it provides; but when faced with lack of clarity they can then demand official advice about exactly what would constitute a minimal standard of compliance.

There is also confusion about costs. The affordability of specific measures does not relate to the financial circumstances of the individual duty holder. You cannot plead poverty and get away with a lower standard of safety but you can factor in opportunity costs, for example, the longer-term costs of restricting a particular activity or of unintended consequences such as risk transfer.

The fundamental ideas in our health and safety law about risk/cost optimisation originated in the philosophy and practice of radiological protection developed from the 1940s onwards. Here, the core doctrine was “justification, optimisation, risk limits”. In other words:

1. If an exposure is tolerable, is it justified by sufficient benefits?
2. Has exposure been optimised? (I.e. has a point of diminishing returns been reached in terms of further dose reduction?)
3. Have upper bounds been set? (I.e. have suitable dose limits been established?)

This approach can be applied to all kinds of risk decision-making in health and safety.

In practice the workability of a reasonably practicable approach to safety depends on skill in undertaking suitable and sufficient risk assessments. Initially this means establishing if risks are trivial, moderate or high and, if they fall into the last two categories, deciding if control measures are adequate or if more needs to be done. Assessments also enable duty holders to prioritise risks for attention and they can be generic, specific and/or dynamic.

In many cases, those managing risk may carry out very little actual assessment. Much of what is called “risk assessment” is really little more than hazard identification and involves minimal exercise of judgement as to the probability or consequences of failure. If this simple approach enables standard but quite satisfactory solutions to be selected from the overall health and safety guidance lexicon then this does not necessarily matter, particularly if it leads to people adopting sufficiently safe systems of work. On the other hand, there is always a danger of “over-hitting” if the level of risk actually presented by the hazard is trivial and the standard solution selected is substantially more than is really required.

A simple approach to finding the right balance is what I have called “iterative triage” or “the Goldilocks Principle”. (In her search for beds and porridge Goldilocks found beds that were too hard or too soft, and porridge that was too cold or too hot – and this enabled her to find the ones that were “just right”.)

What all this demonstrates are two awkward truths:

1. There is probably no practical regulatory alternative to a goal-setting approach supported by reasonable practicability, especially in the complex risk environment of our contemporary world of work
2. If this approach is to be successful in practice, duty holders need to be suitably informed and competent or have access to suitably competent advice.

Those daunted by the challenges posed by this approach to work-related safety and health often demand regulatory simplification or a return to common sense. The reality is, though, that the risk profile of even apparently benign settings such as shops, office and schools can often be quite varied and complex; the devil is always in the detail and the right solutions are sometimes counter-intuitive.

An approach to regulating and managing risks based on what is reasonably practicable is undoubtedly a more mature approach than one based on prescription, but it only works in practice if the challenges are matched by necessary competence.

Getting health and safety judgements right is not always easy, but if they help to save lives, reduce injuries and safeguard health without wasting scarce resources, then the effort involved is surely worthwhile.

As ever, readers’ comments are invited below.

Roger Bibbings, RoSPA’s occupational safety adviser

There is something of an inherent paradox in Solvency II when it comes to smaller firms. On the one hand the regulation aspires to harmonise the European insurance market, while on the other, it must allow the market to operate freely and without distortion. The latter means protecting diversity and allowing small firms to thrive and provide valuable localised services. Quite how a one-size-fits-all regulation can do that is unclear.

To mitigate this paradox and create a regulation that is both uniform yet allows smaller firms to flourish in the EU’s insurance landscape, a principle of proportionality was introduced.

Proportionality

Back in 2002, when Solvency II was in its infancy, both the “Sharma Report” and the KPMG background survey, which guided much of the thinking at the outset, noted the importance of maintaining the nature of the industry and the trappings of the one-size-fits-all solution. 

The Directive text states, “The Commission shall ensure that implementing measures take into account the principle of proportionality, thus ensuring the proportionate application of this Directive, in particular to small insurance undertakings.”

Solvency II is supposed to be applied in proportion to the size, nature and complexity of the risks of the undertaking: many feel this is not the case, in part because they still wait for guidance on the practical application of the principle.

Not only excessive but also ineffective

Proportionality is crucial for the survival of smaller firms under the regulation, “Typically, SMEs have simple structures and risk profiles,” the CEA states in a report published this year. “An across the board application of the current Pillar II and III requirements to SMEs is likely to be excessively burdensome and would, in effect, result in their policyholders paying excessive and unnecessary costs.”

The CEA report highlights a number of concerns:

Public disclosure will only be effective if someone reads the report, but currently disclosure is too complex and detailed. Policyholders are unlikely to read and understand complex financial documents while many SMEs are too idiosyncratic for analysts or the media to take an interest. Instead the CEA proposes a short ‘executive summary’ style report.

Similarly it argues that the supervisory reporting is also too complex and of little use to regulators given the “simpler structures and risk profiles of SMEs.”

In the context of governance, regulators should apply proportionality with a view to achieving the underlying objectives, and consider that in smaller firms knowledge is more widely shared – therefore individuals should be allowed to preform multiple roles. The focus should be on an individual’s ability to do a particular job rather than their specific qualification.

There is also a concern that the ORSA will become “an internal model through the back door” and regulators should allow firms to develop an ORSA process that reflects their needs.

Solvabilité II, a good question but poor answer

One organisation that is particularly vocal about the effect of Solvency II on SMEs is ROAM (Réunion des Organismes d’Assurance Mutuelle) – a professional association of French mutuals. The association runs the Stop Solvency 2 website; its byline “a good question but poor answer” sums up its views.

ROAM’s main concern is that, “many players will not be able to continue doing business or that a sharp fall in supply may occur, and as a result in many cases insurance prices will be pushed higher without improving the security of consumers,” according to its website.

For the past five year it has raised its concerns about the regulation and has been a strong proponent of Swiss-style transition, where insurers and regulators had three years training prior to implementation.

ROAM successfully lobbied agains the almost exclusive use of English language in related texts, which it says, “has handed an abnormal advantage to English speakers and has prevented the stakeholders in general from responding appropriately to the various consultations.”

Solvency II and SMEs

 AMICE (pronounced a-mee-che), the Association of Mutual Insurers and Insurance Cooperatives in Europe, an umbrella organisation representing over 100 members, has been active in putting its concerns to the Commission.

Silvia Herms, Senior Advisor – Economic and financial affairs at AMICE, notes that resources are an even greater stress than capital to many of their members. “In smaller firms it is often the case that one person performs a number of key functions, as the reporting requirements grow, many of our members are having to bring in external consultants to cope with the increasing work load,” she told Solvency II Wire.

There is also a sense that in some cases SMEs are adopting a wait-and-see attitude, especially after so many participated in the QIS5 exercise.

According to Martin Shaw, Chief Executive of the Association of Financial Mutuals (AFM), “After investing a lot of time and resources in QIS5 many SMEs are of the view they should wait until the final draft of the Directive is published. This complacency is misguided,” he told Solvency II Wire. His warning is timely given Commissionaire Barnier’s riposte to industry critics on 1 June in which he states categorically, “Solvency II will enter into force as planned on 1 January 2013.”

Mr Shaw notes that the scepticism being expressed is perhaps in some way imbued by  informal reports at the FSA conference that despite its tough rhetoric on the deadline, the FSA might think otherwise. But, he insists, firms would be wise to continue implementation measures to meet the official deadline.

Coming up with solutions

Still, the financial and resource burden remains substantial for many smaller firms and the AFM is developing a number of shared tools to help its members.

For example, it has estimated that Solvency II reporting will require about two million actuarial calculations, however 95% of those can be standardised even for the diverse range of firms belonging to AFM. “We are looking at developing shared solutions, which enable firms to share platforms or templates to get them to the right outcome more cost effectively,” Mr Shaw said. The AFM is also exploring an ORSA reporting tool that will be based on a peer benchmark.

“The FSA has shown an interest in these ideas and has expressed a willingness to work with us on these solutions,” Mr Shaw added.

Solvency II reshaping the landscape?

It is as yet unclear what the full effect of Solvency II will be on the European insurance landscape in general, or the diversity of SMEs in particular. But perhaps the reason behind a recent merger of two mutual societies may foretell of things to come.

In March the Schoolteachers Friendly Society merged into the Oddfellows group. In its Special General Meeting notice the Society explains the reason for the merger (emphasis added), “The Society’s required minimum capital requirement is currently in the region of £700,000 whereas, under the new Solvency II legislation, the Society’s required minimum capital requirement will increase to approximately £3.2m at the beginning of 2013.

“It should be noted that no change in the profile of the Society’s methods of operation, risks or liabilities has caused the increase in the Society’s minimum capital requirement and it is purely as a result of the new European legislation.”

Record level of covered bond issuance may quench insurers’ thirst for long-dated debt. The FT reports that the large amounts of covered bonds being issued by banks to comply with Basel III may offer one of the most efficient ways of investing in long term bonds under Solvency II. This may help reconcile the mismatch of supply and demand for long dated debt between banks and insurers.

European covered bond issuance

European covered bond issuance has returned to pre-crisis levels (see chart left), while UK sterling issuance in 2011 has already reached close to £6 billion, the FT reports. Insurers and pension funds hold 18% of UK regulated covered bonds (see chart below).

Investors in regulated covered bonds

However, covered bonds have come under scrutiny. The Cut (FT Alphaville blog) noted in March that a US House of Representatives bill may dilute the strength of US covered bonds. “While European banks have used covered bonds’ conservatively managed pools of loans to lower borrowing costs, most loans are high-quality mortgages. US proposals would add student or car loans that could attract different investors drawn to risk rather than stability.”

Richard Ryan, senior credit fund manager at M&G, told the FT there was an issue with the transparency of some of these ultra safe US covered bonds. “The worst ones label themselves ‘covered’ but offer a rollercoaster ride rather than disclosure or protection. Chasing their yield and piling in with no analytical backup is foolhardy,” he said.

In April the FSA published a Review of the UK’s regulatory framework for covered bonds.

Proportionality unease for captives

Captive insurers are unclear how Solvency II will affect their capital and reporting requirements. Business Insurance reports that the industry is still seeking clarification on how proportionality will affect captive insurers.

The proportionality principle aims to treat each firm in a way that will not create an unnecessary regulatory burden – ensuring regulators aren’t using a sledgehammer to crack a nut.

Although primarily aimed at small and medium size insurers, proportionality also applies to specialist insurers. The Directive text states, “This Directive should not be too burdensome for insurance undertakings that specialise in providing specific types of insurance or services to specific customer segments, and it should recognise that specialising in this way can be a valuable tool for efficiently and effectively managing risk.”

But it is unclear how the principle will be applied to captives. According to Carlos Wong-Fupuy, analyst at A.M. Best, and one of the authors of a recent report on the subject, a captive will be assessed on the “complexity of risks underwritten within a captive rather than its size.”

The captive industry is also lobbying for looser reporting requirements. Pierre Sonigo, general secretary, Federation of European Risk Management Association (FERMA), explained that “since most captives do not write insurance for the general public, they should not be required to disclose as much information as traditional insurance companies writing third-party business.”

Business Insurance also looks at how Solvency II may increase the capital requirements of captives, prompting some firms to reconsider the viability of having a captive insurer.

Solvency II: far-reaching impact on credit ratings

Implications for credit ratings under Solvency II SOURCE: The Actuary

Solvency II will have a mixed effect on the credit ratings of insurers. A feature in The Actuary discusses how adjusting the asset portfolio to make the most of the regulation’s capital charges could affect the ratings of some firms.

The change in credit rating will also depend on how each firm handles the transition to Solvency II, as well as new levels of exposure to risk.

“Solvency II could transform the insurance landscape with some fundamental shifts to a lower-risk product mix, more cautious investment strategy and, for certain products, higher premiums,” according to the authors.

The chart shows how some of the drivers could affect credit ratings.

From the Sphere

The Bond Vigilantes on covered bonds

M&G’s blog, Bond Vigilantes, has a couple of posts on covered bonds. In the latest post on the subject, Matthew Russell writes about the effect they have on senior debt holders. “This Titanic issuance of covered bonds is more than moving the proverbial deck chairs around to fund the banks. In fact senior and subordinated bond holders are being rearranged further from the safety of government and legal lifeboats.”

Tweets before posting

EIOPA selects XBRL for Solvency II insurance reporting Insurance … http://bit.ly/l1PKad #Insurance—
SYSTEMIC Risk Mgt (@SystemicRM) May 30, 2011

Le chantier « Solvency II » inquiète le monde de l’assurance | Actualités mutuelle et assurance http://t.co/WkjafFC via @ProjetAssur—
Projet Assur (@ProjetAssur) May 30, 2011

Interesado en #Rumania?. Lea la entrevista a Jean-Pierre Vigroux, Managing Partner de #Mazars en Rumania http://ow.ly/55NLc via @zaffcat—
Mazars Spain (@MazarsSpain) May 30, 2011

God does not punish some wrong-doers: he allows another to take the punishment instead. Never would we as decent human beings allow a man’s son to be executed in his place for the murders that his father committed. God does not meet this requirement and is thus not just.

God also does not punish in proportion to the crime: for a mere lifetime of sin – a flash of an instant of a smidgen of a split-second in comparison to the enormity of eternity – he punishes with an eternity of torment. Never would we stone children to death for disobeying their parents, nor would we sentence a man to life in prison for swearing in public, yet God does much worse than this. God does not meet this requirement and is thus not just.

Because God does not meet the criteria of the essential ideas of the term “justice,” it is disingenuous to use the term to describe him. That’s my point in brief, and I know most of you disagree, so I look forward to hearing why.

Markets and reporting key concerns for Level 2

The effect on markets and the reporting burden on insurers are among the main concerns expressed by respondents to the European Commission’s consultation on the Level 2 implementing measures for Solvency II. A summary of the responses was published on 5 May 2011 by the European Commission.

Contribution by member state SOURCE: European Commission

The majority of the 68 respondents came from industry and national and European interest groups, with the largest portion of participants based in the UK.

“It is clear from the nature and the volume of the comments received that stakeholders’ concerns relate to a small number of key issues,” the Commission said. The issues include:

• Impact on long-term products
• Volatility and pro-cyclicality
• Proportionality and reporting requirements
• Transitional measures

The commission has set up a working party to address the issues surrounding long-term products. Serious concerns were raised about the viability of these products, especially guaranteed products, under the current proposed rules.

Addressing concerns of the reporting burden the Commission said: “Many responses cited the need for a concrete application of the proportionality principle in relation to the Pillar III requirements [Disclosure Requirements], for example through exempting certain undertakings from the quarterly reporting based on the size, nature and complexity of the risks in their business.”

Level 2 sets out the technical implementation measures of the “Solvency II Framework Directive” defined in Level 1. It is a part of the Lamfalussy process of drafting EU law.

Stress tests to evaluate reporting under Solvency II

The current stress tests for European insurers will evaluate reporting capability under Solvency II, not capital adequacy. RiskNet reports that according to Gabriel Bernardino, chair of EIOPA, these tests will evaluate how insurers will cope with the five reports they will have to produce each year. Solvency II will require firms to produce four quarterly reports and an annual report.

“Both in the Solvency II directive and in the EIOPA regulations there is the need to perform stress tests as part of the supervisory regime. So what we are doing by stress-testing insurance for the first time is testing how to implement a programme of stress tests on top of the Solvency II framework,” Mr Bernardino said.

The European Central Bank and European Systemic Risk Board are working with EIOPA in the design of the stress tests.

Results of the current test will be published in July.

Is the industry ready to meet the Solvency II deadline?

Confidence in meeting the Solvency II deadline SOURCE: Economist Intelligence Unit

UK insurers are losing confidence in the industry’s ability to meet the Solvency II implementation deadline on 1 January 2013. The annual Deloitte Solvency II Survey 2011 reports that only 46% of respondents were confident the industry could meet the deadline, down from 63% last year. However 73% were confident their firm would meet it.

The survey was conducted among 60 UK-based firms, 68% of which have their headquarters in the UK. The largest firm reported net written premiums (NWP) of more than £5 billon, and the smallest less than £100 million.

Solvency II Training SOURCE: Economist Intelligence Unit

The survey also sheds light on the state of the industry. 95% of the firms surveyed said their board is fully aware and engaged with the Solvency II process, up from 83% last year.

All but two firms have a training programme for Solvency II scheduled, while only half plan to offer general training for all employees.

The survey also found that anticipated costs for life and non-life companies were broadly the same. The majority of firms expect to spend less than £10 million in total on implementing the Directive.

From the Sphere

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Succeeding Under Solvency II Reinsurance and Counterparty Risk … http://bit.ly/ig3J0l #Insurance—
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Solvency II Implementation Programme – Part Two http://bit.ly/mqIVAf Part One is here http://goo.gl/fjzVG—
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