Rights Act to spark litigation boom

British companies and regulators stand by for escalation in legal challenges after human rights law is enshrined in October
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The Independent Online

City law firms are looking forward to a tidal wave of litigation work when the Human Rights Act is incorporated into UK law in October. The new European law is expected to have a wide-reaching effect on UK business; legal experts warn that many firms are unprepared for it.

City law firms are looking forward to a tidal wave of litigation work when the Human Rights Act is incorporated into UK law in October. The new European law is expected to have a wide-reaching effect on UK business; legal experts warn that many firms are unprepared for it.

The Act will broadly affect employment law, the operation of energy regulator Ofgem, and the effectiveness of the Financial Services Authority.

Its influence on employment law will have the biggest day-to-day impact on companies. Most legal experts agree it will make it harder for companies to sack or send employees home over issues such as their appearance. Last year Eurostar sent two female employees home for wearing trousers - and then reinstated them after they threatened legal action. Legal sources say cases like this could become more common under the new Act.

Dismissals on the basis of dress are usually made under a clause in UK law which says that staff can be fired if there is a "substantial reason" to do so. However, Catrina Smith, an employment expert at Linklaters & Alliance, says that this could eventually be scrubbed from British law.

But the new Act won't give employees directly enforceable rights. Instead, the law will be used when an employee takes an employer to an employment tribunal.

Hilary O'Connor, an employment law expert at SJ Berwin, says: "It may be that the Human Rights Act's effect on employment law will be gradual and long term rather than ... an immediate revolution. The Act may well give rise to some strange decisions in its early days as it may take the higher courts some years to work through the consequences of its integration into UK law."

Second, legal experts predict the Act will trigger legal action against Ofgem, the energy regulator. The body, which regulates gas and electricity companies, has the power to identify breaches of competition rules, investigate the cases and fine companies up to 10 per cent of their turnover. Once a company has been fined, its only redress is to challenge the decision by judicial review.

Lawyers claim the limited appeals process could be challenged under the new Act. Michael Cutting, of Linklaters & Alliance, says: "Companies on the receiving end of action are clearly going to be looking at their new rights under the Act. A lot will depend on how careful the utility regulators are about how they exercise their undoubtedly wider powers." The energy regulator's powers to fine firms - contained in the Utilities Act - "may not survive all challenges".

Ofgem also has the power to impose conditions on energy companies. British Energy is currently in dispute with the energy regulator Callum McCarthy over conditions imposed on its licence. The case is being heard by the Competition Commission and it is understood that, as part of its defence, British Energy has cited the Human Rights Act.

However, some members of the legal community claim that the Act's potential impact on the competition authorities has been overstated.

One lawyer says: "There is a certain amount of excitement from rather academic lawyers about the Human Rights Act and competition policy. Yes, if a regulatory body screws up, then it will fall foul of the Act, but in most cases that is as far as it will go."

Finally, legal experts predict the Financial Services Authority could have its wings clipped by the Human Rights Act. When the City watchdog is fully empowered, it will have the authority to draw up a set of "general principles" under which companies and individuals working for public companies should operate. If a British-based firm or individual breaks a principle, the FSA will be able to impose a fine.

However, Stephen Fletcher of Linklaters & Alliance argues that the principles could be in breach of the Human Rights Act: "If the FSA says to a company that a principle means that it can't do X, Y and Z, then the company will claim that the principle didn't spell this out and it was unaware that it was in breach. Potentially it could have a case to call for under the new Act."

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