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Imbalance of information has been a problem endemic in much of life recently
Had certain people at the BBC known about, and acted upon, the information which is alleged about Jimmy Savile, might things have turned out differently? George Entwhistle tried to explain yesterday in the DCMS Select Committee his local audit trail of what exactly had happened with the non-report by Newsnight over these allegations.
‘Information asymmetry’ deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Information asymmetry causes misinforming and is essential in every communication process. In 2001, the Nobel Prize in Economics was awarded to George Akerlof, Michael Spence, and Joseph E. Stiglitz for their “analyses of markets with asymmetric information.” Information asymmetry models assume that at least one party to a transaction has relevant information whereas the other(s) do not. Some asymmetric information models can also be used in situations where at least one party can enforce, or effectively retaliate for breaches of, certain parts of an agreement whereas the other(s) cannot.
In adverse selection models, the ignorant party lacks information while negotiating an agreed understanding of or contract to the transaction, whereas in moral hazard the ignorant party lacks information about performance of the agreed-upon transaction or lacks the ability to retaliate for a breach of the agreement. An example of adverse selection is when people who are high risk are more likely to buy insurance, because the insurance company cannot effectively discriminate against them, usually due to lack of information about the particular individual’s risk but also sometimes by force of law or other constraints. An example of moral hazard is when people are more likely to behave recklessly after becoming insured, either because the insurer cannot observe this behavior or cannot effectively retaliate against it, for example by failing to renew the insurance.
Joseph E. Stiglitz pioneered the theory of screening, and screening is a pivotal theme in both economics and medicine. In this way the underinformed party can induce the other party to reveal their information. They can provide a menu of choices in such a way that the choice depends on the private information of the other party.
Examples of situations where the seller usually has better information than the buyer are numerous but include used-car salespeople, mortgage brokers and loan originators, stockbrokers and real estate agents. Examples of situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament, life insurance, or sales of old art pieces without prior professional assessment of their value.
This situation was first described by Kenneth J. Arrow in an article on health care in 1963. The asymmetry of information makes the relationship between patients and doctors rather different from the usual relationship between buyers and sellers. We rely upon our doctor to act in our best interests, to act as our agent. This means we are expecting our doctor to divide herself in half – on the one hand to act in our interests as the buyer of health care for us but on the other to act in her own interests as the seller of health care. In a free market situation where the doctor is primarily motivated by the profit motive, the possibility exists for doctors to exploit patients by advising more treatment to be purchased than is necessary – supplier induced demand. Traditionally, doctors’ behaviour has been controlled by a professional code and a system of licensure. In other words people can only work as doctors provided they are licensed and this in turn depends upon their acceptance of a code which makes the obligations of being an agent explicit or as Kenneth Arrow put it “The control that is exercised ordinarily by informed buyers is replaced by internalised values”
In standard civil litigation, disclosure of information takes place between the two parties in standard proceedings, a party must disclose every document of which it has control and which falls within the scope of the court’s order for disclosure. Even if a party discloses a document, the other party is not entitled to inspect the document. Of course, this disclosure procedure might have effects in producing information imbalances, where it is important to see ‘the big picture’. Such a situation is the Leveson Inquiry, ultimately looking at how activities might be better regulated if appropriate (and by whom). The communications with the former News International chief executive and the News of the World editor-turned spin doctor, Andy Coulson, were reportedly kept from the hearings into press standards after the Prime Minister sought legal advice. Labour said that David Cameron, the UK Prime Minister, must make sure that “every single communication” that passed between him and the pair be made available to the inquiry and the public. The cache runs to dozens of emails including messages sent to Mr Coulson while he was still an employee of Rupert Murdoch, according to reports. It was described by sources as containing “embarrassing” exchanges with the potential to cast further light on Mr Cameron’s relationship with two of Mr Murdoch’s most senior executives. However, Downing Street was said to have been advised that it was not “relevant” to the Leveson inquiry as the documents they contained fell outside its remit, according to The Independent.
Information imbalances, for us on a more daily basis, have a direct effect on the consumer-supplier relationship of the econy, We have been told to absurdity on how much of our problems as consumers would be solved if we could simply ‘switch easily’ between energy suppliers. In a sense, either there should be far less competition (i.e. the whole thing merges into one state supplier, reducing absurdities in a few suppliers all providing the same product at a high price, similar to exam boards currently), or there should be far more competition (there is currently an oligopolistic situation in many markets, which would be greatly ameliorated by having many more active participants in the competition market.) In 2009, the four largest banks supplied 67% of the market of mortgages, and, in 2006, the ‘big four’ banks accounted for 47% of the market. According to the “Cruickshank review”, the ‘big four’ banks accounted for 17% of the market. Demutualised building societies held 48%: these are, (a) Lloyds TSB, Halifax and Bank of Scotland; (b) Royal Bank of Scotland, Natwest; (c) HSBC, First Direct; (d) Abbey, Alliance and Leicester, Bradford and Bingley.
The Competition Commission believes that helping customers to easily switch products is paramount to the effective operation of competitive markets: markets do not function without customers who vote with their feet. As Dr Adam Marshall of the British Chambers of Commerce told the Commission: ‘There’s lots of products and services on the market, but the theoretical competition between those products and services is limited by the real world barriers of form filling, hassle, bureaucracy, decisions not being taken, etc…’ The regulator responsible for consumer protection regulation should have both: (a) an explicit mandate to promote effective competition in markets in the financial sector; and (b) the necessary powers to regulate the sector to achieve this, including the ability to apply specific licence conditions to banks and exercise competition and consumer protection legislation. These powers will be concurrent with the competition powers of the OFT, and will enable the regulator to both enforce competition law and make market investigation references to the Competition Commission.
The aim of consumer protection regulation is to promote the conditions under which effective competition can flourish as far as possible, and where not, the regulator will be able to take direct action. In order best to promote the interests of the consumer, the regulator will encourage financial firms to compete: on the merit of the quality and price of their products and services; and to gain a competitive advantage by investment in innovation, technology, operational efficiency, superior products, superior service, due diligence, human capital, and offering better information to customers. Ideally, the regulator would then step in whenever there is a sign of market failure. Market failures include: (a) poor quality information being disclosed to consumers when they are deciding whether to purchase products; (b) information asymmetry between the provider and the consumer; or (c) providers taking advantage of typical consumer behaviour such as the tendency evident in retail customers to select the default option offered, and reluctance to switch products because of inertia. Any sign of market failure indicates that competition is probably not effective, and the regulator should then take action to counteract the failure.
Therefore, it is hard to see how information imbalances are not at the heart of many ‘decisions’ affecting modern life, and can lead to imperfect decisions being made. Ideally, it is up to parties to make a full disclosure about things, whether this includes personal health or corporate misfeasance; if they are not so willing to give up their secrets, they possibly can be ‘nudged’ into doing so. Of course, some parties, particularly those intending to generate a healthy shareholder dividend, may not be very keen at all at spilling the beans, and that is where law and regulation come in. However, even then there can be significant imbalances in the legal process which can be obstructive in the correct solutions being arrived at. Certainly the field has progressed substantially since this Nobel Prize for Economics was first awarded over 30 years ago.
I am NOT in favour of any plans to extradite Gary Mckinnon: professionals must respect mental conditions
I have been following Janis Sharp, and been followed by Janis Sharp, on my @legalaware and other Twitter accounts for the last two years.
Investigations themselves can place a huge mental burden on a person. I have listened to the debates about how this is an affront to liberty, especially how one country may try to assume jurisdiction over a person’s crime, even if done in a place hard to determine.
Home Secretary Theresa May is due to announce whether computer hacker Gary McKinnon will be extradited to the US. Gary McKinnon, who admits accessing US government computers but claims he was looking for evidence of UFOs, has been fighting extradition since 2006. The 46-year-old, with a clinical diagnosis of Asperger’s Syndrome, could face 60 years in jail if convicted in the US.
It is possible that Mrs May will also announce changes to Britain’s extradition arrangements with the US. Mr McKinnon’s case has been highlighted by critics who say it is too easy for the US to demand the handover of UK citizens. David Cameron raised the issue with President Barack Obama during a meeting at the White House in March and said he would like to see a review.
I believe most fundamentally that nobody should be punished on account of a psychological condition, and should instead be given full support to live his or her own life. That Gary’s condition has been diagnosed is a start, but it is up to all professionals to act correctly on this information. Certainly I believe that no-one is above the law in doing so.
I am NOT in favour of any plans to extradite Gary Mckinnon: professionals must respect mental conditions
I have been following Janis Sharp, and been followed by Janis Sharp, on my @legalaware and other Twitter accounts for the last two years.
Investigations themselves can place a huge mental burden on a person. I have listened to the debates about how this is an affront to liberty, especially how one country may try to assume jurisdiction over a person’s crime, even if done in a place hard to determine.
Home Secretary Theresa May is due to announce whether computer hacker Gary McKinnon will be extradited to the US. Gary McKinnon, who admits accessing US government computers but claims he was looking for evidence of UFOs, has been fighting extradition since 2006. The 46-year-old, with a clinical diagnosis of Asperger’s Syndrome, could face 60 years in jail if convicted in the US.
It is possible that Mrs May will also announce changes to Britain’s extradition arrangements with the US. Mr McKinnon’s case has been highlighted by critics who say it is too easy for the US to demand the handover of UK citizens. David Cameron raised the issue with President Barack Obama during a meeting at the White House in March and said he would like to see a review.
I believe most fundamentally that nobody should be punished on account of a psychological condition, and should instead be given full support to live his or her own life. That Gary’s condition has been diagnosed is a start, but it is up to all professionals to act correctly on this information. Certainly I believe that no-one is above the law in doing so.
Legal proposals on the repeal of the Health and Social Services Act [2012]
Andy Burnham MP, currently Shadow Secretary of State for Health, will repeal the Act, but is due to establish Labour’s official position at Conference later this week. Burnham answered my straightforward question about the Health and Social Care Act (2012) with a simple answer, at the Fabian Society Question Time this evening, hosted by Alison McGovern MP, and a panel also including Owen Jones, Dan Hodges, and Polly Toynbee. I had a very nice chat with Andy at the end, and Andy seemed to be quite impressed that I had read the entire Act carefully ‘from cover to cover’.
Andy reinforced his belief that the Act would be repealed, but he wanted the NHS to further a spirit of collaboration. There’s been a question about, even if the Act is repealed, there are genuine questions about which policy planks might go into reverse. I feel it is unlikely that NHS Foundation Trusts will be revised, and I don’t think commissioning will be done away with, though I am uncertain about the future of ‘clinical commissioning groups’ (“CCGs”). Andy’s indication that existing structures might be asked to do different things gives Andy a bit of lee-way as to the working relationship between NHS Foundation Trusts, or CCGs (or whatever they turn out to be).
Part 3 will be first in the firing line, the Act will be repealed, and the NHS will go back to a system based on collaboration consistent with its founding principles. Critically, this Part of the Act establishes the legislative framework for the sector-regulatory body and its functions, “Monitor”, competition and licensing. My guess is that Andy Burnham MP will find a way for the NHS not to be a free-for-all in an unfettered market. My impression is a lot depends on escaping the EU definition of “undertaking” in EU competition law.
Dr Kailash Chand OBE (@KailashChandOBE), who is the Deputy Chair of the BMA, has this morning voiced in an article in the Guardian grave concerns about CCGs:
“Unfortunately, this proposed new dawn has already been tarnished by the protracted passage of the health bill and the ongoing financial squeeze that could mean there are fewer services available for CCGs to commission. Many GPs are concerned that they could become the administrators of NHS cuts as they are handed responsibility for decimated budgets. The NHS Act 2012 gives CCGs the authority to decide to whom they will provide a service, and what service they will provide. They will be under no obligation to ensure that a whole range of services are available to their catchment population. (There is already rationing of services such as hernia, cataracts and hip or knee replacements). The NHS Act also enables CCGs to enter into joint ventures with private companies to outsource most work to private companies with vested interests, beyond the scope of full public scrutiny.”
The NHS prior to this Act had been immune from a discussion of competition in that the NHS had from this previously is that a regulatory authority for competition, the Office for Fair Trading (“OFT”) did not consider that any public bodies involved in the purchasing or supply of goods or services within the NHS were “undertakings”, and therefore were not subject to action under the Competition Act. In other words, any involvement of these bodies was for “non-economic purposes”. This was reinforced by the EU in relation to a Spanish healthcare case FENIN v Commission in 2006, on the basis that the system concerned operated on the principle of ‘solidarity’. They have therefore exposed some services (which previously would have been provided in-house) to a scenario where they will be considered for competitive tendering. The extension of Any Qualified Provider (albeit with a more limited, phased implementation from 2012) to a wider range of services, and the distancing of the state from acute sector provision in the form of foundation trusts could conceivably weaken the argument against healthcare provision being for “non-economic purposes”, particularly when individual service lines are considered.
This is a highly significant development, I feel, that Andy Burnham could be steering the NHS away from being run for ‘economic purposes’, and this could be the passport for Andy for not becoming enmeshed in lots of complicated domestic and EU law. As it happens, I have a real feeling that European lawyers would prefer not to enmeshed in a complicated discussion about private provision in healthcare, as they feel that competition law is best applied to pure private or commercial entities not involved in social/healthcare policy.
As it stands, the Health and Social Care Act (2012) is a complex interplay of domestic and EU law in the disciplines of company law (including mergers, financial assistance), commercial law, procurement law (including public contracts), regulatory law, insolvency law (particularly administration). However, the law, albeit at nearly 500 pages, does have some notable omissions, such as what happens if a CCG ‘trades’ while going insolvent. Law would have to clarify consider, in its capacity as a ‘body corporate’, whether the CCG were still capable of wrongful or even fraudulent trading.
Monitor and the regulation of pricing in the NHS
Monitor is in its infancy, but, pardon the pun, I would like to describe an example of childbirth to explain the mountain of problems that the new privatised NHS is yet to experience. Consider this a steep learning-curve that not many of us voted for at the last election.
“The new NHS provider licence: consultation document” was issued by Monitor on 31 July 2012 with a deadline for responses determined as 23 October 2012. According to section 5.1 of this Document on pricing,
“One of Monitor’s new functions will be to set prices for health care services funded by the NHS.Accurate pricing is essential to ensure that providers are paid appropriately for services they provide to patients. Accurate pricing information helps GPs, commissioners and providers to plan and budget for health care services to meet people’s needs. Pricing can also be used to encourage providers to improve the quality of services for patients, and to increase the efficiency with which services are provided. If providers are not properly reimbursed, this can reduce the quality and efficiency of care they offer and may, in some circumstances, threaten the sustainability of their services.”
Pricing is pivotal in markets, and will obviously therefore be expected to the subject of considerable scrutiny by competition regulatory authorities. In future, Monitor will be responsible, in partnership with the NHS Commissioning Board, for setting prices for NHS services. Indeed, according to a statement produced on 20 June 2012,
“The Health and Social Care Act 2012 makes changes to the way health care is regulated in order to strengthen the way patients’ interests are promoted and protected. Monitor’s role will change significantly as we take on a number of new responsibilities. We will become the sector regulator for health care, which means that we will regulate all providers of NHS-funded services in England, except those that are exempt under secondary legislation.”
Take for example the cost to the taxpayer of a provider delivering a baby – not the antenatal or postnatal packages, but the cost of the actual labour and peri-partum process (“the package”). Like any other “product” in the market, a supplier will have to price its product carefully, to ensure that it offers a competitive price, but especially to ensure it does not price itself out of the market by being too costly. The price of “the package” might be determined through a number of different ways.
- Premium pricing (also called prestige pricing) is the strategy of consistently pricing at, or near, the high end of the possible price range to help attract status-conscious consumers. People might buy a premium priced product because they believe the high price is an indication of good quality.
- Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the selling price. This method although simple has two flaws; it takes no account of demand and there is no way of determining if potential customers will purchase the product at the calculated price. You only need to consider the complexity of doing the calculation for the package”, e.g. will the provider use cheap epipdural needs for the anaesthesia, will a foundation year doctor (who is cheaper) perform most of the medicine compared to a specialist registrar (who is more expensive, but more experienced, especially in dealing with medical emergencies).
- Value-based pricing – a price based on the value the product has for the customer and not on its costs of production or any other factor. The relevant issue is how much would you be prepared to have provider A deliver your baby? This is a subjective issue, not easy to predict.
The problem with premium pricing is that providers can collude lawfully to set their prices as high as possible between them. Price fixing is illegal under Article 101 TFEU of the European Union:
Article 101
(ex Article 81 TEC)
1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
– any agreement or category of agreements between undertakings,
– any decision or category of decisions by associations of undertakings,
– any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
It has been incredibly hard to prove price-fixing, but numerous examples exist.
For example, the Daily Mail recently reported price-fixing at the petrol pumps:
“Motorists are being ripped off by profiteering oil companies and speculators, MPs suggested yesterday.They demanded an inquiry into allegations of price-fixing at the pumps, and called for the Government to replace its planned fuel duty rise with a windfall tax on oil company profits.
And last year they reported on the price-fixing of milk:
“Supermarkets and dairy firms have been fined almost £50million over price rigging on milk and cheese that cost families £270million. The collusion put up the price of milk by 2p a litre – 1.2p a pint – and added 10p to the cost of a 500g block of cheese. The punishment was announced by the Office of Fair Trading, following an investigation triggered by whistle blowers at the Arla dairy company. First revealed by the OFT in 2007, the ‘Great Milk Robbery’ took place in 2002 and 2003. But only now has a fine of £49.51million been handed down.”
For Monitor, regulating this will be a mammoth task. Private health providers have much scope for setting between them the most profitable way of delivering the patient’s baby, and it is a great market to be in: the country will never be short of a need for providers of safe deliveries of babies. Whilst other metrics might be important to the clinician, such as mortality or morbidity (infection rates), it could be that private providers are distinguished most themselves by the least cost to a GP practice. Or, it could be that people are genuinely fickle about not caring about who picks up the tab, but the preferred private provider might provide “extra frills”, like en-suite TV with 80 channels.
The problematic issue is what happens if an unconventional problem comes out-of-the-blue. The mother might experience a rare type of headache, such as trigeminal autonomic neuralgia (“TAN”), and there is effectively no “patient choice” involved, save for the GP having to refer the patient to a specialist unit like Great Ormond Street Hospital (“GOSH”). You will notice here that the quality of patient choice is nothing to do with the innovation of the private health provider (can a private provider suddenly make the five stages of labour turn into a more profitable six?), nor indeed how “competitive” the market of private providers of childbirth is (can we get down the speed of the first one from an average of 48 mins to 44 mins?). It is, however, entirely to do with the skill of the clinician in making a rare diagnosis, and having the astuteness of having a specialist unit such as Great Ormond Street Hospital deal with it safely, whatever the cost. You must note that I give this example of TAN at GOSH completely at random, and any similarity to a real-life scenario is of course completely unintentional.
British Gas and oligopolies – the need for regulation and lessons for the privatised NHS
THIS ARTICLE WAS UPDATED ON 13 APRIL 2013
The “fast-buck society”, epitomised by the quick-to-fire Beecroft proposals of employment which is currently unlawful under both domestic and European law, does not respect people in society – it only respects shareholder dividend. Companies are in it for the short-term; therefore any strategy they have is to generate profit in the short-term, indeed a legal obligation of theirs. Unions protect workers, and we virtually agree that it’s essential that workers in society must have protection. The situation regarding privatised utilities is an excellent example of the failure of the markets, and 20 years later history could be repeating itself with our NHS.
Privatisation only works if there is effective regulation of the market, given that the market is so imperfect. The end-result was the production of a few entities in a crowded marketplace, offering effectively no competition and no choice for the customer. Meanwhile, some people did extremely well out-of-it; these are the same people who have benefited from the top band tax cut by George Osborne’s abysmally executed budget.
British Gas this morning faced criticism over alleged profiteering, amid City predictions that the company will reveal this week that it made £100m in extra profits in the first six months of the year. The parent of British Gas, Centrica, reports first-half figures on Thursday. City analysts are now expecting the residential energy supply arm of Centrica, which trades as British Gas, to unveil first- half profits up 25% at £355m as part of a wider Centrica group profit of £1.4bn. Centrica is thought to defend soaring profits by pointing out it reduced its residential electricity prices earlier this year by 5%. Bain has successfully argued that those least able to pay bills are genuinely confused by complex tariffs, and believed that current attempts by the government and industry regulator Ofgem to tackle these problems are insufficient.
The precise accusation is that such companies have been profiteering which comes at the expense of the poor, vulnerable and elderly. Consumer Focus, the government-backed consumer watchdog, said households were facing historically high energy bills, and had long held suspicions that domestic power pricing was not fair. From a regulatory point of view, this has been nothing short of a disaster from the customer’s perspective. The City is encouraging investors to buy Centrica shares and believes that the chances of Ofgem taking a tougher stance against the ‘Big Six; is increasingly unlikely.
The ‘Big Six’ form an “oligopoly”, a common market form. Oligopolistic competition can give rise to a wide range of different outcomes. In some situations, the firms may employ restrictive trade practices such as collusion to raise prices and restrict production in much the same way as a monopoly. Any formal agreement or concerted practice would be unlawful, and be caught by the Competition Act. Firms often collude in an attempt to stabilise unstable markets, so as to reduce the risks inherent in these markets for investment and product development. There does not have to be a formal agreement for collusion to take place (although for the act to be illegal there must be actual communication between companies) – for example, in some industries there may be an acknowledged market leader which informally sets prices to which other producers respond, known as “price leadership”.
What has not happened in this market, unfortunately for the customer, is a situation of competition between sellers in an oligopoly which can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching “perfect competition”. In a normal market, it is supply and demand that mostly affect price. Should a consumer find a similar product offered by another provider at a cheaper price, he will make his purchase from that other provider. Suppliers will not, therefore, over-inflate their prices because they will simply lose customers. In an oligopoly, there is little choice for consumers and this will negate any influence they may have had over price control.
The “Big Six” show all the hallmarks an oligopoly. There is literally a ‘handful’ pf sellers. An oligopoly maximises profits by a number of measures. Oligopolies are price setters rather than price takers Barriers to entry from new competitors, are high The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy new firms. Additional sources of barriers to entry often result from government regulation favoring existing firms making it difficult for new firms to enter the market. The sellers are all selling the same thing (e.g. gas, water) – i.e. it’s a heterogeneous undifferentiated market. The distinctive feature of an oligopoly is interdependence. Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm’s market actions and will respond appropriately. This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and their reactions.
Left to its own devices, it is hard to see how end-users (or customers) can benefit from this imperfect competition. That is why the law must step in, and one of the ways in which it can do this is taxation of the utility companies. Due to the dire state of the public finances, made massively worse by this current Government, this might be a reasonable next step.
David Bennett has recently indicated that a “spoonful” of competition will help the NHS. But this is precisely the point – a ‘spoonful’ will produce an oligopoly, where a lot of profit is returned to the shareholder and incumbent directors, but not much value is returned to the customer. If the NHS fails to attract many entrants because the significant risks in a sustainable business and financial strategy, exactly the same situation will result from private providers doing a bulk of NHS work. This will end up costing the NHS substantially more in the long-term, and makes a fragmented, non-universal service much more likely. Even Richard Branson opined on LBC this week, on Margaret Thatcher’s death, that he wishes that he had seen more competition in the airlines industry; this, from the perspective of the end-user, is exactly why.
The death of Ian Tomlinson – important issues of 'but for' and 'the thin skull rule'
This week, Simon Harwood was cleared of killing newspaper seller Mr Tomlinson during the G20 protests in London in 2009. The latest developments, at the time of writing, are outlined here, for example. Ian Tomlinson was an English newspaper vendor who collapsed and died in the City of London on his way home from work during the 2009 G-20 protests. An inquest jury found in May 2011 that he had been unlawfully killed. Simon Harwood, a constable with the Territorial Support Group of London’s Metropolitan Support Group was charged that month with manslaughter and was found not guilty on 19 July 2012 at Southwark Crown Court. The first PM, conducted two days after the death, concluded that Tomlinson had died of natural causes after suffering a heart attack. His death became controversial four days later when The Guardian published video footage from an American investment manager who had been visiting London. The video showed Tomlinson being struck on the leg from behind by a police officer wielding a baton, then pushed to the ground by the same officer. He walked away after the incident, but collapsed and died minutes later.
Here is the footage from the Guardian, watchable on YouTube, with a helpful explanatory commentary.
After The Guardian published the video, the Independent Police Complaints Commission (IPCC) began a criminal inquiry. Further postmortems, conducted by three other pathologists on April 9 and 22, indicated that Tomlinson had died from internal bleeding caused by blunt force trauma to the abdomen, in association with cirrhosis of the liver. The Crown Prosecution Service (CPS) announced over a year later in July 2010 that no charges would be brought against Harwood, the officer identified as having struck him, because the disagreement between the first and later pathologists meant the CPS could not show a causal link between the death and the alleged assault. That position changed in May 2011 when an inquest jury returned a verdict of unlawful killing, ruling that the push and baton strike had involved unreasonable force. This led the CPS to review its decision and charge Harwood with manslaughter.
Voluntary manslaughter occurs either when the defendant kills with a mental state which could be described as “malice aforethought” (an intention to kill or cause serious harm), but there are mitigating circumstances which reduce culpability, or when the defendant kills only with an intent to cause serious bodily harm. A killing which occurs after provocation by an event which would cause a reasonable person to lose self-control. There must not be a cooling off period negating provocation. If there is an interval between the provocation and killing sufficient to allow the passion of a reasonable person to cool, the homicide is not manslaughter, but murder. Here, critically, the footage video shows no provocation on Tomlinson’s part—he was not a protester, and at the time he was struck was walking along with his hands in his pockets. If one argues that it is uncertain beyond reasonable doubt that Harwood wished to kill Tomlinson in the first place, voluntary manslaughter for securing a conviction is not an option.
Constructive manslaughter is also referred to as ‘unlawful act’ manslaughter. It is based on the doctrine of constructive malice, whereby the malicious intent inherent in the commission of a crime is considered to apply to the consequences of that crime. It occurs when someone kills, without intent, in the course of committing an unlawful act. The malice involved in the crime is transferred to the killing, resulting in a charge of manslaughter. For example, a person who runs a red light in their vehicle and hits someone crossing the street could be found to intend or be reckless as to assault or criminal damage (see DPP v Newbury). There is no intent to kill, and a resulting death would not be considered murder, but would be considered involuntary manslaughter. The accused’s responsibility for causing death is constructed from the fault in committing what might have been a minor criminal act.
The difficulty here is proving beyond reasonable doubt, and this is where the Court can only be directed by expert opinion evidence from medical professionals, who can give such evidence which is admissible in a criminal court, that causation had taken place. There has been to proven a direct link between the baton strike and the subsequent death. This was discussed in R v White (1910), where the prosecution failed to establish causation in fact; The defendant put cyanide into his mother’s drink, but she died of heart failure before the poison could kill her. The answer to the question ‘But for what the defendant did would she have died?’ was in fact ‘No’ as she would have died anyway. She had not committed murder.
I’ve never read the judgment, but patients with severe cirrhosis, in my knowledge, always have deranged clotting evidenced by their clearly abnormal prothrombin and APTT times. Such patients would therefore be extremely prone to haemorrhage, and a direct blow by the baton to Harwood would be different as Harwood is a susceptible individual. This rule is therefore highly relevant, in my view. Cited formally, the ‘thin skull’ rule says that the defendant must take his victim as he finds him. Therefore, even if injury or death is not reasonably foreseeable the law still considers the defendant liable if the victim suffered from some physical or mental condition that made him or her vulnerable.
Helena Kennedy QC explained on BBC Any Questions last night that the burden of proof in criminal law was necessarily high, beyond reasonable doubt. This was to large degree a public policy consideration, so that the State and the public could feel safe in the convictions that the Crown had secured, and this necessarily was a good thing. Having a jury go through the evidence in detail was felt to be far superior to trial by media, argued by other panellists such as Kelvin Mackenzie.
I personally feel that we should not go down a path where ‘trial by media’ becomes superior to the criminal justice system. I feel that the public, especially law students, should be very careful about what they tweet in public, as the law and medical issues in this case are extremely complicated.
The author of this blogpost does not practice law or medicine, has postgraduate degrees in both, but has a strong academic interest in such matters.
Politicians should not undermine public perception of the English law
John Hirst, who took the UK to court over prisoners’ voting rights, once said, “MPs are not part of the Big Society themselves. More like Pig Society, with their noses in the trough.”
Politicians, as a group, with all their bickering over who was to blame over members of News International and Barclays Bank allegedly acting illegally, have been first to play down the existence of laws currently in force in the UK. The impression which David Cameron and George Osborne would like to leave you with is that we have generally under-regulated thanks to Labour. Wrong. In 2006, Labour enacted the Fraud Act, after a report by the Law Commission reviewing relevant jurisprudence here on the matter. This is exactly the same trick where the Tories tried to leave the media and the public with the impression that phone hacking may be morally wrong, but not illegal. Since #Leveson, they have been unable to peddle this myth.
It is the case that LIBOR-rate fixing is not covered yet by the financial regulations, but the Financial Services Bill will be amended to reflect that. Lawyers should not tolerate the undermining of the existence of the Fraud Act.
MPs are not above the law either, as some of them will know all too well from the expenses scandal. The Home Secretary has been found to be incorrect over the nature of the human right (article 8), has been found guilty of contempt of court, and was unable to count time, all earlier this year. As a Home Secretary, this will further add to the undermining of the perception of law in the general public.
Some MPs have tried to advance the case that certain lawyers are “ambulance chasers”, and that they are only in it for the money. This argument has been disseminated in a wish to propose that our legal aid budget, protecting the employment, immigration, housing, welfare benefit (inter alia) rights of citizens in the England, toward the socially-deprived end of society’s spectrum, is luxurious rather than essential.
So I call for all politicians to be careful in not undermining the English legal system.
John Flood chairs a debate on the impact of the Cloud on law and legal education #LawTechCampLondon 2012
[This blogpost gives accounts as if the own words of the speakers involved. The author does not take responsibility for the accuracy of information contained therein.]
Track One: Law + Tech: Advances Online, in the Cloud and with the Crowd (Methven Room)
Moderator: Prof. John Flood, University of Westminster
Extra talk
Computers will cut down the head count by 15%. The legal market may require new services from distress goods to consumer goods, from only when they need lawyers when things are bad, to providing law services otherwise. We ideally want to change from a Martini glass to a beaker glass.
First step: connect with law firms.
You then have to provide new services which are not currently been offered. For example, lawyers can provide services for them to plan their lives. You can also brand ‘family legal check-ups’, i.e. seeing a lawyer even if you’re not sick. One of the services could be, for example, a credit check. A way forward would be to pay into untapped markets, and perhaps create a Google or Apple system where lawyers can continually think about new products and services, and to deliver them in a new way. Not all clients are currently online, but future clients will be online. You need an accessible website.
Tom McGinn, Director of Business Development, VirtualCourthouse
Virtual Courthouse is a startup in Washington. Low income individuals are being priced out of the law. Online dispute resolution and self-litigation are important new areas. There is no right to civil legal aid in the US. How is the Legal Services Corporation faring? Currently, the ratio of legal aid lawyers to low income individuals is 1:6,415. More people are entitled to legal aid, but also the legal aid services budget is being cut. More and more people are going thirsty, and there is less water available. In 2011, 72,900 represented themselves in the federal courts (20% of all cases filed). 1:5 in Americans therefore represent themselves in court, as they cannot afford one. Litigants put themselves at a huge disadvantage, as they do not understand the nature of the legal system; it is analogous to an emergency room, and the emergency room cannot cope. What is the solution to this? Alternative dispute resolution is far from a new idea, for example Plato ‘The Laws’ and Abraham Lincoln has provided a description thus: “discourage litigation: the nominal winner is often the loser in fees, expense and cost of time”. Technology can help us drive the most efficient way of doing something: disputes settled with live litigators but with the help of technology, and disputes settled entirely through technology. This was touched upon in Prof. Susskind’s keynote speech. ‘Cybersettle’ (online dispute resolution) has saved $11.3mn http://www.cybersettle.com/pub/ ?#LawTechCamp?
Josh Blackman, Asst. Professor, South Texas Law, Creator of FantasySCOTUS.net, Harlan Institute
Disruptive technology is changing how we do law. ‘Law’s Information Revolution’ involves disruptive technology. People can make predictions – this crowd-sources the prediction market, based on ‘The wisdom of the crowds’ by James Surowiecki. Most people involved with the judicial system interact with the lower courts. There are inherent problems therefore in crowd-sourcing, therefore. Assisted decision-making can instead help make decisions, with the help of ‘Super Crunchers’ (Ian Ayres). Individuals have capabilities which are limited. In the US, we use ‘PACER‘ which is not free, and close sourced. It’s a very good money-maker, but the information is there. Law is like data, and there are facts and trends lying there, like “The Matrix”. Another example is Harland which has used the PACER data which can track the timeline which we have developed, and events can be linked easily. For example, one could ask what cases are Google currently involved in? It would be very difficult to track this without such a platform. Take another example: imagine if you have an app where you could ask to ask, “I want to draft to draft a contract which…” or “My landlord won’t fix my problem” – regarding the latter, the app could produce various options.
Dr. Adam Wyner, University of Liverpool
“We want to lead law students astray, because we’re bad” Lots of open, unstructured legal data, so how do you find the information you need? Law students highlight information by highlighting different text, however this is time-consuming. We wish to create an open-source resource which can allow information-extraction, used by law students interested in case analysis, but it would be a nice tool to incorporate into law school classes. We are targeting the same type of annotations which law schools already use – there will be a tool to analyse conflicts. A blog explaining this is here. There is additional semantic meaning which is mapped onto the annotation, for example information about the appellant, jurisdiction or defendant. The legal case factors are also interesting, and very important for legal case-based reasoning. Research from intellectual property can find the textual basis in deducing the legal basis of intellectual property cases, in working out whether cases are sufficiently similar. A gold-standard can be found on the basis of inter-annotator agreement; they then curate the disagreements to create a Gold Standard corpus. You can also search the annotations using a tool such as ANNIC. We’re academics, and we’re making these data helpful to the public.
Richard Cohen, Executive Chairman & Group Counsel, Epoq
This topic is on online automatic automation. Epoq is the largest provider of online legal services which provided 390,000 drafting services. We have 300 different legal document/form drafting services. We use an online automation platform, and currently the ‘brand behind the brand’ allowing others to ‘dig for the gold’. We provide the platform for about 350 banks and a relatively small number of law firms (“early adopter firms”). The client’s journey begins with a phone call – there may then be an online interview, the client buy service, lawyer review, and the document is prepared. The phone call is an example of ‘quick registration’ – e.g. a client needs a will, e-mail goes to the client, the client gets sent an e-mail to request specific information. The client has access to helpful notes in the Q&A process, and these are the same questions which a real lawyer would ask. In most cases, the lawyer is in fact more interested in the answers than the actual document itself, but the document is nonetheless reviewed in detail. At the end of the process, the document can be exported into Word or as a pdf – the system will notify the client that the document is ready for execution, or it is necessary for the client to come into the office. How does this compare to traditional delivery of documents today? The current system is very inefficient: a will with power-of-attorney would normally cost £750, and take about 3 hours (private client work). 969 were wills and lasting powers-of-attorney for husband and wives – it is uncertain how many people will engage with the business as these legal services will normally be bundled with other services like life insurance. Lawyers are changing – it is cultural, like working with pens. Law firms in England and Wales are managed by partnership, just a collection of sole practitioners working in a big building, and even if there is management it is very poor on change.
Raj Abhyanker, CEO @ Trademarkia.com
This is a search engine for logos, trademarks and brands. They can find Apple’s latest product, or J-Lo’s latest perfume. We attract 1.7 million unique people/month allowing us to monetise, such that we are now the largest trademark in the firm. I created ‘Google Offers’, which is the Google alternative to Groupon. How can law firms move forward? Quality Lawyers, Legal Zoom and Rocket Lawyer are the competitors. The real market is international, the power of the internet, and a global structure. Lawyers and law firms will adapt to a new reality, and attorneys will be accessible to people in a new way (no amount of automation can replace face-to-face law). The belief is to create ‘retail spaces’, which are not law firms, but are the bookstores or coffee shops of law. You can access your law through an #ipad – this is a ‘coal hub and spoke’ opening at University Avenue, Legal Force Trademarks. The key to creating legal space – and we are measuring ROI for everything we do. If I have an online presence in London, I can be at an advantage, and producing a pool of lawyers through collaboration is much stronger. The ROIs have to be shown to the actual law firms. The distance between one solicitor and another, in one of the competitors, is quite large, and we are trying to create a hub and specific ‘brand experience’. My tips are:
1. When you dream, dream big
2. Plant trees today, harvest in 500 years (Oxford trees)
3. Best lawyers and web entrepreneurs are psychiatrists.
4.Appreciate lawyers who like law, but find the rare breed who challenge it.
The psychopathy of the corporate personality; lessons for law from cognitive neurology
In cognitive neurology, ‘psychopathy’ does not mean ‘a tendency to kill someone’ as is common thought by the general public. ‘Psychopathy’ is literally a ‘suffering of the mind’, and is used by cognitive neurologists to refer to individuals who cannot understand the mental states of others. This inability to understand the mental state of another in your mind is thought to go to awry in autism, from the seminal work by Prof Uta Frith, at UCL (and who was awarded an Honorary Doctorate at Cambridge this year) and Prof Simon Baron-Cohen, Macurdy Professor of Abnormal Psychology at Cambridge. It is even thought an ability to monitor to your own mental state, in particular distinguish internally-generated mental states from those of other people, can lead to conditions such as schizophrenia, causing delusions.
Salomon v Salomon provides the pivotal House of Lords case in English law, establishing that the body corporate has a separate legal personality. The concept of a corporate having a personality allows it to commit crimes such as manslaughter and fraud. It is fitting that there should now be a term called ‘corporate psychopathy’ to describe the sickness of the organisational cultures of otherwise ‘successful’ corporates. Had Lord Denning been alive today, he would have been the first to ask his juniors to consider how best to pierce the corporate veil to bring relevant parties to justice. ENRON, News International and Barclays provides three horrific examples of the emergence of ‘corporate psychopathy’, where a company can be highly successful shareholder dividend generator, but is in fact morally and legally sick.
The shocking aspect about ENRON was that it was winning industry-level awards and highly profitable while being completely sick. In fewer than two decades, ENRON grew from nowhere to be America’s seventh largest company, employing 21,000 staff in more than 40 countries, however the firm’s success proved to have involved a giant scam. ENRON lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn’t show up in the company’s accounts. Kenneth Lay was ENRON’s former chief executive and chairman since 1986 refused to testify at the last moment after saying he had been pre-judged. That ENRON’s false accounting was not spotted sooner has prompted the accounting industry to take a hard look at itself. Strikingly, ENRON had like a malignant cancer had metasised to parts of the establishment. ENRON provided millions of dollars to finance Mr Bush’s 2000 election campaign. Mr Bush was a personal friend of Mr Lay, but has been quick to distance himself from any involvement with the firm.
News Corp provides another chilling example. A reporter and a private investigator who worked for the Murdoch-owned News of the World tabloid were convicted of phone-hacking in 2007. News International, Murdoch’s British newspaper arm, had said the hacking was limited to a single rogue reporter but more victims of hacking were revealed in 2009, suggesting the practice was widespread. On 15 July 2011, Brooks resigned as chief executive of News International, following widespread criticism of her role in the controversy. On 17 July 2011, she was arrested on suspicion of conspiring to intercept communications and on suspicion of corruption – making corrupt payments to public officials. On 13 March 2012, she was again arrested on suspicion of conspiracy to pervert the course of justice. On 15 May 2012, Brooks was charged with conspiracy to pervert the court of justice. Murdoch apologized in person to Milly Dowler’s family and his company took out full-page advertisements in British newspapers saying, “We are sorry.” Andy Coulson, who followed Brooks as editor of the News of the World, resigned after the 2007 convictions and was later appointed by then opposition leader David Cameron, Prime Minister, as his communications chief in 2007. Coulson was arrested on July 8 on suspicion of phone-hacking and corruption, and released on bail. Again, the comparisons are chilling. According to the Leveson Inquiry, Rebekah Brooks sent an effusive text message to David Cameron on the eve of his 2009 party conference speech, telling him: “Professionally, we’re definitely in this together”.
Bob Diamond is an Amercian banker, currently Group Chief Executive of British bank, Barclays Plc. He is also Chief Executive of Corporate & Investment Banking and Wealth Management, comprising Barclays Capital, Barclays Corporate and Barclays Bank. In early 2011, Barclays announced that Diamond would receive an annual bonus of £6.5 million in 2011, the largest of any CEO of a British bank. However, Diamond voluntarily gave up his bonus for 2012 after Barclays was fined £59.5 million by the FSA (£290m in total) “over the bank’s ‘serious, widespread’ breaches of City rules relating to the LIBOR and EURIBOR rates. The bank had been found to have lied, sometimes to make a profit, and other times to make the bank look more secure during the financial crisis. The UK’s Financial Services Authority (FSA), which levied a fine of £59.5 million ($92.7 million), gave Barclays the biggest fine it had ever imposed in its history. The FSA’s director of enforcement described such behaviour as “completely unacceptable”, adding “Libor is an incredibly important benchmark reference rate, and it is relied on for many, many hundreds of thousands of contracts all over the world.” Osborne has long been highly critical of City regulators for not spotting the accounting tricks used by Lehman Brothers to artificially inflate its balance sheet.
That there is something pathological in the corporate personality in the past of Barclays, what I have called “corporate psychopathy” has been vociferously criticised by Sir Mervyn King, the current Governor of the Bank of England: “That goes to both the culture in the banking industry and to the structure of the banking industry, from excessive levels of compensation, shoddy treatment of customers, to deceitful manipulation of one of the most important interest rates and now this morning to news of yet another mis-selling scandal.We can see we need a real change in the culture of the industry. And that will require two things – leadership of an unusually high order and changes to the structure of the industry.”
Mr Diamond gave the Today programme lecture in November 2011, saying that banks had to be “better citizens” and create a trustworthy culture.” (listen to this clip from the ‘Today’ programme on the BBC website); he proudly reported that, “the evidence of culture is how people behave when nobody is looking”. This is particularly horrific given the latest scandal news. What is worrying about ‘corporate psychopathy’ is that it seems to be supported by the mutual collusion of other corporates, who are often themselves healthy. For examples experts have claimed that under US law such transactions involved in the Lehman Brother affair could not be booked as sales. However, it is reported that crucially, City law firm Linklaters gave a legal opinion in 2006 that transactions booked under Repo 105 could be treated as sales under UK law. This appears to have enabled Lehmans to keep billions of dollars of debt off its US balance sheet.
There are some lessons to be learnt from cognitive neurology, most probably. One is that a psychopathic individual who has a complete inability to infer the mental states of others is incredibly hard to rehabilitate. Secondly, psychopathic individuals can function very well in other domains, some having extremely high IQs in fact. This is what makes it difficult in ascertaining the precise punishment for true ‘psychopathy’ as it is fundamentally a mental health issue. Instinctively, I feel that this makes it inherently difficult to know what precisely to do with a psychopathic corporate. Sure, you can dream up new methods of diagnosis and potential actions, as the US legislators did with their problem in the form of the Sarbanes-Oxley Act, but it is easily arguable that you are not treating the underlying cause.
