PFI: When is a contractor like a council?

The act defines a public authority as any person who carries out any functions of a public nature. This has been left deliberately vague to ensure that people can enforce their rights regardless of whether a public service, or part of it, is delivered by the public sector or by the private sector on behalf of the relevant authority. The act is very likely to apply directly to any private sector contractor involved in a private finance initiative or public-private partnership transaction.

A PFI or PPP contractor provides a service that would otherwise be delivered by central or local government and therefore will be a “public authority”. However, liability will result only from the public functions that are carried out by the contractor and not any private functions that it is also involved in. Both the contractor and the authority could be liable for any breach of the act, but it is not yet clear how the contractor and the authority will share the risk of liability. Indeed, there does not seem to be any restriction on how far down the contractual chain the act may apply – thus a subcontractor may also be directly subject to the act if it performs public functions.

Where contractors may be affected

In general, a PFI contractor will be affected by the act in the same way as a public authority. However, there are certain key areas that PFI contractors (including subcontractors) will need to be made aware of.

• Most contractors are employers, and employment issues will be relevant to all PFI or PPP deals. The right to a fair trial provided by article 6 will govern internal disciplinary procedures or hearings. The contractor will need to be aware that employee disciplinary procedures should be scrupulously fair.

• The right to freedom of thought, conscience and religion (article 9) could be relevant where the beliefs of an employee require the wearing of particular clothes or not working on certain days.

• The right to respect for private and family life (article 8) will impinge on the contractor’s desire to control certain work-related activities. Recording telephone calls, vetting e-mails, drug testing, use of CCTV, disclosing personal information, prohibiting personal relationships with colleagues and no smoking policies could all infringe this right. The right to freedom of expression (article 10) may affect any restrictions against whistle-blowing.

• Certain work sectors will raise specific human rights concerns. For example, the right to life (article 2) will clearly have an impact on contractors that run care facilities, hospitals and prisons. The right to freedom from inhuman or degrading treatment (article 3) may affect the conditions that the contractor is to provide in a prison, care facility or hospital. Physical and mental ill-treatment will also be covered by this right. The right to respect for private and family life (article 8) could affect issues of privacy in some institutions. Projects in the defence sector will also need to be looked at carefully.

If a contractor asks for an indemnity against Human Rights Act liabilities, the indemnity will not be effective

Restrictions on the act

Interference with some of the convention rights, for example, respect for private life (article 8), may be permitted if the interference is proportionate, fair and lawful. Legitimate reasons for restrictions include security, health and corporate image. Also, the act provides that if an authority is acting – and could not have acted differently – under other “primary legislation”, this will, in effect, override the act. However, a contractor will probably not be entitled to raise this as a defence.

PFI bidding consortia should note that the provisions of the act are mandatory. All UK legislation will have to be interpreted so as to check compatibility with the convention. Any conflict between UK law and the convention may lead to changes in those existing laws.

What action should contractors take?

In order to be successful at the bid phase, contractors will now need to address the issue of compliance with the act. Local authorities are likely to be more inclined to select bidders that have a low “human rights risk”.

As always, contractors face the tension between wanting to become preferred bidder but not taking on unacceptable or unmanageable risks. For many contractors, human rights risk may fall within that category, or they will at least want the risk to be shared. But there are problems. For example, if a contractor asks the authority for an indemnity against Human Rights Act liabilities, the indemnity will not be effective because an indemnity aimed at compensating a party for unlawful acts is unenforceable.