Businesses that have had the Electronic Communications Code (“ECC”) applied to them pursuant to s.107 of the Communications Act 2003 (“Code operators”) are required under Regulation 16(1)(b) of the Electronic Communications Code (Conditions and Restrictions) Regulations 2003 (“the Regulations”) to file their annual certificate pursuant to that provision with Ofcom by 1^st April 2023, unless exempt from that requirement (see below for more detail).  

Ofcom provide on their website a specimen certificate that might be used or adapted. They also have guidelines on assessing funds for liabilities, which may be of assistance.

This note provides:

1. Some suggested action points; and
2. A General Background section, which provides additional explanation and context.

Suggested action points

1. Ignore this note if this is already being dealt with!
2. Commence review for purposes of determining the appropriate amount of funds for liabilities.
3. Determine how the financial provision is made.
4. Complete certificate and other required actions and file the certificate (together with additional required documents) with Ofcom by 1^st April 2023.
5. Diarise to repeat process in time for 1^st April 2024.
6. Contact us if it would be helpful to discuss the points raised in this email.

General background

Where a Code operator is subject to the requirement to provide the Regulation 16(1) certificate, failure to do so by the deadline can result in enforcement action being taken by Ofcom. It has been notable over the past 12-18 months that Ofcom has increased its enforcement investigation of Code operators, particularly where the certificate filing requirement has not been met.

The annual certificate is more than just a ‘tick box’ exercise. What the certificate does is require the Code operator to confirm, amongst other things:

1. How and on what basis the Code operator has assessed its potential specified liabilities for purposes of Regulation 16 of the Regulations;
2. The amount of funds for meeting liabilities that has been provided for; and
3. How that financial provision is being made (with evidence of the same).

In the case of a limited company, the certificate requires board resolution approval and also requires the board to state in its reasonable opinion that it has complied with its obligation under Regulation 16(1). This does potentially create wider risks to directors, particularly if it was subsequently determined that no reasonable director could have reached the opinion that the amount of funds for meeting specified liabilities was sufficient or the obligation satisfied on the information which was considered. This situation might only arise if the company suffered a “relevant event”, as defined in Regulation 16(10) of the Regulations.

The annual certificate provided to Ofcom can be subject to scrutiny and question by Ofcom. If Ofcom is not satisfied that the Code operator has met its obligations under Regulation 16(1) it may direct further action be taken by the Code operator to satisfy Ofcom that Regulation 16(1) has been complied with. 

With the economy and the communications sector currently facing some notable challenges, aspects we consider it is possible that Ofcom may pay increased attention to are:

1. the amount of funds for meeting liabilities detailed within the annual certificate; and
2. the means by which that provision is being made.

Whilst Ofcom does not prescribe the amount of funds for liabilities, it may start to ask questions if the amount of funds for liabilities made does not appear to them to be reflective of the potential risks attaching to the scale and nature of build works being undertaken or they are not content with the method of provision of the funds.

It is also the case that the amount of funds for liabilities that may have been entirely appropriate at the time Code powers were obtained may no longer be reflective of the potential specified liabilities risk that the Code operator might now face, particularly after several years of active and extensive ongoing network build.        

The requirement to provide the annual certificate under Regulation 16(1) only applies if the Code operator has exercised rights conferred by the Electronic Communications Code (“ECC”). If no such rights have been exercised, the annual certification obligation is not generally triggered (although it may still be, if a Code operator has acquired relevant apparatus and/or infrastructure from a 3^rd party where that apparatus/infrastructure would be subject to this requirement). Where however a Code operator intends to start exercising its rights under the ECC, it must provide the same certificate to Ofcom not less than 2 weeks before it exercises its right to install apparatus (and then annually thereafter by 1^st April). 

It should also be noted that the requirement to make provision of funds for liabilities (and provide the Regulation 16(1) certificate) will generally only be triggered where the Code operator has or is exercising its rights under the New Roads and Street Works Act 1991 that the ECC confers (but note the point in the paragraph above about acquired apparatus and infrastructure that might still be subject to the requirement). Those Code operators who undertake works solely in private land might not be subject to the requirement to make such provision.   

Where we might assist

We are experienced in advising:

1. New entrants to the sector and obtaining Code powers on their behalf;
2. New and existing Code operators on the amount of funds for meeting liabilities for purposes of Regulation 16 and on how it is provided;
3. Code operators on Code power rights and obligations;
4. Code operators on enforcement investigations and action by Ofcom; and
5. Code operators in respect of the wider regulatory framework, including the New Roads and Street Works Act 1991 and how that impacts on them.  

Contact us if we might assist you in relation to anything addressed within this briefing note.

There are still some places on our forthcoming online seminars on challenging s.74 charges. Email [email protected] for dates and details.

We’ll let delegate comments from previous training seminars do the ‘hard sell’…

“The ops teams training you did for us has contributed to a significant rise in site compliance and a massive drop in over runs.”

“Brilliant course”

“A very clear and precise presentation through a very difficult/ confusing subject”

This is a sentiment we still hear from some undertaker clients when they find themselves in a New Roads and Street Works Act 1991 (“NRSWA”) related muddle and in need of our assistance.

The types of NRSWA muddle that explanation might be advanced in respect of might be:

1. An unexpected claim from a street authority for s.74 prolonged occupation charges;
2. A criminal prosecution under NRSWA and related legislation; or
3. Fixed Penalty Notices (“FPNs”) for NRSWA and/or permit scheme non-compliances.

Whilst it may be an understandable sentiment from an undertaker, it is not one that always gets one anywhere.

Within this article what we want to do is:

1. Consider where NRSWA liabilities sit;
2. Address contractual ‘counter measures’ and their limitations; and
3. Look at possible solutions.

Notwithstanding the title of this article, parts of it may be as applicable to undertakers with their own direct labour teams as those using contractors.

Where NRSWA liabilities sit

Although it may be the contractor’s acts and/or omissions that gave rise to the NRSWA muddle, legal liability for the outcome of any such muddle invariably sits firmly with the undertaker for NRSWA purposes. As a result it will be the undertaker and not the contractor:

• Being prosecuted and potentially convicted and fined for any criminal offence; and
• Against whom any civil claim might be brought by an authority or other party seeking to recover sums recoverable by it under NRSWA.

It is only in respect of the two criminal offences created by the Traffic Management Permit Scheme (England) Regulations 2007 that a permit scheme authority might consider raising a FPN or related criminal prosecution against a contractor in place of the undertaker itself. It has also been notable that authorities have generally proven reluctant to exercise their ability to pursue contractors for those offences, either by means of FPN or criminal prosecution, when they may have the undertaker ‘on the hook’ for them in any event.

Contractual counter-measures and their limitations    

With liability to NRSWA criminal prosecution and/or civil claims sitting firmly on the shoulders of the undertaker, it makes sense for the undertaker to have express agreed contractual:

1. warranties in place with its contractor requiring that the contractor undertake its works in compliance with NRSWA and other relevant legal requirements; and
2. indemnities from the contractor against the loss/ damage/ costs and other financial penalties the undertaker might incur as a result of the contractor’s acts and/or omissions in breach of warranty.

At least with such contractual counter measures in place, the undertaker may have some prospect of holding a ‘wayward’ contractor to account and recovering its losses. Without such provisions in place holding a ‘wayward’ contractor to account may prove significantly more of a challenge.

Whilst strongly recommending that parties do have clear and express contractual warranties and indemnities in place, it is also the case that such warranties and indemnities:

1. Will not guarantee that the contractor will never breach such warranties;  
2. Are unlikely to provide any comfort or defence against a NRSWA criminal prosecution against the undertaker (and the reputational damage that may ensue); and
3. Will not ensure reimbursement to the undertaker of any charges, fines, or other penalties that it might be required to pay out to a third party as a result of any NRSWA criminal prosecution or civil claim resulting from the contractor’s breach of warranty.

Point 1 above is one that can occasionally take one in circles within a NRSWA context. This is best exemplified by the occasional response to the question “what were you doing to ensure NRSWA compliance?” being “we were paying the contractor to do that”. Viewed solely within a contractual context, that answer may make sense. Viewed within the context of NRSWA liabilities sitting solely on the undertaker’s shoulders, that answer may fall somewhat short. It is also an explanation that may fall even shorter on each occasion that the same contractor is the cause for the undertaker having another trip to a Magistrates’ Court for another alleged criminal breach of NRSWA. The Magistrates will want to know what you as an undertaker are doing to make sure the contractor isn’t getting things wrong, rather than hearing how the contractor may be repeatedly getting the same thing wrong (despite your paying them to get it right).  

In respect of point 2 above, it is the undertaker’s name that may be press released by the prosecution and appear in the local “Bugle and Gazette” paper in the crime pages in the event of a NRSWA criminal conviction being received. Rarely would one ever see the contractor’s name in print in the same context.

As for point 3 above, this is particularly relevant where the amount of financial penalty imposed on the undertaker may be beyond the means of the contractor to pay out on any indemnity it has given. This has possibly become more of a risk with the increasing levels of fines the Courts have been imposing over recent years for NRSWA offences, especially when combined with the tight profit margins that some contracting sectors operate on. It is also the case that some contractors may legitimately challenge the basis of an indemnity claim for an alleged breach of warranty. It is therefore not guaranteed that an undertaker will always recover amounts it believes are due to it from contractors, even where contractual counter measures are in place.

When considering the issue of recovery under any indemnity, there is another feature of the utilities sector to consider. That is the ‘many linked’ length of the contractual chain that may exist between the undertaker and the contractor doing the actual work giving rise to the problem. It is common that there is a string of ‘back to back’ warranties and indemnities from the undertaker down to the furthest contractor. Those ‘back to back’ warranties and indemnities may however sometimes create a false sense of security for all parties by seemingly shifting ‘problems’ ever further away.

Whilst the undertaker will be the party paying out any NRSWA fines, charges or penalties, its ability to recover those amounts under any indemnities it has may be dictated by the ‘depth of pocket’ of those beneath it in the contractual chain. It is not unheard of for each ‘link’ in the contractual chain to ‘kick’ any indemnity claim down to the next ‘link’ in the chain. If at the bottom of the chain there is the proverbial ‘bloke with a wheelbarrow’, that liability may start working its way back up the contractual chain – particularly if said ‘bloke with a wheelbarrow’ proves not to have the means to pay up on any indemnity. Where the indemnity liability is likely to ‘stick’ on its way back up the chain is at the link in the contractual chain that does have the requisite depth of pocket to carry the liability. That could mean the ‘yo-yo’ indemnity claim, having gone all the way down the contractual claim, then works its way back up the chain, potentially leaving the undertaker again ‘holding the baby’.

What’s the solution?

So, having said what we have above, what’s the solution?

The contracting model is undoubtedly with us for the foreseeable, so we can forget any Elysian pipe dream of all works being undertaken by direct labour (good luck getting that model through a regulatory settlement or past an institutional investor…). It isn’t even as if direct labour would eliminate the problems in any event, as any undertaker with its own direct labour teams will confirm. The same NRSWA muddles are common to both models.  

As alluded to above, one of the possible consequences of the contracting model is that it may provide a false sense to both undertakers and their contractors of NRSWA compliance responsibilities sitting ‘somewhere else’ in the contractual chain. The same risk may also however be present within an undertaker with direct labour where that direct labour sits within various different isolated ‘silos’. It is obviously the case that any part of the chain, whether it’s internal within the undertaker or external contractors, may trigger a problem that results in NRSWA liabilities being acquired by the undertaker. It is also the case that any link in the chain ‘dropping the ball’ they are responsible for can have knock on consequences elsewhere within the chain, causing other balls to be dropped and additional NRSWA liabilities to be acquired.

As local authorities come under increasing financial pressure, NRSWA related charges and penalties may (have?) become ever more a daily and increasing feature. Given that undertakers may have significant amounts of turnover and profits, it is possibly unsurprising that authorities might focus their attention on them. Whilst some NRSWA charges and penalties might be considered avoidable (such as: prosecutions; FPNs; and s.74 charges), others are starting to have the character of taxation – think permit fees, lane rental etc. 

Although NRSWA criminal prosecutions may be relatively rare, particularly where imposing FPNs is more financially advantageous to authorities, when they do arise the consequences will almost certainly be greater than the sum of any fine that might be imposed by the Court upon conviction. Even on the financial side, the uncapping of fine levels for many NRSWA offences does mean even first offence fines can be a significant sum of money.

An undertaker should of course have appropriate contractual warranties and indemnities in place with contractors. However, don’t make the mistake of thinking they are the solution. They are certainly part of it but on their own won’t prevent problems from arising nor guarantee that the undertaker will be reimbursed the value of any loss/damage that might result from any contractor breaches.

With a significant proportion of the road system in England having originally been built by the Romans, the reputed advice from the Emperor Honorius to his distressed Romano-British subjects in 410 AD telling them to “See to your own defences” seems as apt for undertakers today pondering their potential NRSWA liabilities as it was to Romano-Britons (albeit the advice was given in a significantly different context!). If contractual warranties and indemnities are only part of the defences (and relatively passive elements at that) we advise that an undertaker take the following additional active measures to mitigate its potential NRSWA civil and criminal liabilities:

1. Understand the range of NRSWA legal duties and obligations that apply to its works, irrespective of whether those works are undertaken by its own direct labour or by contractors on its behalf;
2. Ensure that its own staff and its contractors’ staff understand the obligations under NRSWA that apply to the works that are being done for the Undertaker;
3. Have an effective system of NRSWA compliance auditing and monitoring of its own staff and contractors’ works on its behalf; and
4. Effectively monitor and assess the nature of NRSWA related charges and penalties being incurred by it (be they FPNS, s.74 charges, inspection charges, parking bay suspensions and (increasingly) lane rental, amongst others) whether incurred by direct labour or contractor’s and take steps where possible to reduce them.

And for all those who believe they are already doing all of the above, here’s a picture that may take some people back a few years (20 or so years to be precise). This particular copy of that out-of-date Code of Practice was one ‘liberated’ by the writer from an attendee at a training session delivered a few years after the 3^rd edition of that particular Code of Practice had come into force. Its owner had been unaware that he (and presumably every site he had set up for some years) was two editions of the Code of Practice out of date. He was a direct employee and not contractor staff for that particular undertaker…

If you want to know more about our work in this area and whether we maybe able to assist you  contact us.   

At the outset we make no apologies for the length of this article. In it we seek to consider and address some issues that appear fundamental to how road and street works operate in England and Wales.

Over the years we have advised statutory undertakers in respect of criminal prosecutions by authorities for alleged offences under the New Roads and Street Works Act 1991 (NRSWA), a common theme for authority prosecutors to take in Court has been that signing, lighting and guarding offences under s.65 of NRSWA are so serious that they should be viewed by the Court as akin to Health and Safety breaches and very significant fines should be imposed. This has led on various occasions to unsuccessful attempts by prosecutors to persuade Courts to apply the Sentencing Council’s guidelines on sentencing Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences. In addition to those attempts being fundamentally flawed in a number of different regards, they also highlight a very significant cognitive disconnect. That cognitive disconnect relates to road works undertaken by authorities.

NRSWA and related legislation create any number of different criminal offences that a statutory undertaker might commit in connection with its works in the public highway. Whilst we might personally question why it was necessary to criminalise various of these matters, we accept that Parliament did criminalise them and that breaches do occur. The same authorities that Parliament empowered to prosecute statutory undertakers under NRSWA themselves undertake road works in the public highway with identical potential impact. We also accept that Parliament has criminalised some activities by authorities under the Highways Acts and other legislation.

What we want to focus on within this article is the very significant disparity between how road and street works are treated from a legal perspective. We will do this by considering some of the criminal and civil sanctions that exist in respect of street works.

Both authority and statutory undertaker undertake activities in the public highway with substantially identical potential impact and risks to the public and those who undertake the works. If one is seeking to remedy the perceived ‘ills’ associated with road and street works, we suggest that one must treat both the same in terms of the breaches that might be committed and the sanctions that can be applied. It is only as between authority and statutory undertaker that any distinction between road and street works exists. For the general public, whom both authority and statutory undertaker serve, “stuff” being done in the public highway is generally perceived as just being “road works” and an inconvenience.  It is also the case that highways authorities historically have undertaken considerably larger numbers of road works than statutory undertakers do street works, which in part may explain that public perception.

Much of the legislation for both road and street works is what might politely be referenced as being “rather long in the tooth”. NRSWA itself stemmed from the privatisations of the 1980s and 1990s. Whilst we accept that privatisation was always going to throw up a few anomalies, that was a long time ago and the anomalies became apparent some time back. That those anomalies exist cannot really be questioned.

Back in 2003 when NRSWA was still in its relative infancy the Master of the Rolls, Lord Phillips, said of it:

“The statutory provisions are long and complex. At times I have been inclined to wonder whether they are the product of a demented computer”

In the years since Lord Phillips considered the statutory provisions, they have only grown longer and more convoluted. We continue to wonder whether Lord Phillips’ demented computer is still at work.    

We commenced this article with reference to s.65 of NRSWA because that provision is the most visible example of the disparity highlighted above. It is also one that attracts significant comment from both sides, albeit for different reasons. On the authority side, such comment might be along the line of s.65 non-compliances showing a disregard for the safety of workers and the general public. Such a position might garner some support. A statutory undertaker might agree or disagree with such an authority stance but also simultaneously ask why the same authority’s own sites are not held and sanctioned to the same standard.  

Within the context of significant five and six figure sum fines having been imposed by Courts on statutory undertakers for some s.65 breaches in recent years, one might say that the Courts would not have imposed such fines if the circumstances had not merited it. Such a position might have some credibility. Against that, those on the undertaker side might point out that the site in respect of which such a large fine was incurred was a few hundred yards from a road works site belonging to the prosecuting authority that evidenced the same or greater non-compliances in terms of signing, lighting and guarding than the site in respect of which the fine was incurred. Over the years we have been provided with any number of photos of non-compliant authority sites. We have also directly observed any number of such authority sites as well. Obviously, non-compliance by the authority with signing, lighting and guarding requirements provides no excuse to a statutory undertaker for not complying with its obligations. Additionally, s.65 of NRSWA does not apply to road works by an authority.

So, are complaints by statutory undertakers about authority sites just “sour grapes” by a statutory undertaker caught in the act? Whilst there are some who may consider that to be so, we consider that there is a fundamental inequity in the sense of an unfairness or lack of balance. This is in terms of s.65 of NRSWA and many other provisions.

Within the context of s.65 of NRSWA, street works by a statutory undertaker are required to comply with the statutory Safety at Street Works and Road Works Code of Practice (the Safety Code). Authorities are also subject to the Safety Code pursuant to s.174 of the Highways Act 1980.

On the basis of both parties being subject to the Safety Code, some might say “So what are you complaining about? Authorities are required to comply with the Safety Code too and, if they aren’t, something can be done about it.” Whilst nominally that might appear correct, the reality is that nothing does ever get done about it and even if something was done about it, it certainly does not have the same consequences. The reasons for this are various.

In the first instance, one must compare the sentencing powers open to the Courts under the respective legislation. A breach by a statutory undertaker of s.65 of NRSWA is punishable by a now unlimited level 5 fine. Under s.174 of the Highways Act 1980 an identical breach of the Safety Code by a highway authority is subject to a maximum fine of £10.00 per day. One might therefore have an authority and statutory undertaker site adjacent to each other evidencing identical Safety Code non-compliances. If prosecuted for the breach, the Court might only impose a £10 fine for one and, say, a £15,000 fine for the other. That position makes no logical sense. If an act or omission is considered so serious as to merit a criminal conviction and an unlimited fine if committed by one party, it must logically follow that the same act or omission committed by another party merits the same criminal consequences and unlimited sanction, particularly where the potential risks to the general public and those working at such sites are identical.   

Attempting to justify the difference in available sentences by reference to one entity being a public sector one and the other a private enterprise falls flat on its face. Highway authorities, like statutory undertakers, are subject to health and safety, environmental and other regulatory requirements. In those other areas they face identical maximum fines to those faced by statutory undertakers. Over the years we have heard eloquent attempts to justify the peculiar distinction that exists in respect of street and road works. None have however really managed to square this particular circle and all have substantially boiled down to “well that’s the way it is”. We know that’s the way it is. However, the point is that the way it is makes no logical sense and is inequitable.   

One might say “Well this isn’t really a problem because there haven’t been any prosecutions of street authorities under s.174 of the Highways Act. If there had been, Parliament could have done something about it, if they thought it necessary. So, again, it’s just sour grapes by statutory undertakers.” We would agree that there haven’t been many such prosecutions of highways authorities. In actual fact, we aren’t aware of any such prosecutions. Let us explore the reasons for that.

In the first instance, how likely is it that authorities will prosecute themselves for their own alleged s.174 offences? The phrase “turkeys voting for Christmas” immediately springs to mind in respect of that question. On a less flippant note, one might legitimately suggest that the absence of significant criminal sanction applicable to non-compliance by an authority’s own sites would diminish any rationale for undertaking any inspection of such sites in the first instance. With a maximum £10 per day fine, there can be no impetus to regard any non-compliance as being serious. As for the Police, they quite correctly are not going to regard inspecting a highways authority work site as something they would routinely be interested in, even if they had the time and resource for it. There is another party that would have the knowledge necessary to determine whether an authority road works site was compliant with the Safety Code. That party is a statutory undertaker. The legislation itself envisages a statutory undertaker as a party that may commence a prosecution against an authority in respect of a breach of s.174 Highways Act 1980.

In light of the above paragraph, an observer might ask “if this is a real issue for statutory undertakers, surely they would have started prosecuting highway authorities?” That is a fair question. We have advised various parties about the possibility of commencing criminal prosecutions against authorities for non-compliance with s.174 of the Highways Act. The main reason we have been given against commencing such prosecutions is grave concern about the retribution that they would face from the same authority if they were to take that step. Statutory undertakers have works to complete for commercial and regulatory purposes and any degree of retribution by an authority could potentially have significant financial and regulatory impact. As a result, it is generally considered safer to let things lie and not trigger “tit for tat” prosecutions. There might be some who would question whether an authority would ever look for retribution against a statutory undertaker that commenced a prosecution against it. We do not suggest that all authorities would act in such fashion. We do however suggest that some may – a few permits refused here, some particularly onerous conditions attached there, early starts refused, extensions refused, a higher rate of inspections etc. To say such things do not already occur would be naïve, even if not all authorities would countenance such behaviour.  

It is also the case that statutory undertakers do not see their role as being the regulatory enforcement body for authorities for their road works. Within the wider regulatory crime landscape, street and road works appear somewhat unique in there being the possibility of the regulated acting as the regulator against the very party that regulates them for the same thing. There is however an imbalance of power, which we have identified above, that deters statutory undertakers from taking up the regulatory function that s.174 of the Highways Act 1980 appears to have envisaged them assuming.

Another example of disparity is the range of fixed penalty notices (FPNs) that a street authority might impose on a statutory undertaker. Each of these FPNs is a means to discharge liability to criminal prosecution for distinct criminal offences that a statutory undertaker might be prosecuted for. No equivalent criminal offences or associated FPNs apply to roads works undertaken by the authority itself for similar failings that we are aware of. Some authorities commendably seek some degree of parity by imposing a financial contractual penalty equivalent to a FPN upon their contractors for equivalent non-compliances. Whilst such attempts by authorities are commendable, no one can credibly claim that a contractual financial penalty is equivalent to or on par with a day out at the Magistrates’ Court resulting in a criminal conviction, fine and associated reputational damage that can result if a statutory undertaker is prosecuted for the substantive offence.

We accept that some FPNs carrying criminal offences are unique to statutory undertakers in respect of their administrative and other obligations. As such, there may not be an equivalent for all those specific matters that a statutory undertaker might receive a prosecution or FPN for. Where there is however complete equivalence in terms of obligation, but none in respect of criminal or other sanction, is in respect of works under permit schemes. Both authority and statutory undertaker are required to obtain a permit to undertake works subject to the permit scheme and such permits can be subject to conditions. A statutory undertaker can be prosecuted for an offence of working without a permit or working in breach of a condition attaching to a permit. The level of criminal penalty that might be imposed is an unlimited level 5 fine for working without a permit or a £2500 maximum fine for working in breach of a permit condition. Liability to prosecution for both offences can be discharged by means of payment of a FPN (where such is offered by the authority). No criminal sanction or penalty applies to an authority’s own highway works where they have proceeded without a permit or in breach of condition. Again, some authorities impose contractual fixed penalties upon their contractors in a step towards parity for non-compliance. But again, and for the reasons already stated above, that is not equivalent or on par with criminal sanction.

That authority road works do proceed without permits or in breach of any conditions attaching to them is not open to question. We are not suggesting that all authority road works proceed without permits or in breach of condition, just as no authority would suggest all statutory undertaker works proceed in breach. What however is not clear is what volume of authority works proceed in breach of their own permit schemes. That data is not in the public domain. As no sanction applies to such breaches by an authority there is also no impetus to gather such data, albeit some authorities may seek to gather comparator data.

A couple of years ago at an industry event, the writer was chatting with an authority street manager who said that his main reason for introducing a permit scheme was not works by statutory undertakers but instead to try to find out where his own highways teams were working. He also added that it hadn’t worked though because he still didn’t know where they were. Whilst partly said in jest, the point is one that statutory undertakers’ works teams will be familiar with. They may attend site with a permit to undertake works only to find the location already occupied by the permit granting authority’s own highways team undertaking works without a permit.     

The issue of FPNs raises another factor that has to be addressed. Authorities are allowed to retain the funds received from FPNs. This differs from the position if the substantive offence (in respect of which a FPN might be given) is prosecuted and a conviction secured. Any fine ordered by the Court is, effectively, payable to the government. Back when FPNs were first in contemplation for street works related offences, the writer recollects reading an authoritative document that anticipated that the number of FPNs that would be issued would only ever be minimal. Which document that was is long forgotten by the writer. However, it was incorrect – although its rationale may not have been.

The number of FPNs issued since their introduction to street works has been significant, as has been the volume of funds generated for authorities by them. One might say that this is the fault of statutory undertakers for placing themselves in a position in which they are exposed to potential criminal liability. Whilst such a position might garner support in some quarters, it also fails to take account of the sheer volume of administrative and other activities that are required to undertake street works across multiple authority territories to operate, maintain and renew complex infrastructure critical to all our daily needs. Whilst 100% compliance might be the aim, it is not one that anyone seriously expects to be achieved all of the time.

This issue of FPNs also introduces a somewhat unpalatable one that needs to be addressed. That is the issue of the ‘income stream’ that authorities receive from FPNs and how that fits with their regulatory function. It raises questions as to whether an authority receiving a FPN derived ‘income stream’ is effectively regulating the party from whom the income stream is being received. Whether IT systems with capacity to ‘crawl’ or ‘sweep’ through data to identify and issue FPNs were fully anticipated by those introducing FPNs might possibly be in question. The writer does however recollect reading promotional material from various IT providers at about the same time as that long forgotten document promising that their systems would be able to do just that.

If an authority has become in any respect financially dependent or reliant upon an income stream derived from another party’s theoretically criminal acts, that authority would seem in some way to have a financial interest in continued theoretically criminal acts by that party. We have said theoretically criminal within this context for a very specific reason. That is because we personally question whether many of the substantive acts and omissions that might lead to a FPN should have been criminalised in the first instance. If they were considered of such gravity as to merit criminal sanction, their merely becoming a FPN income stream for an authority would seem to undermine any element of criminality. One might seek to argue that there is no difference between a FPN in this situation and that of a speed camera derived fixed penalty notice. Whilst both are FPNs they are not analogous. The speed camera issued FPN is issued as a deterrent against an activity that could have real and terrible consequences. The street works related one is issued for administrative oversights, where any deterrent value or intent is questionable – particularly if the enforcing authority is or has become partly financially dependent upon the income stream it produces. Where it becomes something from which an essential income stream for the authority is derived, it would seem to become merely a tax on doing business, particularly where 100% compliance is neither possible nor expected.

In saying what we have above, we are not saying that FPNs should just be depenalised and allowed to continue as some form of statutory charge. To do so would diminish them even further and confirm them as being merely a “tax on doing business”. We are also not proposing that authorities should prosecute all alleged offences. Instead, what we propose is that the entire system should be reviewed to determine whether it is serving any appropriate purpose. If they do serve any purpose, FPNs should be applied equally to both authority and statutory undertaker in respect of their identical activities. When some authorities are reputed to make enquiries of statutory undertakers about when their FPN “invoice” is going to be paid one might question exactly what their understanding of the legislative structure and purpose of FPNs actually is.

Taking the issue of parity (or its absence) out of the criminal context and placing it in the civil one, some additional peculiarities with street and road works arise. By way of example, prolonged occupation charges under s.74 of NRSWA can give rise to a statutory undertaker being charged up to £10,000 per day where its works overrun. Over the years we have advised statutory undertakers, some of the prolonged occupation charges we have challenged might be described by the less charitably inclined as revenue generation without any basis in law or reality. That is not to say that all s.74 charges are unjustified. We are however aware that there has sometimes been a tendency to settle s.74 charges rather than challenge them so as not to ‘rock the boat’. Needless to say, authorities’ own works are not subject to an equivalent civil sanction. The very same perceived shortcomings on a statutory undertaker’s site that an authority might seek to use to justify s.74 charges against that statutory undertaker may be present on the authority’s own highway works site just down the road but no charges can be imposed. If the “evil” that s.74 charges are intended to counter is so grave, there can be no rationale for not applying them to an authority’s own identical shortcomings with its road works. If some overlooked and abandoned cones and barriers left behind by a statutory undertaker merit imposition of s.74 charges by an authority, why should the authority’s own abandoned cones and barriers not be subject to identical charges?

There are any number of other examples of disparity that one might consider, but the examples considered above are significant enough and do raise questions. As lawyers have the reputation for liking Latin, you must indulge us for a moment as we reference Juvenal’s Satires and ask  “Quis custodiet ipsos custodes?” or “Who guards the guards?” Within the context of street works, the authority regulating the activities of statutory undertakers and able to levy financial charges upon them or criminally prosecute them for non-compliances is not subject to the same penalties itself for its own works with identical potential impact. We submit that this is neither sustainable nor credible nor equitable. If road and street works are such the bind and nuisance as is frequently suggested, there is no rational explanation for imposing criminal and financial sanction on one of the parties involved but not on the other.

Perhaps the time has come for the regulatory function of NRSWA to be transferred to an independent entity charged with enforcing a system containing identical criminal sanction and financial penalties in respect of both road and street works upon both statutory undertaker and authority. Without parity the current system is left looking as though it is as much, if not more, concerned with providing a source of indirect taxation to authorities than it is to actually remedying any underlying issues that apply to both road and street works. With authorities undertaking activities with identical potential impact but no criminal or other sanction for them, the absence of parity and the longer it is allowed to continue the greater the strength to arguments that the current system is just a form of indirect taxation.

Be under no misapprehension. We are not impugning the character or motive of authorities and we accept that statutory undertakers may not achieve 100% compliance levels. We also accept that the legislation is as it is and are not seeking to say it should not be complied with (albeit some of it really leaves us scratching our heads).

There are those who might say “if you can’t do the time, don’t do the crime”. That however is missing the point. This article is not a plea for de-penalising street works related criminal offences (albeit we consider some should never have been criminalised in the first place). Instead, it seeks to make the point that acts and omissions with identical potential impact should carry the same sanctions, whether committed by authority or statutory undertaker. To argue otherwise would lack both logic and justice. Before anyone suggests that it would be unfair for the public sector to be subject to the same range of sanctions as multi-million pound turnover companies, in most, if not all, other regulatory areas shared in common with commercial enterprises they already are. The Courts are more than capable of distinguishing between different types and sizes of entities when it comes to determining the appropriate fine to be imposed.    

As to whether parity of sanction is required, do not take our word for it. Instead, go back to the start of this article and take the word of those authority prosecuting lawyers who have stated that non-compliances with the Safety Code are incredibly serious requiring and meriting the heaviest possible sentences. They know that a £10 fine for their own non-compliant highways works as opposed to a £15,000 fine for a statutory undertaker’s works with identical non-compliances with the Safety Code is illogical. It is either a £10 fine for both or an unlimited level 5 fine for both or justice is not served. Instead, it is mocked.

If you want to know more about our work in this area and whether we maybe able to assist you  contact us.   

Authority and other works necessitating diversion, removal or protection of utility apparatus have long been a feature of the utility sector, along with the questions of who does what and who is to pay for it.

For purposes of this article, the phrase “diversionary works” includes protective works to apparatus and removal of apparatus and not just diversionary works as they might generally be understood in the context of the New Roads and Street Works Act 1991 (“NRSWA”).  

With HS2 Phase One now starting to cut a swathe across England and HS2 Phases 2A and 2B likely to do the same in time, the issue of diversionary works is likely to be a factor impacting on many statutory undertakers. Some of those undertakers may not previously have had infrastructure projects of such scale impacting upon their apparatus. Those undertakers who have been involved with HS2 or had other major infrastructure projects impact on their apparatus may be all too familiar with the potential complexities of this area. Whilst small scale diversions of apparatus within the public highway can be relatively straightforward, when multiple items of apparatus both in the public highway and private land need to be diverted, potentially over a large area, the complexities can significantly increase.

One common misapprehension with diversionary works is that NRSWA cost sharing discount applies across the board. Whilst such a discount might sometimes apply, it will not always apply. Understanding which piece of legislation may provide the grounds for diversion of which items of apparatus is key to understanding the basis of diversionary works and the costs recovery that may apply. A variety of different legislation may trigger diversionary works and includes:

• The New Roads and Street Works Act;
• The High Speed Rail Act 2017;
• Development Consent Orders under the Planning Act 2008;
• The Water Resources Act;
• Orders under the Transport and Works Act 1992; and
• Certain utility enabling legislation.

Legislation other than those listed above may also contain relevant provisions so the above list is not exhaustive.

An important point to note is that different parts of what might be considered the overall diversionary works project may be subject to different enabling legislation, particularly where the apparatus concerned is located within private land and the public highway over a large area. This can give rise to situations in which different parts of the overall diversionary works project may be subject to different cost recovery schemes. By way of example, one section of the diversionary works might be subject to NRSWA diversionary works whilst another is subject to another legislative basis. Diversionary works required by HS2 are a situation in which this possible hybrid cost recovery basis might arise. Such hybrids can also arise elsewhere.

Another critical factor is to ensure that any costs recovery is determined on the correct basis. By way of practical example, if one proceeded on the basis of NRSWA cost sharing applying across an entire diversionary works project, an undertaker might bear 18% of the costs associated with their diversionary works. If, however NRSWA only correctly applied to a small fraction of the overall diversionary works, the undertaker might only have been obliged to apply NRSWA cost sharing to only that part and could have made a full recovery of all its reasonable costs for the other aspects of the project. It is even possible within hybrid schemes that different parties might be liable to contribute towards the costs of different aspects of the overall diversionary works.

In any sizeable diversionary works project, incorrectly applying NRSWA cost sharing could unnecessarily cost the statutory undertaker significant sums of money. Even within diversionary works subject to NRSWA, it is not the case that cost sharing applies in all situations. There are some circumstances where works might be required under NRSWA to an undertaker’s apparatus where no cost sharing would be required and an undertaker would be entitled to full recovery of its associated costs.

Another situation in which problems can arise is where a statutory undertaker discovers works have been undertaken by an authority in the vicinity of it apparatus without any prior consultation having been engaged in. In some circumstances this may not be an issue. However, in others the undertaker may identify that diversionary works will have to be undertaken in consequence of those authority works. This may give rise to claims against the authority who failed to undertake advance consultation for the costs of the diversionary works subsequently required.   

There are a number of other factors to be considered with any diversionary works that we will not address here. We may address the issues of betterment and deferment of time for renewal allowances that may accompany diversionary works in a subsequent article.

The importance of ensuring that any diversionary works project is carefully analysed to ensure that the correct parties are identified (and appropriate agreements entered) at the outset cannot be overstated. Without careful analysis, one could potentially prejudice the prospects of successful costs recovery.

We:

• Advise statutory undertakers in respect of diversionary works projects;
• Recently concluded on favourable terms for a client a multimillion pound arbitration where the claim arose from significant and large scale diversionary works; and
• Are advising various clients in respect of ongoing claims arising from diversionary works.

If you want to know more about our work in this area and whether we maybe able to assist you  contact us.   

On the basis of prevention being better than an expensive cure, we thought it worth offering some tips to avoid a trip (real or virtual) to the Magistrates’ Court in 2021 on street works related prosecutions – with its potential adverse reputational and financial consequences.

Our tips are as follows:

1. Ensure that your staff and contractor teams understand the requirements that have to be met and are equipped to meet them;
2. Robustly audit and monitor compliance of works done by direct labour and contractors;
3. Monitor defect reports and FPNs and address any substantive issues that are identified;
4. Respond in a timely and effective fashion to any alleged non-compliance that might give rise to a prosecution; and
5. Undertake root cause analysis on any problems identified and implement effective change to reduce the risk of re-occurrence.

Applying similar processes, the risks posed by FPNs, s.74 charges and defect inspections fees can also be reduced. Every FPN is a potential criminal prosecution.

If your business has the misfortune to find itself facing criminal prosecution or civil disputes under the New Roads and Street Works Act 1991 and related legislation, our team has extensive experience of advising and training undertakers and their contractors on street works compliance and defending related criminal prosecutions and civil disputes.

Do contact us if you think we can assist in reducing your legal risks from street works.

Whilst there have been very significant increases in street works compliance by utility companies and their contractors over the years, the financial and reputational risks posed to utility companies by certain street works related criminal offences has dramatically increased in recent years. This is as a result of the “uncapping” of level 5 offences brought about by the implementation on 12th March 2015 of s.85(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. For anyone wanting to know the detail, the implementing legislation was the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 11) Order 2015 (SI 2015/504).

The upshot of “uncapping” is that the previous maximum fine of £5,000 that applied to level 5 fines was removed and the level of fine that the Magistrates’ Court might impose is now effectively unlimited.

Before the “uncapping” of level 5 fines, a bad day in Court on a level 5 capped street works offence was unlikely to prove too financially painful – in the greater scheme of things. That is no longer the case. A bad day in Court on something that 5 years ago might have attracted a £3,000 fine might today see a utility company be sentenced to a considerably larger fine. Whilst it has taken a few years for fines to increase, fine ‘inflation’ has been significant in some parts of the country for even relatively minor non-compliances.

There are steps that an undertaker can take to mitigate the risks that its street work activities may pose. These include:

• Ensuring that all internal and contractor staff have an appropriate understanding of the legal obligations that street works legislation imposes;
• Self auditing of works being done by you and on your behalf and ensuring all non-compliances are promptly identified and rectified; and
• Responding promptly and effectively to any report of problems with a site or works.

Our team has extensive experience of advising undertakers on street works compliance and defending related criminal prosecutions.

Do contact us if you think we can assist in reducing your legal risks from street works.

Being as keen on bacon sarnies as the next person and also seeing the real benefit of seeking to resolve disputes at an early stage, we take no issue with sorting out disputes over a bacon sarnie. Likewise, if your tastes run to chocolate biscuits with settlement discussions, we’re still completely on side. We’ll add the dull (but necessary) caveat about gifts and hospitality policies being complied with in terms of who is giving/receiving what.

One thing we are less certain of is whether all such discussions set off on the firmest of footings – particularly in respect of the legitimacy of the charges being discussed.

It’s obviously a great result for the paying party if they manage to successfully negotiate a claim down to a fraction of its original value. If however there was no legitimate charge there in the first place but you have agreed to paying 10% of the claimed charge, it may look less of a deal.

Placed in the context of low margins in the sector and those margins potentially getting smaller the further down the contractual chain one goes, a £10,000 payout on a s.74 charge could seriously dent the financial viability of the ultimate paying party. It’s obviously a great result if the charge is legitimately payable but has been successfully negotiated down. It’s a less great result if that charge should never have been accepted in the first place – even if it was successfully negotiated down.

Bearing in mind the significant sums that might fall to be decided over the bacon sarnies, we think there is real merit to going through all the individual charges with the proverbial fine tooth comb. If a proportion of them can be booted into touch before the bacon sarnies invite gets sent or the choccie biscuits bought, the base line for settlement discussions might significantly change.

From our own experience of advising on prolonged occupation charges, one of the key issues is the timely collation of factual information about the job in question relevant to how and why a job may have taken the time that it did. Collating that information as the job progresses so that it is all immediately accessible 12 months later when people are actually looking seriously at the charge makes things far easier than for the person charged with dealing with the dispute having to try to piece together what went on and why. Having all that information to hand may make the difference between nothing being paid out and several thousand being paid.

That a street authority may want you to pay them several thousand pounds for something they perceive to be a prolonged occupation meriting a charge, doesn’t necessarily mean that you owe them anything. Starting off with all of the relevant information to hand will provide considerably greater certainty of what sums may be owed and what a deal looks like.

Knowing that one has all relevant information before going into a meeting with the street authority will enable the person meant to be cutting the deal to concentrate on the key question for the meeting.

And, as we all know, that key question is whether to opt for brown sauce or ketchup.

We advise various energy and utility companies on the validity of s.74 prolonged occupation charges and challenges to such charges.

Contact us if we can assist you with any prolonged occupation charge issues you are encountering.