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Brown faces legal challenge after scrapping OFR

Dec 8 2005

The Chancellor of the Exchequer, Gordon Brown, may face a judicial review over his highly controversial decision - announced at the CBI conference last week - to scrap plans to make publicly-listed companies report annually on social and environmental issues that affect their business.

Friends of the Earth today sent a "letter before claim" to the Chancellor stating its belief that his decision to abolish the Operating Financial Review was "unlawful" because his decision was "procedurally unfair, irrational/perverse, a breach of legitimate expectation, and based upon material errors of fact".

In particular, the letter cites how:

• The Chancellor's failure to consult before making the decision was in breach of the Government's own Code of Practice on Consultation and denied key stakeholders the opportunity to comment;

• His decision was based on a false premise (he claimed the OFR represented an example of the "gold-plating" of EU regulations when it actually arose from an independent policy making and legislative process known as The Company Law Review);

• The decision was irrational because the Government has gathered evidence over many years which supports the OFR which have been disregarded in the decision making process;

• The decision ignores the Government's own promise to carry out a review of the OFR;

• His decision was primarily made "as a sop to the CBI" and to protect his reputation as a "pro-business" Chancellor rather than act in the interest of society as a whole

Craig Bennett, head of Corporate Accountability Campaign at Friends of the Earth said:

"We believe Gordon Brown's decision to scrap the Operating Financial Review was unlawful. It appears to have been made purely as a sop to the CBI to protect his reputation as a pro-business Chancellor, rather than in the interest of society as a whole. The huge outcry against his decision is an indication of just how wrong he was."

Phil Michaels, Friends of the Earth's legal advisor said:

"We have written to Mr Brown today to warn him that unless he can satisfy us that his decision was lawfully made we intend to seek a judicial review. The decision was a breach of fundamental public law principles of fairness and due process. Friends of the Earth remains committed to challenging unlawful public decision making that acts against people and the environment."

The OFR would have required the top 1,300 companies to produce an annual statement on their prospects including in relation to social and environmental issues. Companies were due to start publishing the first Operating and Financial Reviews in April 2006.

Gordon Brown's decision to scrap the OFR provoked criticism from campaign groups, investors, trade unions and business organisations alike. Many of these organisations invested considerable resources in the seven year consultation that lead to the OFR and, in the case of companies, in preparing to implement it.

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