Judicial Review of Private Regulatory Bodies: A Transatlantic Commentary

DRAKE STOBIE ∙ November 2, 2022 ∙ ARTICLE

A core concept within administrative law is the importance of judicial review. American agencies institute mechanisms of judicial review to serve a variety of functions within the plethora of agencies comprising the administrative state, from conferring legitimacy[1] to practically securing fairness and accuracy.[2] However, there are a variety of private organizations that also provide regulation over segments of American society, such as the American Psychological Association, the National Fire Protection Association, or the American Bar Association. In its present form, the administrative principle of judicial review does not touch these private regulators in the same manner as government agencies, leaving tort or contract litigation as the only means of accessing judicial review for decisions made by these bodies. This structure has been unchallenged in the United States, but is there a better alternative? Looking across the Atlantic to the United Kingdom, we see a different way of viewing the relationship between private regulatory bodies and judicial review.

Let us turn to the area of mergers and acquisitions to see the contrast in approaches. Specifically, the case from the United Kingdom R v Panel on Take-overs and Mergers; Ex parte Datafin plc (“Datafin”) involved a private organization called the Panel on Take-overs and Mergers (“the Panel”) which at the time was an unincorporated association charged with enforcing its code of conduct for mergers and acquisitions within the City of London.[3] Datafin PLC brought its case to the courts because it saw another company allegedly breach the Panel’s code and was unsatisfied with Panel’s decision.[4] The Court of Appeal of England and Wales (“the Court”) reviewed the issue of whether the standards of administrative law should apply to a panel set up under private law.[5] The Court found that they did in a groundbreaking decision. The Court characterized two manners of self-regulation: either an instance of an individual voluntarily regulating herself to certain principles, or a system where a group of individuals use their collective powers to force compliance with a code of conduct of their own creation.[6] While the Master of Rolls, Sir John Donaldson, determined that the Court of Appeal had the authority to review the decision, Lord Justice Lloyd proposed a two-part test for determining whether private organizations are subject to administrative law judicial review. First, the source of the power an organization exercises is evaluated: if the source is a statute or other Act of Parliament, judicial review exists.[7] However, the nature of the power should also be evaluated, and “[i]f the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may…be sufficient to bring the body within the reach of judicial review.”[8]

This approach represents a significant paradigm shift that can also be seen as reflective of the tension between “formalism” and “functionalism.” Instead of looking to whether a private regulatory body stemmed from explicit government authorization, the Court of Appeal instead looked to the role that the Panel played, determining that the power exercised by the Panel served a public function, thus opening it to administrative judicial review. It also represents a significant distinction between American judges and those of other common law countries. American judges tend to be more concerned with looking to the source of authority for a particular decision or government action, while the Law Lords in Datafin rely on an assumption of government authority that would likely cause many American judges to recoil.  

While it may seem easy to either champion Datafin as a model for the United States or castigate the decision as a warning of creeping governmental influence on private society, Professor Caroline Bradley warns that it is difficult to even understand if decisions like Datafin were right without an understanding of the complexities and nuances of the local legal system that produced it.[9] Indeed, many have explored the implications of Datafin to ascertain what the best method for assessing the distinction between public and private power.[10] However, the case should be used as a starting point for evaluating the nature of private governance in the United States, as well as the relationship between private governance and public administration.

Nowhere in Datafin was the importance and expertise of the Panel criticized; rather, the Court of Appeal recognized the importance of the Panel. Extending judicial review to private regulatory bodies serving a public function should not be seen as a denigration of these bodies, but a recognition of the power these bodies wield. Judges in other common law countries have used Datafin to consider the applicability of administrative judicial review over private bodies,[11] and it would serve the American legal system for its own judges to engage in the conversation over this issue as well.

[1] M. Elizabeth Magill, Agency Choice of Policymaking Form, 71 U. Chi. L. Rev. 1383, 1413 (2004).

[2] See Shruti Rana, “Streamlining” the Rule of Law: How the Department of Justice is Undermining Judicial Review of Agency Action, 2009 U. Ill. L. Rev. 829 (2009).

[3] R v Panel on Take-overs and Mergers, ex p. Datafin Plc [1987] QB 815, C.A.

[4] Id.

[5] Id. at ¶ 7.

[6] Id. at ¶ 4-5.

[7] Id. at ¶ 64.

[8] Id. at ¶ 65.

[9] Caroline Bradley, Transatlantic Misunderstandings: Corporate Law and Societies, 53 U. Miami L. Rev. 269, 271 (1999).

[10] See Colin D. Campbell, The Nature of Power as Public in English Judicial Review, 68 The Cambridge L. J. 90 (2009).

[11] See Air Canada v Toronto Port Authority [2011] FCA 347.