The proliferation of administrative fines – A controversial legal technique?

This column today looks at the imposition of fines being imposed by various public agencies, and reviews recent judicial decisions which provide guidance and direction as to what is expected from public authorities when they decide to impose a financial penalty.

Fines are being regularly imposed by the many public agencies that are sprouting year after year.  The imposition of a fine, or the threat of it, seeks to achieve obedience to the law, but it is also a convenient way of gaining additional revenue.

Fines are being created for minor infractions and are often unmerited and disproportionate.  They are an illustration of uncreative and inadequate law-making.

Too many new laws create lazy excuses for the imposition of fines, often against ordinary unsuspecting citizens who have caused no harm or detriment to the community.  So we find fines, fines and more fines: fines for any reason and for any season.  Fines are now rightly coming under the judicial spotlight.  

The issue is not simply one of constitutional validity and protection, which is of course of vital importance.  It is the challenges they pose to our administrative law principles, the extent of the powers being awarded to so many public agencies, powers which are often misunderstood and misused by public officials who have no training or experience in the legal and ethical responsibilities that should attach to the exercise of such extensive powers.

Power excites and may give rise to a heady sense of misplaced virility. In the wrong hands, it may be a dreadful piece of administrative bullying. The imposition of fines is not a sophisticated technique, but a most unimaginative one. It may be justifiable in some cases, but certainly not always. In the wrong hands, it may develop into an instrument of harassment and bullying.

Several reasons may explain the slide towards the extended use of fine-imposing powers which is becoming the rule rather than the exception:

(a) Public agencies largely write their own rules and do this in their best interest; 

(b) The drafting of these rules is often of poor standard and fails to address the need for legal safeguards for the subject persons and to ensure due process and equal arms;  

(c) By way of these fines, public agencies manage to increase their revenue and become more financially self-sufficient.  The very idea that public agencies are allowed to enjoy the fruits of their fine-making powers raises a serious conflict of interest problem which has been ignored for far too long. 

Reference will now be made to a few useful recent decisions which can offer guidance and direction and reveal judicial expectations in this regard:

1. The Administrative Review Tribunal has held that instead of just firing fines at subject persons, public authorities should engage in dialogue to explain the necessary legal requirements and processes, particularly when these have only recently been introduced. (See Falzon Fuel Services Limited v Malta Resources Authority, 27 November 2023)

2. The same Tribunal has held that before imposing a fine, which was quite hefty, the public authority should have acceded to the subject person’s request to hold a face-to-face meeting to hear him out and to provide any necessary clarifications and avoid needless misunderstandings. (See Cassar Fuel Limited v Malta Resources Authority, 7 October 2024)

3. The Constitutional Court has found that exorbitant penalties imposed by the FIAU (which had already been substantially reduced by the Court of Appeal on the grounds of proportionality) were the product of ‘biased’, ‘byzantine’ and ‘incestuous’ internal processes which severely disadvantaged the subject person and annulled it on constitutional grounds.  The high penalties were also deemed to be of a criminal rather than of a purely administrative nature.  (See Not R Caruana v FIAU and the State Advocate, 28 September 2023).  This position seems to have been reversed by a very recent Court of Appeal decision (Phoenix Payments Limited v FIAU et. of 18 November 2024), which warrants more detailed and careful scrutiny.

4. Generally, the process of fining should be open and transparent, fully explained and founded on fair and sound administrative practice, rather than on absolute discretion.  In one recent case, the Court of Appeal confirmed the annulment by the first court of a penalty imposed by the Registrar of Companies on the ground that the form of the penalty note issued had insufficiently explained and justified the penalty and provided no adequate breakdown.  This unfairly disadvantaged the applicant who in the circumstances could not adequately contest the imposition and the quantification of the penalty in question.  (See M Aquilina and Euro Concrete Blocks Limited v Registrar of Companies, 3 September 2024)

Power is a good thing if used properly for the right purposes and exercised judiciously, sensibly, proportionately and with restraint.  The courts and tribunals are being regularly called upon to review and to restrain any misguided, abusive or exaggerated resort to the imposition of fines and penalties. They can shield us from over-zealous and unduly self-righteous use of discretionary powers and from administrative overreach.

David Fabri LL.D., Ph.D. (Melit) lectures in company law, financial services and business ethics.  He serves as Visiting Senior Lecturer at the University of Malta.  His latest publication Studies in Maltese Consumer Law is awaiting publication. This column represents solely his views and is intended for information purposes only.

This opinion was first published in The Corporate Times.