Companies hit with more hefty fines over criminal sanctions

File photo / NZ Herald

Hefty fines on companies of up to $10 million are are being used much more frequently as an alternative to criminal sanctions.

The Law Commission today outlined its recommendations on the design of pecuniary penalties in a report tabled in Parliament's House of Representatives.

The report was intended to help ministries and government departments better understand how monetary penalties worked.

Law Commission president Sir Grant Hammond said financial penalties, which were used in place of criminal sanctions, were first introduced in 1986 under the Commerce Act and were now included in 18 different laws.

They were not used everyday but were often applied in significant cases -- and were now being used more frequently.

"They weren't used very much ... but in the last several years we have seen a surge," Sir Grant said.

The penalties are imposed by the courts but defendants cannot be imprisoned and do not face a criminal conviction.

Instead, the courts can impose penalties of up to $1 million for individuals or $10 million for companies.

The highest penalty to date was in 2011, when the Commerce Commission imposed through the courts a $12 million penalty against Telecom for restrictive trade practices.

Sir Grant said although pecuniary penalties were being used more frequently, there was still a certain amount of confusion about what they were intended to do and how they were intended to work.

"We were asked, without creating new legislation, if we could give some guidance as to how these sorts of monetary penalties should be assessed and how they should be made to work," Sir Grant said.

In its report, the Law Commission said it believed pecuniary penalties were a legitimate regulatory tool when used appropriately, but they needed to be carefully designed so they did not create a risk of unfairness or injustice.

Sir Grant said there has been some debate about whether there should be pecuniary penalties at all.

"We have said the answer is yes, they are an appropriate kind of thing today, but there need to be adequate safeguards attached to them through the court system.

"Some ministries and departments were arguing that they should be able to assess these things themselves but we have said no, they have to go through a court."

After today, the report will be circulated to ministries and government departments to offer guidance as to how these penalties were intended to work.

"It is like a guidance manual for the government, ministries and lawyers," he said.

Justice Minister Amy Adams welcomed the report, saying it was a timely review.

"Pecuniary penalties challenge the traditional distinction between criminal and civil law," she said.

"Addressing these issues is important given how widespread pecuniary penalties are in New Zealand statutes today. They are a valid statutory tool and the commission anticipates that they will be included more often in new legislation."