STRATEGY, STUDENTS AND GOVERNANCE   

Charities Bill 2005: The public benefit test

The current legal presumption that to advance education is to benefit the public will end when the Bill comes into force.  Our article explains the Charity Commission's approach to the assessment of "public benefit" in order to qualify as a charity. Read more

FINANCE, TECHNOLOGY AND INTELLECTUAL PROPERTY

Technology Transfer Block Exemption: the deadline approaches

Universities need to check their existing licence agreements to ensure compliance with the new TTBE before 31 March 2006.  Our article explains the background, and the impact on universities, and summarises the main changes.  Read more

Public Procurement: new rules

An article from our public procurement specialists discussing the key changes to the UK public procurement rules and the practical implications for universities' procurement practices.  Read more

FOI Training Update

There are some places still available on the Pinsent Masons Freedom of Information courses in Manchester in February and March.  Each course is a full day in-depth workshop and as well as introductory courses, courses are available on: the interface between data protection and freedom of information; records management and FOI; the Environmental Information Regulations; understanding and applying the exemptions; handling complaints and appeals.  Courses count towards ISEB exam preparation but are open to those not sitting the examination.  For further information please contact Helen Hadjipantelis on 0207 490 6218 or see www.pinsentmasons.com for details of freedom of information and data protection courses in our other offices.

HUMAN RESOURCES

First EAT decisions on Statutory Grievance Procedure

The EAT in its first wave of decisions on the new procedure has sent a clear message to employers to be on their guard against "disguised grievances", triggering obligations to comply or risk increased compensation awards. Read more

Turner Report

Our article reviews the recommendations of the Report of the Pensions Commission on the future of pensions in the UK, highlighting points of interest for universities. Read more

FULL ARTICLES

STRATEGY, STUDENTS AND GOVERNANCE

Charities Bill 2005: The public benefit test

In anticipation of the coming into force of the Charities Bill 2005 in England and Wales the Charity Commission have released two publications – the first is a commentary on the descriptions of charitable purpose contained in the Bill; and the second initial guidance on the legal principles of "public benefit".

Charitable purposes

To qualify as a charity following the Charities Bill 2005, it will be necessary to show that an activity is covered by the list of charitable purposes, and secondly that it is for the public benefit.  The Bill lists 13 purposes, one of which is "the advancement of education" – this is unchanged from the existing rule.  However, under the present law there is a presumption that to advance education is to benefit the public – this presumption ends with the coming into force of the Bill. 

Public benefit

There is an obligation on the Charity Commission to consult on the meaning of public benefit following the introduction of the Charities Bill 2005, and therefore their second publication is to be seen as opening the consultation.  Their views could be refined during the consultation process.

The Charity Commission list five main principles to show benefit to the public:

• There must be an identifiable benefit, but this can take many different forms;
• Benefit is assessed in the light of modern conditions;
• The benefit must be to the public at large, or to a sufficient section of the public;
• Any private benefit must be incidental;
• Those who are less well off must not be entirely excluded from benefit.

In the context of university education and research it is helpful to note the discussions in the publication on intangible and indirect benefit.  The publication specifically notes the intangible benefit of education.  One may also note the indirect benefit to the wider public of others in society being educated at all levels.

In considering whether a sufficient proportion of the public can benefit, it is noted in the Charity Commission publication that it is acceptable when providing benefit or services for a certain standard of skill or knowledge to be required or possession of qualifications to be specified (they use an example of an orchestra or choir).  Any private benefit to an individual must be incidental arising as part of the furtherance of the charity's purposes.  So, clearly, the students obtain a private benefit in that they personally receive an education, but this is directly the result of the university's promotion of education and is therefore acceptable.

The most difficult aspect of public benefit is the requirement that those who are less well off must not be entirely excluded from benefit.  It is noted that charities may charge for access to their services and facilities – as do universities.  This only becomes a concern if the charges are at such a rate that they effectively exclude the less well off.  In these circumstances the Charity Commission set out the broad principles that apply:

• Both direct and indirect benefits to the public, or a sufficient section of the public, may be taken into account (as noted above, there is a good argument of the indirect benefit to the public of some individuals being university educated);
• The fact that the charitable services will be charged for, and will be provided mainly to people who can afford to pay the charges, does not necessarily mean that the organisation is not for the benefit of the public;
• However, an organisation which wholly excluded less well off people from any benefits, direct or indirect, would not be set up for the benefit of the public and would therefore not be a charity.

The Charity Commission then go on to note that it will be relevant (mainly in the case of private schools and hospitals) to consider what concessionary, subsidised or free places are available.  Also relevant is the provision of some wider access, for example, lending out staff or equipment (for example, by an independent school to a state school).

In general the Charity Commission's initial guidance is helpful – it is based on an analysis of existing case law and does not seek to introduce new principles.  In the case of universities, where high fees are charged to certain students on certain courses, it would seem clear that overall this will meet the public benefit test given the intangible indirect benefit to the wider public and the availability of funding to those who are able but less well off. Go back.

janet.hoskin@pinsentmasons.com

FINANCE, TECHNOLOGY AND INTELLECTUAL PROPERTY

Technology Transfer Block Exemption: the deadline approaches

Universities need to check their existing licence agreements to ensure compliance with the new Technology Transfer Block Exemption ("TTBE") before 31 March 2006. If they do not comply with the TTBE the agreements lose the benefit of automatic exemption and there is a risk that they will be deemed unenforceable. If, however, they can rely upon the protection of the Article 81(3) individual exemption, the agreement will be enforceable. This applies throughout the UK.

Think about the last few technology transfer agreements you have contributed to. Recall the care taken over drafting the right words to capture the deal and negotiating terms with the other partners. Imagine if, after all your hard work and careful consideration, you discovered that your agreement was unenforceable. This could be just the position you find yourself in on 1 April 2006 if you haven't checked that your existing licence portfolio is compliant with the TTBE and any non-compliant terms are addressed.

The dull but necessary background law

Article 81 of the Treaty establishing the European Community aims to prevent anti-competitive agreements. A new EC technology transfer block exemption (Reg. 772/2004/EC) came into force on 1 May 2004. It can be used to automatically exempt from prohibition certain technology transfer agreements which would otherwise fall foul of Article 81. Agreements previously exempt under Regulation 240/96/EC, but which do not satisfy the new TTBE, benefit from a transitional period. However, this transitional period will expire on 31 March 2006 and from that date all technology transfer agreements still in force must comply with the new TTBE to obtain automatic exemption.

What is the impact of this for universities?

• all new agreements must comply with the new TTBE; and
• all existing agreements which were entered into before the new TTBE will have to be reviewed in the light of the new TTBE.
  

This means that all universities who have any technology transfer agreements with a term continuing beyond 31 March 2006 should assess whether the agreement in question will need to be amended in any way to continue to benefit from the new technology transfer block exemption. As the new TTBE is considered to be wider than the old, it is hoped that not many amendments will be needed but for safety's sake it will be best practice to audit your agreements to ensure they are compliant with Article 81.

A brief summary of the main changes from the previous block exemption

• It is particularly noteworthy that the inclusion of copyright licences is a change from the old block exemption, which only covered patent and know-how licences. Thus, if you have copyright licences (and universities very commonly develop and license software) then you may not previously have considered competition provisions in any detail and this class of licence would particularly benefit from review.
• The new TTBE draws a distinction between those agreements which have been entered into between competitors and those which have been entered into between non-competitors. Universities should not conclude that their only competitors are other institutes of higher education and that they need only review inter-university licences. A competitor is defined as an undertaking which competes within the relevant product or technology market. Thus, it is entirely possible for a university to 'compete' with a commercial company if both are developing and commercialising products or services in the same market.
• The new TTBE introduces a new concept of market share, which is relevant to its applicability. Universities will need to consider existing agreements and assess whether their market shares for the relevant product or technology market fall within the relevant thresholds (20% combined market share of the university and its competitor/licence partner or individual market shares of 30% each for non-competing undertakings). Even though you may not consider that you have a dominant position, market share can be very narrowly defined by regulators.
• There is no "white list" of specifically approved clauses so in this respect the new TTBE can be viewed as more flexible than the old. The new "black list" or "hardcore restrictions" as it is now known is narrower than previously, although a new category of "excluded restrictions" is introduced.

The table below summarises the main differences between the old and new block exemption terms:

Go back.

louise.townsend@pinsentmasons.com

Public Procurement: new rules

The rules affecting universities' procurement of contracts for works (e.g. the building of student accommodation), services (e.g. cleaning services) and supplies (e.g. computer equipment) have now been brought together in one piece of consolidated legislation for England, Wales and Northern Ireland, the Public Contracts Regulations 2006 and one piece of consolidated legislation for Scotland, the Public Contracts (Scotland) Regulations 2006, (together the Regulations, which will both come into force on 31 January 2006). These Regulations implement the European Commission's Consolidated Directive (which was adopted in March 2004) into UK law.  This article is accordingly relevant to universities throughout the UK.

What changes have been made?

Consolidation

One of the aims of the European Commission's Consolidated Directive is to bring together the three old directives covering works, supplies and services into a new single consolidated text. This change should make it easier for universities to follow the public procurement rules as they can now all be found in one place, in the Regulations.

Clarification of the rules on selection and contract award

It had also emerged over the years that important aspects of the rules set out in the various directives were unclear and, as a result, had to be clarified by the European Court of Justice in a number of cases. The new Consolidated Directive, and therefore the Regulations, both provide a clearer statement of the law, bringing it into line with the ECJ's judgments. The Commission has also simplified the financial thresholds under the public procurement rules. This should make it easier for universities to understand when the rules apply to them.

Universities should also be aware that the rules on shortlisting candidates have altered under the Regulations. Universities must now be ready to inform contractors in advance of any thresholds they are applying at pre‑qualification stage and state these in their contract notice.  In terms of evaluating candidates, universities now have more flexibility and may use alternative methods to select candidates, for example, by drawing lots (as long as the methods are objectively applied in each case). Ability may also be taken into account in relation to works and supplies procurements, as well as services ones.

Debriefing & Alcatel

Following the decision of the ECJ in Alcatel, universities are now obliged to allow a standstill period of at least 10 calendar days between the date of notifying tenderers of their contract award decision (which must be in writing) and the date they propose to enter into the contract (in the case of contracts subject to the full regime). If a tenderer makes a request for a debriefing by the end of the second working day of the 10 day period, universities must debrief the tenderer during the standstill period. In any event, universities must allow 3 working days between the debriefing and the end of the standstill period. The purpose of this change is to allow aggrieved bidders a reasonable chance to consider their situation, and to bring an action before the contract is concluded if they think they have a case (see below).

Frameworks

A commonly used procurement tool is the multi-supplier framework contract. Universities should be aware that under the Regulations, strict rules now apply to frameworks.  For example, they must not generally exceed a term of 4 years and the terms of any framework must be determined at the outset. The Regulations also provide for a "mini-competition" to be used as an alternative way of making call-offs under the framework contract (the other being by applying the prescribed terms of the framework contract itself).

"Competitive Dialogue"

The Regulations also introduce a new procedure known as the "competitive dialogue", alongside the existing open, restricted and negotiated procedures (with/without advertisement). Although it is only available in limited circumstances for the procurement of "particularly complex" contracts, this procedure has the advantage of allowing universities to benefit from the input of those participating in the tender process. During the "dialogue", a university is able to discuss all the aspects of the contract individually with tenderers. Once the dialogue has generated solutions to the university's requirements, tenders are invited based on each tenderer's individual solution. The university can then select the best tender.

E-procurement

Apart from clarifying and simplifying the rules on public procurement, the Regulations also aim to modernise procurement practices by placing more emphasis on the use of e-procurement. For example, not only are universities now able to benefit from shorter time-scales when sending contract notices electronically, but they can also detail their own procurement activities on a website known as a "buyer profile". Publishing scheduled purchases and PINs (Prior Information Notices) on a buyer profile should ensure that universities receive the optimum response to any contract advertisement, by giving potential tenderers plenty of time to prepare in advance of contracts being formally publicised.  It is also a useful management tool, sitting well with Freedom of Information obligations.

Universities can also benefit from the introduction of two new electronic purchasing tools: dynamic purchasing systems (DPS) and electronic auctions. DPS allow universities to set up an electronic mechanism for multiple purchases under successive contracts from a list of pre-qualified tenderers. As the name suggests, the "dynamic" nature of the DPS means that universities should benefit from continual competition between tenderers, who are able to update their indicative tenders throughout the life of the DPS.  However there are disadvantages to the DPS, not least the need to place an OJEU advertisement prior to every contract awarded under it.  Electronic auctions may also be used by universities to place pressure on tenderers to revise their prices downwards, or offer improved elements to their tender offers.

What are the risks to universities of not complying with the public procurement rules?

Universities, like other contracting authorities, are under a duty to comply with the public procurement rules (where applicable). If they do not comply, they open themselves up to two main risks. Firstly, aggrieved contractors may bring actions in the UK courts for damages and/or for the award decision to be set aside (subject to strict time limits).

Alternatively, a contractor may bring the breach to the attention of the European Commission by lodging a complaint with it. If the Commission were to launch an investigation, this could ultimately lead to the UK facing formal legal proceedings in the ECJ (as the Member State where the alleged breach took place). Although damages could not be awarded to the aggrieved contractor, the Commission could insist that the UK take action against the university in order to ensure that it complies with any judgment.  It is therefore very important for universities to be aware of their obligations under the public procurement rules and to ensure that they minimise the risks of challenge where possible.

Pinsent Masons has produced "A Short Guide to the New Rules" (one version covers England, Wales & Northern Ireland, and one version covers Scotland). This handy reference guide covers the changes brought about by the new Regulations in detail. We also offer training on the new rules tailored specifically to universities.  Go back.

For further information please contact:

jill.marsal@pinsentmasons.com or barbara.linehan@pinsentmasons.com

HUMAN RESOURCES

First EAT Decisions on Statutory Grievance Procedure

Employers need to be on their guard against "disguised grievances" which trigger obligations under the statutory grievance procedure.  That is the clear message from the Employment Appeal Tribunal in the first wave of decisions on the procedure, introduced in October 2004. This article is relevant to universities throughout the UK.

The aim of the statutory procedure is to promote internal resolution of employment disputes, by forcing employees to raise complaints with their employers before taking them to employment tribunal.  The procedure also imposes obligations on employers to deal with those complaints through a specified statutory process. 

In all of the recent cases, the EAT considered the very first step of the statutory procedure – the requirement for the employee to put the complaint in writing and send it to the employer.  If the employee fails to take that step, or does so but does not wait 28 days before filing a tribunal claim, the tribunal will (subject to certain exceptions) refuse to hear the complaint.  The EAT decisions reveal a consistently liberal approach to what an employee must do to satisfy step 1 of the procedure.  Indeed, in one case the EAT stated that the sanction of barring an employee from pursuing a complaint in the tribunal should be very rarely used.

The implications of this approach are far-reaching, going well beyond the narrow issue of whether a tribunal claim can proceed.  The employee's stage 1 complaint triggers important obligations on the employer.  The employee must be invited in writing to a meeting to discuss the grievance, given a written response and a right of appeal, and the procedure must be completed in a reasonable timeframe.  If the employer fails to comply, any compensation awarded by the tribunal can be increased by up to 50%.  The clear danger for employers is that the easier it is for employees to comply with step 1 of the procedure, the more likely it is that employers will not recognise that a complaint triggering the procedure has been made and will fail to deal with the complaint appropriately.

One point clearly confirmed by the cases is that employees do not have to use the word "grievance" when raising their step 1 complaint, nor do they have to use or refer to the employer's own internal grievance procedure.  While this might appear paradoxical, the two procedures are distinct and should not be confused.  Indeed, the statutory grievance procedure is best considered as a form of pre-litigation protocol, requiring certain steps to be taken by both parties before a tribunal claim is made, regardless of how those steps are taken.  All that is required at stage 1 is a written complaint from the employee – this does not have to comply with any requirements imposed under the employer's internal grievance procedure, such as a requirement that grievances be raised with specified managers.  Indeed, in one of the recent cases, the EAT held that it was irrelevant whether the employee intended to raise a grievance or to pursue it as such, as long as the employee had made a written complaint to the employer. 

It also makes no difference if the written complaint "doubles up" as some other type of document.  A resignation letter complaining about actions taken by the employer, or a solicitor's letter before action will both satisfy step 1 of the statutory procedure.  In another case, the employee made a formal request for flexible working, which contained criticisms of how her request had been handled when she raised it informally with her manager.  When she subsequently resigned and complained that the rejection of her request and its handling amounted to constructive dismissal, the EAT found that the written complaint included in her formal request was enough to comply with the statutory procedure.

The EAT has also ruled that there is no need for the step 1 complaint to contain all the details subsequently included by the employee in a tribunal complaint.  It is sufficient that the general nature of the complaint is made clear and that the employer can understand the general nature of the issue being raised. 

The practical implications are that managers must avoid thinking in traditional terms of "grievances".  Indeed, it is probably best to train managers to think more in terms of "written complaints" than formal grievances and to be alert to e-mails, resignation letters and other documents which trigger the statutory grievance procedure.  In many cases, the appropriate response will be to try to resolve the dispute under the employer's grievance procedure.  Even if the manager decides to deal with the issue informally, they should ask the employee (even if only by e-mail) to meet with them to discuss the complaint, provide a written response and give a right of appeal.  The procedural steps under the statutory grievance procedure are not onerous, and the real danger lies in not realising when the procedure applies.  Go back.

christopher.mordue@pinsentmasons.com

Turner Report

At the end of November the Pensions Commission published its long awaited report concerning its recommendations for the future of pensions throughout the UK (widely known as the Turner Report).  The report has generally been welcomed as a starting point for a larger debate on this issue.  Some of the proposals have been widely welcomed whilst others have received a more mixed response.  This article briefly sets out the main proposals of the report.

Introduction of a National Pension Savings Scheme (NPSS) by 2010

The report recommends the introduction of a new national scheme in which UK employees who are 21 or over would be automatically enrolled (although they would be able to opt-out).  Universities (and other employers) who offer their own, good quality, pension schemes may be made exempt from the requirement for its employees to be automatically enrolled in the NPSS.  The report suggests this may be the case where:-

• employees who are 21 or over are automatically enrolled in the university's own pension scheme;
• if the university's pension scheme is a defined benefit scheme the level of benefits accrued under the scheme should, for most members, be higher than those estimated to be available under the NPSS; and
• if the university's scheme is a defined contribution scheme the university's contributions must match or be higher then those required under the NPSS, the overall contribution level net of fees and other costs must be at least equal to the overall contributions net of fees and costs under the NPSS.

There would be compulsory contribution levels under the NPSS.  Initially these would be set at 5% of salary for employees (although with the effect of tax relief this would broadly be 4% employee and 1% government contributions) and 3% of salary for employers.  Additional contributions would also be allowed.

Two of the main reasons for the recommendation of the NPSS are:-

• economies of scale: by having such a national scheme the administration costs would be lower than those currently charged to many schemes; the report suggests that an administration fee no higher than 0.3% of the fund per year should be aimed for; and
• encouraging saving: by making enrolment automatic and contribution levels compulsory it is hoped more people will start saving for their retirement or that they will save more than they are currently.

Reform of State Pensions

The other major area of reform suggested by the Turner report is in the area of state pensions.  In this area the report recommends the following:-

• public expenditure on state pension should increase from 6.2% of GDP to 8% of GDP by 2045;
• making both the basic state pension and the state second pension flat rate over time (i.e. not dependent on an individual employee's level of earnings);
• moving increases in the basic state pension to be in line with the growth in average earnings rather than the growth in the retail prices index;
• raising state pension age, possibly to 68 by 2050;
• having state pension payments linked to residency rather than contributions record; and
• the Government should be aiming towards a universal, residency based full basic state pension for all pensioners over 75 by 2010.

Other Proposals

The introduction of the NPSS and reform of state pensions are the two major proposals for reform in the Turner report.  However, the review is detailed and encompasses most aspects of the pensions system.  Other points of interest for universities include:-

• the recommendation that the Government encourages and facilitates later working through anti-age discrimination legislation and financial incentives to work late;
• the recommendation that contracting out of the state second pension scheme is abolished for defined contribution and personal pension schemes (meaning all pensioners are entitled to a full state pension as outlined above); and
• the proposal for a review of the annuity market (annuities are basically contracts with insurance companies which are used to provide a person's pension payments).

The Government has said that it will be producing a white paper regarding pension reform in the Spring.  This should provide more information on whether the Government is prepared to follow the Turner report's proposals.  If so, universities offering their own schemes rather than participating in the Universities Pension Scheme will have to decide if they wish to continue to do so and are willing to comply with the stricter requirements to be introduced.  Some reform of state pensions seems likely.  However, how far this will go remains to be seen, especially given that Gordon Brown reportedly opposes some of the report's recommendations in this respect.  One reform which is likely to find favour with the Government is the need to increase state pension age. Go back.

michael.kemp@pinsentmasons.com

We welcome your feedback, criticism and suggestion

If you have any comments, or if you would like further advice or assistance with any of the issues covered in this briefing, or for information about Pinsent Masons' National Universities Team, please contact Nicola Hart, Head of Education at Pinsent Masons. 

Email: nicola.hart@pinsentmasons.com

Tel: 0121-260 4050

While our Universities Legal Briefing is copyright, you are welcome to copy or forward it to colleagues within the institution, and to quote from it as long as the source is acknowledged.

This briefing does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered.

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