Stuhmcke, Anita --- "How good is private justice?" [1997] LawIJV 3; (1997) 71(1) The Law Institute Journal 6

• How good is private justice?
• PRIVATISATION AND ACCOUNTABILITY
• OPERATION OF THE EIOV
• The Board
• The Council
• The Ombudsman
• HOW GOOD IS PRIVATE JUSTICE?
• CONCLUSION

How good is private justice?

In the 1990s a shift has occurred in dispute resolution. As discussed by Moira Rayner in her article "Industry tribunals and ombudsmen - no complaints so far" (The Australian, 19 March 1995, page 15), the court system and traditional methods of alternative dispute resolution, such as statutory tribunals, are increasingly being supplemented by the development of industry based privatised complaint systems. At the federal level, examples of these "private justice services" include the Telecommunications Industry Ombudsman and the Australian Banking Industry Ombudsman.

This creation of new private justice services is occurring for a number of reasons:

Z it promises quick, cheap, accessible, understandable and effective resolution of disputes;

federal and state govern‑ ment owned business enter‑ prises are increasingly being commercialised, corporatised or privatised with the result that many essential services, such as water, are no longer subject to government control. Therefore, private industry may be required by governments to install its own private sys‑ tem of justice or may perceive such privatised com‑ plaint systems as a good public relations exercise as well as a means to ward off government regulation.

Victorian industry has been instrumental in the creation of private justice services for consumers. The privatisation of the Victorian electricity industry and the subsequent creation of the Electricity Industry Ombudsman (Victoria) (the EIOV), provide some in-sight into these privatised mechanisms of dispute resolution which are fast becoming the alternative remedy of the 1990s.

PRIVATISATION AND ACCOUNTABILITY

Since 1992, the Kennett government has embarked on an extensive program of corporatisation, commercialisation and privatisation of former government owned business enter-prises, including the former State Electricity Commission of Victoria (the SECV).

One consequence of the privatisation of the SECV is a loss of public accountability. For example, as a government owned business enterprise the SECV was subject to the scrut‑ iny of the government Ombuds‑ man. Ombudsman investigation is a relatively informal method of judicial review, usually without formal hearings and published decisions.

The privatisation of the SECV meant that the powers of the government Ombudsman were removed. Section 13(1) of the Ombudsman Act 1973 (Vic) states that the government Ombudsman may investigate "any administrative action taken in any government department or public statutory body to which this Act applies or by any member of staff of a municipal council". Thus, the powers of the government Ombudsman do not extend to a privatised body, even if that body was formerly owned by the Victorian government.

Privatisation of the SECV has resulted in the creation of an industry based privatised complaint system. The role of the government Ombudsman has been replaced by a 1990s style private justice service - the EIOV. This follows a British trend of companies in the private sector embracing the ombudsman principle as an appropriate technique of resolving disputes between them-selves and their customers.

The EIOV began in late February 1996 with a limited service, taking written referrals from the Office of Fair Trading. On 1 May 1996 the EIOV became fully operational. Between February and May 1996 the Office took 109 inquiries and 141 consultations; no decisions have been required to be handed down.

OPERATION OF THE EIOV

The EIOV is a company limited by guarantee - the Electricity Industry Ombudsman (Victoria) Limited. The memorandum and articles of association of the company establish a scheme comprising three tiers: the Board, the Council and the Ombudsman.

The Board

The business affairs and property of EIOV Limited are managed by a board of direct-ors. The Board is appointed by the members of the scheme who are the holders of retail, distribution and transmission licences under Part 12 of the Electricity Industry Act 1993 and who have been accepted as members. The initial members of the scheme are: Citipower Limited; United Energy Limited; PowerCor Australia Limited; Solaris Power Limited; Eastern Energy and Power Net Victoria. The Board exercises final authority in relation to the financial affairs of EIOV.

The Council

The primary responsibilities of the Council are to oversee the scheme and to appoint and maintain the independence of the Ombudsman. The Council acts as an intermediary between the Ombudsman and the Board and provides advice to the Ombudsman on policy and procedural matters (Electricity Ombudsman Constitution Part C). The Council is appointed by the Board on the recommendation of the Regulator-General after consultation with the Regulator-General's Consumer Consultative Committee. The Council members are selected for their knowledge of customer interests and customer service issues within the electricity industry, with an equal representation of industry members and consumer inter ests and an independent chair-man.

The Ombudsman

The Ombudsman has responsibility for the day to day operation of the EIOV scheme and the resolution of individual complaints. The Ombudsman must not be associated with any member of the EIOV. Fiona McLeod has been appointed as the first electricity ombudsman.

According to initial publicity releases, the EIOV offers customers of Victoria's power companies an ^"independent enquiry and complaints service" which is "free, fair and absolutely in-dependent". The aim of the office is to resolve disputes through conciliation.

The Ombudsman can receive, investigate and facilitate the resolution of disputes concerning the provision and sup-ply of electricity, billing, credit and payment services, disconnections, security deposits and property access. The Ombudsman also has the discretion not to investigate a complaint where, for example, the complaint is best handled by another body or is considered to be frivolous.

If conciliation is not possible, the Ombudsman may make a decision which is binding on the relevant electricity company but not on the customer. Decisions are limited to compensation totalling $10,000 although this may be increased to $50,000 with the consent of all parties. If a customer chooses to reject the decision of the Ombudsman, he or she may pursue the matter through the court system.

HOW GOOD IS PRIVATE JUSTICE?

The industry initiative to create the EIOV scheme is commendable. The approach of the EIOV is to supply a fast, cost-effective mechanism which is specialist and informal and combines complaint investigation with mediation, decision-making and recommendations for reform. The privatised complaints scheme which the EIOV offers is an alternative to the expense and delay of litigation.

In essence, the EIOV tries to replicate the impartiality of the court system through corporate veils. However, the EIOV scheme closely shadows its British and commonwealth banking ombudsman counter-parts and is therefore open to many of the same criticisms. For example, the principal guarantee of the Ombudsman's independence is the three tiered structure of the scheme: the Board, Council and Ombudsman. This structure has been heavily criticised (for example, in D Everett, "Australian Banking Industry Ombudsman" (1990) 5(10) Banking Law Bulletin 213) as being unable to afford the impartiality and independence which is crucial to the effectiveness of any ombudsman scheme.

Some of these criticisms are: the Council, which acts as the buffer between the Board and the Ombudsman to maintain the Ombudsman's independence, comprises three members to represent consumers and three members to represent the industry with an independent chairman. Arguably, the existence of the independent chairman is not sufficient to protect the independence of the Ombudsman. Indeed, the representation of any electricity industry representatives on the Council may compromise its function as a buffer;

• the funding of the scheme is entirely industry based and controlled by the Board;

• consumers may perceive the scheme, which is created and operated by industry, to be biased; and

• it has been argued that such a privatised system of complaint resolution will only work when it applies to the whole industry. The current scheme does not cover all electricity industry members and is therefore not comprehensive.

CONCLUSION

The EIOV is an example of the new trend in dispute res‑olution. It is an electricity industry initiative, which is industry funded and industry based. The advantage to the consumer is that the EIOV is specialist, cheap, efficient and informal - allowing customers to recover compensation which they might not otherwise pursue through the more formal court system.

The EIOV is representative of a private justice service. While the structure of the EIOV is open to some criticism in terms of its accountability and impartiality, the scheme itself is popular with consumers and allows disputes to be resolved without the presence of legal practitioners.

As private justice services such as the EIOV become increasingly common, analysis must be undertaken as to the impact such services will have on the practice of law. Indeed, thought should be given to whether some of the more alluring aspects of the "new" private justice services can be incorporated into the court system and the more traditional methods of alternative dispute resolution.

ANITA STUHMCKE

Note: After this article was written, a new code for the electricity industry was introduced. It will commence in February 1997. Consumers will be able to obtain compensation for poor service and companies must provide a 24 hour 7 day a week telephone service for consumers.