The Role of a General Safety Requirement in Canada's Health Protection Regime

Investigator Name: Professor Jamie Benidickson

Project Completion Date: October 2006

Research Category: Synthesis Research

Institution: University of Ottawa

Project Number: 6795-15-2004/6610005

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Summary

The purpose of this Paper was to consider the suitability of the General Safety Requirement (GSR) as a regulatory instrument to help Health Canada achieve multiple objectives under its 'Legislative Renewal Initiative', namely:

1. To promote a culture of safety as a unifying principle under a proposed Canada Health Protection Act by including a general prohibition against manufacturers and suppliers producing or supplying unsafe products to the public;
   
   
2. To authorize Health Canada to take timely, precautionary action, before injury occurs, against unsafe unregulated products or products that, although nominally regulated, present serious emerging risks not dealt with under existing regulations;
   
   
3. To reinforce the "front end" obligation of producers to properly assess and manage, on a life-cycle basis, risks associated with products to be supplied to the public;
   
   
4. To expedite the detection, remediation or removal of unsafe products from the market through mandatory reporting by producers and suppliers of substantial product hazards;
   
   
5. To foster an "outcome oriented" (or performance-based) product safety regime which facilitates both technical innovation and continuously improving safety standards; and
   
   
6. To promote the enhanced use and continuous improvement of voluntary standards by giving official recognition and effect to private voluntary standards and industry codes of practice, by providing that compliance with such standards will raise a legislative "presumption of conformity" with general product safety requirements.

Evolution of the GSR

The European model of the General Safety Requirement evolved in a unique set of political, economic and legal circumstances. It is premised on a "New Approach to Regulation" developed in Europe in 1985 to overcome regulatory gridlock resulting from diverse Member States trying to agree, unanimously, on the content of highly detailed product standards that were being harmonized for the purpose of establishing and improving the European Common Market. The legal and political raisons d'être for the GSR is internal trade. Product safety is an ancillary consideration under the Treaty establishing the European Community.

Europe's New Approach to regulation makes use of voluntary standards in a manner likely to be construed in Canada and the United States as a form of "Back-door Rulemaking". Only the essential requirements (broad performance standards) are included in legislation. Responsibility for establishing technical product standards is, in effect, sub-delegated to private standard-setting committees that are usually dominated by industry experts.

Although the standards thus established are 'voluntary', they are quasi-mandatory in practice, especially for medium and small enterprises that do not have the capacity to develop acceptable alternative standards. The New Approach to Regulation was based on a regulatory framework employed in Germany and some Nordic countries that legislate only essential product requirements, leaving the matter of compliance with those requirements to the private sector based on codes of practice, standards and official guidelines.

The GSR is also premised upon absolute liability for product 'defects' based on Europe's Product Liability Directive of 1985. This concept is not generally replicated in Canada, but is a major factor in compelling positive compliance behaviour in the area of product safety in Europe, including under the GSR.

Initial Development

The European Union's policy rationale for the General Product Safety Directive (GPSD) was that it would temporarily fill out the regulatory gaps created by new unregulated products or emerging risks with the expectation that the scope for the GPSD would diminish as new product legislation was developed. In practice, the tendency for the general safety provision is to expand into a permanent form of horizontal regulation characterized by multiple layers of uncertainty. The reasons for this include: the failure of industry standards to meet safety objectives; slow progress in harmonizing European product standards due to a general policy bias against regulation if it was not rigorously justified; failure to meet the five year target for reviewing approved standards leaving more scope for the GSR and the fact that new Member States with inadequate product safety legislation or product standards employed the general safety provision as an instrument of first resort.

The GSR is a performance-based regulatory technique under which regulations are effectively replaced by voluntary specification standards, only some of which are 'approved' by government. The regime, unfortunately, is characterized by multiple layers of uncertainty, including built-in uncertainties in the definition of 'safe' product, inconsistent methodologies for assessing product risks, uncertainty about the threshold for identifying 'serious' risks, residual uncertainty about the manner of establishing conformity with the GSR and the paucity of product standards approved under the General Product Safety Directive. The GSR is not a good candidate for effective enforcement under a criminal law model. This is especially so, given the degree of imprecision in the definition of the general duty violation; the fact that Courts construe definitions of criminal offences strictly in favour of the defendant as a matter of legal principle and the requirement that the State prove the factual elements of an offence beyond a reasonable doubt before the defendant is placed under any onus to disprove negligence, or otherwise mount a positive defence.

Implementation

Although "beguilingly simple" in concept, the General Safety Requirement is difficult and expensive to implement. In theory, pre-marketing duties (product development, product design, hazard assessment, risk management and production) are reinforced in law under the GSR as the responsibility of producers. In practice, the degree of uncertainty associated with the GSR's highly flexible framework results in industry seeking comfort from the public authority on a day-to-day, product-by-product basis, concerning not only how the law will be administered but also, in effect, about what the law is. (ie: Is there an approved domestic standard applicable to this product? If not, what foreign standards are acceptable for the purposes of the domestic GSR? Does this product present a 'minimal', 'acceptable' or 'serious' risk? If we alter our production process in this or that manner, will the end product be viewed as meeting the exigencies of the GSR?)

European experience under the General Product Safety Directive confirms the need for extensive advice and guidance from public authorities, particularly on the part of small enterprises. Small enterprises seldom have the capacity for rigorous risk assessment, testing or for developing new technical standards and innovative quality management systems. If they cannot afford third party expertise, they look to government officials for advice and assistance in these matters. In some cases, local authorities have had to take over testing functions for small enterprises to make the scheme work.

Three case studies developed under this Report, and the results of interviews conducted during its preparation, illustrate the major elements of cost associated with implementing a GSR. They include: an extensive advisory program of 'expert' advice, scientific testing, rulings, guidelines and operational manuals; new skills training for the inspectorate (e.g. auditing quality systems vs. inspecting products); financial support for standard-setting agencies to expedite the establishment of new product safety standards; compensation for government officials and consumer representatives on standard-setting committees to maintain some stakeholder balance in the standard-setting process, research into world-wide product standards to develop a rolling inventory of standards available for the administration of the GSR; augmenting the capacity of government testing laboratories, and the cost of hiring and retaining various government 'experts' to sustain an effective challenge function against industry 'experts' under a GSR regime that is largely industry self-regulated.

The compliance and enforcement measures that a public authority must undertake under a highly self-regulatory regime like the GSR may be somewhat different from those under an inspection-oriented prescriptive regime, but do not likely involve resource savings for government. Hodges^[1], in his text on European Regulation of Consumer Product Safety sets out a framework for the post-marketing activities of authorities under the GSR which includes the following elements: verification: that economic operators have correctly and adequately carried out their pre and post-marketing functions; market surveillance to identify unsafe products; taking action to ensure that appropriate action is taken when safety issues are identified; collaboration with other regulatory authorities, economic operators, and consumers/users; enforcement, that is, imposing sanctions, or proposing to courts the imposition of sanctions on economic operators for non-compliance with legal obligations and, in addition, providing public information such as through vigilance information databases, answering questions from stakeholders about reporting thresholds, and possibly providing rulings on whether particular products meet the general safety requirement.

Each of the above functions involves a broader subset of tasks, many of which will be resource-intensive. In elaborating on the public authority's post-marketing verification activities under a GSR where it must assess risks associated with potentially "dangerous products," Hodges notes that a public authority must have the ability to address a series of detailed questions associated with the prior conduct of the producer or supplier.

Examples of such questions may include: Has the producer assembled the technical documentation on the product's design and manufacture and labeling, including a risk assessment, and kept it up to date and available? Did the producer collect, record and collate safety information from users, retailers, distributors, regulators, or any other source, including scientific and technical literature, on how safe the product is in practice and whether it continues to conform to the standards of safety as these evolve in the light of new scientific and technical information? Did the producer adequately investigate negative incident information? Did the producer undertake an adequate assessment of the information thus garnered? Did the producer make appropriate use of external technical, regulatory, medical, or legal advice, or update the product's assessment, where appropriate? Was information required in law to be reported to the Authority adequately reported? Did the producer make an appropriate decision on whether any changes needed to be made or action taken as a result of the assessment, such as (i) changes in the design, manufacture, labeling, or packaging in relation to products not yet placed on the market, or (ii) action such as informing users, distributors, regulators, or others of changes in potential risks with the product, or instituting a recall of products already on the market?^[2]

In practical terms, the Case Studies submitted with this Report illustrate how many of the above-mentioned tasks would have to be addressed under a GSR by Health Canada in relation, for example, to bicycles (an unregulated product); Konjac Jelly Mini Cups (an inadequately regulated product); and electrical household products (an area of federal-provincial regulatory overlap).

Outcome oriented (performance-based) regulation like the GSR, though largely untested by time and the courts, is viewed by major industry and the public sector as a promising vehicle for better meeting regulatory objectives and advancing a growing convergence between business and regulatory practices. Yet the benefits and limitations of performance-based regulation, in which law, business, industry and the stakeholders relying on regulatory protection, interface, remain the subject of continuing debate and controversy. Performance measurement and enforceability will be significant challenges for Health Canada if it introduces an "outcome-oriented" GSR regime, particularly under the constraints of a criminal law model. The advantages and limitations of performance-based regulation are discussed in this Report with reference to a Harvard University seminar on the subject; a report of an Australian Commission on 'Grey-Letter Law'; the expectations of Canada's Auditor General when auditing performance-based approaches to regulation; and to practical considerations associated with performance-based regulation in the experience of the Offshore Oil and Gas industry.

Cost/Benefit Considerations

The cost/benefit considerations applicable to the GSR differ significantly between Europe and Canada. Cost-benefit and business impact considerations will be especially important in determining whether to proceed with a full European style GSR under the proposed new Canada Health Protection Act, or to incorporate only some of its features in existing legislation, or to rely on other legislative options as a 'safety net' for regulating emerging product risks.

The cost/benefit considerations of Europe's ' New Approach' to regulation and the GSR are unique. While the regulatory costs to government and industry inherent under the European GPSD regime are significant, the financial and political benefits associated with achieving an effective European Common Market and functioning Union are enormous. In Europe the benefits of these regulatory techniques are measured almost exclusively in macro-economic and political terms. Product safety is an ancillary consideration under the terms of the Treaty establishing the European Union.

The precise effect of a General Product Safety Directive to ensuring safe products in Europe is far from clear. Much of the effectiveness of the European product safety regime seems attributable to the formidable market sanctions that may be imposed on producers, suppliers and exporters within the Common Market, and the producers' absolute liability for defective products under the European Product Liability Directive. There is little case law, and Europe has had only minimal experience with the GSR in its present, substantially revised, form (The revised GPSD came into force only in January of 2004).

Effect on Compliance Behaviour

There is little evidence that the mere enactment of a General Safety Requirement (to supply 'safe' goods) has any appreciable effect on compliance behaviour in the absence of vigorous industry / government programs to promote safe practices.. The requirement to report serious product risks to public authorities is an effective element of the GSR, given the consequences that may flow from such a report in Europe such as absolute liability in damages for product defects, suspension or banning from the European Common Market, prohibition against exporting the product beyond the EC and loss of commercial reputation in the wider European Community.

With the exception of large enterprises, there is little awareness of the general safety requirement in Europe. The General Safety Requirement is a difficult concept to explain to 'regulation-centric' industries and has proven to be a significant communications challenge for European administrators. Extensive safety programming that is backed up by credible safety enforcement is the minimum requirements for bringing about a 'cultural' change in this area. Despite sectoral differences, the programming lessons learned in the Occupational Health and Safety area are likely to be helpful to Health Canada in promoting a 'culture of safety' in the consumer product sector.

However, the more mature consumer product safety programs in European Member States do seem quite effective - to the point where product safety is not regarded as a significant problem in several jurisdictions. In the UK and the Netherlands, for example, there appears to be a significant 'culture of safety' already in place amongst local industries. Some have argued that the GSR is a disproportionate response to the real product safety problem, which, overwhelmingly, is cheap imported electrical goods and toys from China and the Far East. Some argue that a more targeted solution to the problem is called for -- specifically, tighter border control and education of foreign exporters about European standards. But Europe's strict product liability laws, coupled with the potential enormity of a loss of market possibilities following a Rapex Report on a dangerous product, and fear of damage to corporate reputations remain the main compliance incentives for industry.

Benefits and Disadvantages of a GSR

Health Canada should carefully weigh the benefits and offsetting disadvantages of a GSR regime before deciding to include it as part of a proposed Canada Health Protection Act.

The GSR is a form of performance-based regulation under which voluntary standards, in effect, substitute for technical regulations. The GSR's advantages and limitations are summarized in this Report: in both cases they closely parallel the advantages and limitations of any performance-based regime. The GSR's 'advantages' are expressed as perceived advantages because the advantages are sometimes illusory, or may be offset by corresponding disadvantages.

For example, the view that merely by enacting a GSR (in effect codifying the common law duty of care to avoid producing unsafe products) will improve industry's pre-marketing practices seems largely illusory based on the low level of industry knowledge and understanding about the GSR achieved in Europe. While the GSR seems effective as a regulatory 'safety net' to catch unregulated dangerous products, an important offsetting disadvantage is that it is difficult to contain and tends to become an expansive form of horizontal regulation characterized by multiple layers of uncertainty.

Again, though public authorities usually look for resource savings from reduced inspection costs under highly self-regulated schemes like the GSR, the reality is that industry will likely seek 'comfort' from Health Canada's advice, assistance and rulings to clarify the requirements under an uncertain law, possibly on a product-by-product basis. Industry often views regulatory flexibility and closer harmonization with industry practices as a clear benefit in terms of product innovation, or the harmonization product standards, or in terms of minimizing regulatory distortion of the marketplace. However, these advantages for industry can be offset by disadvantages for government and stakeholders in terms of undue industry influence on disputed safety issues, anti-competitive behaviour toward small enterprise and weakening of the government's 'challenge function.' This Report includes a much longer list of potential advantages and (sometimes offsetting) limitations under the GSR for Health Canada to weigh.

Legal Considerations and Impediments

There are a number of legal considerations, and some impediments, to implementing a GSR as an operative provision of the proposed Canada Health Protection Act.

The legal framework that Health Canada is constitutionally bound to utilize in implementing a GSR -- a criminal justice framework - is an impediment to fully realizing the plenary administrative, civil and criminal powers (and programming opportunities) of European product safety regimes under Member States that have full constitutional and regulatory authority for product safety within their respective jurisdictions. The administrative recall power that is considered so important to the success of the GSR by some officials, for example, may not be constitutionally available under health protection statutes based exclusively on the federal authority to enact criminal legislation for the purpose of protecting public health and safety. Effective alternative methods for resolving complex disputes under civil processes (Is the product "safe"?) are not directly available under the criminal process; such techniques have to be carefully crafted to be compatible with the administration of criminal justice, for example, along the lines of environmental protection alternative measures developed for the Canadian Environmental Protection Act.

The GSR also raises important 'rule of law' issues that could emerge as serious impediments to implementing a GSR. Laws should normally be made in advance of when they are to be applied, should operate prospectively, and should be publicized or otherwise made available to those whom they are to govern. In the case of unregulated products for which no standards exist, a "general" safety requirement leaves such an enormous charging discretion in the hands of administrators that Courts might view the Government as trying to 'establish' the law on a case by case basis. Alternatively, the requirements of the general duty violation may be so uncertain, or so easily circumvented by the defendant advancing alternative versions of the legal requirements (e.g. foreign standards), that the GSR will be extremely difficult or, in some cases, impossible to prosecute, given legal requirements for precision in penal processes.

There are other legal considerations, not amounting to impediments, which would have to be addressed in implementing a GSR. Mandatory reporting requirements under the GSR would have to be developed and administered in a manner that did not violate the privilege against self-incrimination in penal proceedings. In practice, Health Canada would also have to carefully manage the heightened risk of regulatory liability for negligent misstatements under an extensive program of advice, testing, and rulings that the Department would likely have to maintain (in particular, for small enterprises) in order for the GSR regime to function. Other legal considerations are discussed throughout this Report.

Summary

By way of summary, there are a number of reasons mentioned throughout this Report as to why Health Canada may wish to reconsider including a general safety requirement as a central element of the proposed new Canada Health Protection Act. The GSR is difficult to implement under a criminal law model and some of the remedies, such as administrative recall orders, may not be available to the Department. The need for a 'safety net' is not the same under the CHPA's constituent Acts and Regulations and the Department has much closer control over emerging risks under the pre-marketing licensing and certification regimes in the Food and Drugs Act than it does under the Hazardous Products Act.

The case for implementing a GSR in Europe was based on circumstances very different from those in Canada. A GSR model imported from Europe that is based primarily on trade considerations may not be the best approach to achieving Health Canada's safety objectives, or for harmonizing Canada/United States product standards. The cost/benefit considerations associated with a GSR in Europe are highly different from those in Canada; the economic and political benefits associated with the GSR and its underlying New Approach to Regulation in Europe are potentially enormous and justify considerable administrative expense to make the Common Market and the European Union work. The resource savings that Health Canada might have anticipated under a highly self-regulatory GSR regime are unlikely to materialize under a full consideration of the cost elements inherent in administering such a regime.

While Canada's regulatory policy encourages the use of voluntary standards to achieve regulatory goals by supplementing regulations and promoting a 'best practices' approach, it does not, on its face, go so far as to countenance the sub-delegation of quasi-regulation-making power to domestic or international standard-setting bodies operating outside of the domestic regulatory process, as occurs in Europe under the New Approach to Regulation. In addition to raising 'rule of law' considerations, the compatibility of the GSR with Canada's evolving regulatory policy should be settled with central agencies of Government before Health Canada proceeds with the GSR initiative.

The Department's potential exposure to regulatory liability, particularly from negligent misrepresentations made under the extensive advisory program required to make the scheme work, may increase significantly. This warrants careful analysis with the Department's Legal Services Unit when and if the terms of a GSR scheme are finalized.

Alternatives

There are a number of alternatives Health Canada may wish to consider, separately or in combination, as methods for achieving the regulatory objectives outlined at the beginning of this Executive Summary. The purpose of this Paper was to consider the suitability of the GSR as a regulatory instrument for achieving Health Canada's objectives under the Legislative Renewal Initiative. Our research has led us to question the suitability of employing a GSR under the proposed Canada Health Protection Act. While reaching that conclusion might have been sufficient for the purposes of our mandate under this Project, we are outlining five broad options for Health Canada to consider for addressing its regulatory goals and objectives, four of which are alternatives to the GSR, namely:

1. The European Model -- Attempt to adapt the European model of the GSR to the Canadian legal context for inclusion in the proposed Canada Health Protection Act. (This was the principle subject of this Report)
   
   
2. Incremental Reform -- Import only needed elements from the GSR into the constituent Acts originally intended for consolidation under the CHPA should the Department decide not to proceed with a consolidation. (i.e. reporting requirements, data-based detection system, missing enforcement powers, etc.) This is the approach adopted by Australia following an extensive review of its consumer protection legislation completed in 2005.
   
   
3. Modified American Approach (HPA Only) -- Under the Hazardous Products Act, Health Canada would enact a general prohibition against advertising, selling, importing etc. consumer products that present an unreasonable risk of injury. 'Risk of injury' would be defined on a basis consistent with the U.S. Consumer Product Safety Act, to mean "a risk of death, personal injury, or serious or frequent illness." 'Risk of injury' is an issue that can be determined with much greater certainty, (including by criminal courts) than the question as to whether particular products are "safe" or "unsafe." This Option has the additional advantage of facilitating closer harmonization of North American consumer product standards, injury data collection and enforcement practice.
   
   This Option would apply only to the Hazardous Products Act on the assumption that there is no real need for a general prohibition of this kind under the Food and Drugs Act and related regulations where closely controlled licensing and certification schemes with pre-marketing and adverse incident reporting requirements are already in place. The GSR is a post-marketing mechanism that assumes little to no government oversight at the pre-marketing stages of product design, development and production. Moreover, an incremental reform approach is already evident under the Medical Devices and Natural Products Regulations, which now include a virtual GSR regime linked to conditions of licensing.
   
   
4. Modified American Approach (All Constituent Acts) -- If Health Canada wishes to extend the general prohibition outlined in the previous Option beyond the Hazardous Products Act, the scope of the HPA could be extended to apply to dangerous unregulated products and serious unforeseen risks in product areas covered by the other Acts administered by Health Canada. While the general duty violation and related powers might be situated in the HPA, the authority would be accessible to enforcement officials administering the other enumerated Acts, as needed, perhaps without requiring significant changes to the Department's internal organization.
   
   While the HPA is mentioned as a possible 'home' for the general prohibition based on American 'risk of injury" terminology, it might be located in some other generic statute administered by the Department such as the Department of Health Act^[3], or the proposed CHPA if the Department proceeds with the consolidation of constituent Acts under the Legislative Renewal Initiative.
   
   
5. Status Quo with Administrative Reform - Under this Option, the Department would rely on the existing provisions for Ministerial Interim Orders in the Hazardous Products Act or the Department of Health Act as the main safety net for dealing with unregulated dangerous products, and unforeseen, emerging and serious risks in regulated products. In this case, however, the focus would be on making the Minister's existing remedy more efficient by developing internal policies for triggering the use of this power together with a fast-track process for exercising it - all in collaboration with the Minister's Office and relevant Central Agencies of Government. The policy and fast-track process would then become a routine element of briefing for new Ministers of Health so they would be familiar with the emergency measure in advance of the need for urgent intervention.

Options two to five (i.e. the 'alternative' options) might be accompanied by a Health Canada program to encourage the development and use of effective voluntary product standards with a view to achieving levels of product safety that routinely exceed minimum legal requirements. For example, on July 10, 2006, the U.S. Consumer Product Safety Commission published a final rule on Commission Involvement in voluntary Standards indicating how the Commission intends to promote improved voluntary product standards in collaboration with the private sector without compromising the public authority's institutional independence or oversite role^[4].

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1. Christopher Hodges, European Regulation of Consumer Product Safety, 2005, Oxford University Press

2. (Hodges, p. 132.)

3. SIC B 1996, c.8

4. Federal Registry, July 10, 2006, Vo. 71. No. 131

The views expressed herein do not necessarily represent the views of Health Canada