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The failing ATOS contract: there is a lawful way out

How can the Government get out of its contract with ATOS?

Parliament can find a way out of the problems of the failing ATOS contracts with the Department of Work and Pensions (DWP), using legal principles upheld during World War I.
ATOS wants to withdraw from its contract for Work Capability Assessments (WCA) for sick and disabled people receiving Employment Support Allowance (ESA); sections of the government oppose this.
ATOS-campaignersNationwide complaints and protests about ATOS’s assessment of claimants receiving sickness and disability benefits are becoming increasing loud and widespread, and the assessment procedure has been cited in reports of suicides which the Benefits Legal Group records. The French medical corporation’s image has suffered enormously; not even their 2012 Paralympics sponsorship endeared them to anyone.
More than 600,000 appeals have been lodged since WCAs began and disturbingly, 40 per cent of ATOS assessments for the DWP are found to be wrong and are overturned on appeal to a tribunal. The true figure of error may be much higher, but only a third of appellants have any representation or support, reducing their chances of success. The position of appellants has not been helped by some GPs charging £25–£120 for medical reports (Daily Mirror, 27.8.2013). When claimants are represented at appeals (and, crucially, supply their own independent medical report), the success rate rises dramatically. And when appellants have lawyers experienced in tribunal proceedings, the success rate on appeal typically reaches over 90 per cent.

What is to be done?

When even the company providing the assessments wants to withdraw, there is clearly something fundamentally wrong with the system; however, inertia in the DWP and the lack of any alternative plans or any idea of how to get out of the ATOS contract is preventing reform. The government wants to get other providers involved, but given the experience of ATOS, how many would want to take this on?
A stumbling block appears to be the widespread notion that because the contract is in place, it cannot be terminated, but must continue to be performed until the bitter end. This is a political rather than legal perspective and does not accurately represent the law in Great Britain.

The legal legacy of World War I can help

The law was settled in the last big set of civil litigation over contracts with an international dimension. During World War I, after trading with Germany was made illegal, the courts heard a number of cases involving commercial contracts with Germany or its allies. In Ertel Bieber & Co v Rio Tinto Co, Ltd – [1918–19] All ER Rep 127 the House of Lords (now the Supreme Court) approved the view expressed in 1802 in Furtado v Rogers [1802] 3 Bos. & P. 191, 198, 199 that:

We are all of opinion that on the principles of the English law it is not competent to any subject to enter into a contract to do anything which may be detrimental to the interests of his country; and that such contract is as much prohibited as if it had been expressly forbidden by an Act of Parliament.

Crucially, the House of Lords stated:

It is admitted that if a man contracts to do a thing which is afterwards prohibited by an Act of Parliament, he is not bound by his contract.

In fact, there was plenty of previous case law for the House of Lords to determine the issues, and the rule can be traced back to 1698. Amongst many justifications, the House of Lords identified:

The rule [of law] sets the public welfare above private bargain… In a matter of national safety the State cannot surely rely on the bare integrity and good faith of persons whose commercial interest may so strongly conflict with their public duty.

The rule was further confirmed in Central India Mining Company Ltd v Societe Coloniale Anversoise [1920] 1 KB 753 which recognised that:

The law is to be found partly in the common law, partly in statutes, and partly in Proclamations. It rests upon public policy. Its object is to prevent dealings or transactions which may result in detriment to this country.

An Act passed by Parliament over-rules any form of other binding legal obligation or duty and any obligation to complete a contract. The Courts will not challenge the validity of an Act of Parliament even if there is an allegation that it has been obtained by fraud. (See British Railways Board v Pickin [1974] 1 All ER 609.) Thus, Parliament could pass an Act that would end the ATOS contracts and release both parties from their obligations.

Public policy grounds for ending the ATOS contract

Furthermore, at common law it is possible to cease to perform a contract on grounds of public policy. Such a view was approved in Kaufman v. Gerson [1904] 1 K. B. 591, 598, 599. where the Master of the Rolls Lord Collins quoted with approval the following passage from Westlake’s Private International Law, 3rd ed., s.215, p.260:

Where a contract conflicts with what are deemed in England to be essential public or moral interests, it cannot be enforced here notwithstanding that it may have been valid by its proper law. The plaintiff in such a case encounters that reservation in favour of any stringent domestic policy, with which alone any maxims for giving effect to foreign laws can be received.

In that case, the Court held that the plaintiff, a man domiciled in France, could not recover in England from the defendant, a woman likewise domiciled in France, upon an agreement in writing made in France, to pay him a certain sum of money, the signing of which agreement he had coerced her into by threats of criminally prosecuting her husband, the consideration being the abandonment of the prosecution, though, according to French law, there was nothing illegal in the transaction.

The solution is for Parliament to act

The way out of the dilemma of the ATOS contract with the DWP is simply for Parliament to pass a statute, as the power to do this by regulation may not fall within Iain Duncan Smith’s 300 regulation-making powers under the Welfare Reform Act 2012. It could be accomplished by a special Act of Parliament, introduced either by the Coalition Government or by way of cross-party agreement or a Private Member’s Bill.

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The failing ATOS contract: there is a lawful way out