The tension between a regulator and the courts in interpreting the real meaning and the “facial” meaning of a ruling is not going away anytime soon
By Somasekhar Sundaresan
The United States (US) Supreme Court’s ruling upholding the travel ban imposed by President Donald Trump brings to the fore a core question that often comes up in regulatory proceedings even in India. The question is whether a judge must look only at the text of an instrument or an order under challenge, ignoring all other attendant circumstances.
The US Supreme Court ruling is a watershed and will be discussed for decades. At the heart of the dispute was whether Trump aimed the travel ban at Muslims and if he did, would it violate the US Constitution. In a nutshell, here is what the court considered and ruled.
By a wafer-thin majority of 5:4, the majority of five judges of the US Supreme Court have literally written counters to the views expressed by the remaining four judges to hold that Trump’s face ban did not “facially” name Muslims and should therefore not be seen as aimed at Muslims. Trump ran an election campaign publishing a document called “Statement on Preventing Muslim Immigration”, which called for a “total and complete shutdown of Muslims entering the United States”. He spoke about how “Islam hates us” and that the US has “problems with Muslims coming into the country”. After he was elected, responding to whether he would proceed with “banning Muslim immigration” he said: “You know my plans. All along, I’ve been proven to be right.” When Trump first announced a ban on persons from specific Islamic societies entering the US, his campaign advisors used the term “Muslim ban” when explaining it.
Trump withdrew this ban and made changes to it. To the list was added a non-Muslim society and some exceptions and waiver proposals whereby the US would give waivers on a case-to-case basis. This is what came up for review by the US Supreme Court. Ruling that the travel ban proclamation was “facially neutral towards religion” and that the references to “extrinsic statements many of which were made before the President took the oath of office”, the five judges took the view that they would not hold the travel ban to be motivated by reference to one particular religion.
While the minority of four judges who disagreed have argued extensively with factual evidence to point out how specious the seemingly neutral language in the Trump ban proclamation was, the majority of five judges have ruled that it would not be swayed by the external evidence since they were not to sit in judgement over whether to denounce those statements but were to sit in judgement on whether on the face of it the President had the power to issue such a proclamation and whether it entailed reasonable measures for making it work. The majority of five found the waiver programme to be adequate although the minority of four dealt with how the waiver programme was a façade and that neither the ban proclamation nor the waiver was being put to work as they claimed to work.
Often, in the regulatory environment in India, instruments are written that seem to be drafted in a generic fashion but are effectively instruments that operate as an order that would clearly apply only to specific persons. One such example was a “circular” from the Securities and Exchange Board of India (Sebi), directing that inter-depository transfers should be effected free of cost. One of the depositories challenged it as an “order” (every order is appealable). The Securities Appellate Tribunal (SAT) held that it was indeed an order that was amenable to appeal and disagreed that the order, termed a circular, deserved to be set aside. The Supreme Court of India ruled that any circular that is “referable” to the legislation-making provisions of the Sebi Act would not be an order and cannot be appealed against — the only challenge then would be in a writ petition in the constitutional courts and not by way of an appeal in the SAT.
The SAT is often faced with situations where it has to take this call —whether an instrument is referable to law-making powers or executive powers. “Extrinsic” evidence such as the one that came up with the Trump ban too plays a role. Regulators often speak quite clearly about what they plan to do with the measures they introduce, and one would need to necessarily see the instruments issued, in context. Regulatory design in India, merging legislative and executive functions in the same authority, brings the position much closer to the Trump travel ban proposition. It is another matter that the generic term used by the regulators would read in motherhood terms such as “investor interest”, “policyholder interests” and “depositors’ interests”.
The tension between the regulator and the courts in interpreting the real meaning and the “facial” meaning will remain a long-standing one. It is somewhat like the proverbial priest answering a kid’s question about smoking and praying. When asked if one may smoke while praying, the answer is “no” while whether one may pray while smoking would beget the answer “yes”. One can often be trumped in the process.
This column was published under the head Without Contempt in editions of the Business Standard dated July 5, 2018