I am today laying a departmental minute to advise that the Department for Digital, Culture, Media and Sport (DCMS) has received approval from Her Majesty’s Treasury (HMT) to recognise a new contingent liability which will come into effect when age verification powers under part 3 of the Digital Economy Act 2017 enter force.
The contingent liability will provide indemnity to the British Board of Film Classification (BBFC) against legal proceedings brought against the BBFC in its role as the age verification regulator for online pornography.
As Members know, the Digital Economy Act introduces the requirement for commercial providers of online pornography to have robust age verification controls to protect children and young people under 18 from exposure to online pornography. As the designated age verification regulator, the BBFC will have extensive powers to take enforcement action against non-compliant sites. The BBFC can issue civil proceedings, give notice to payment-service providers or ancillary service providers, or direct internet service providers to block access to websites where a provider of online pornography remains non-compliant.
The BBFC expects a high level of voluntary compliance by providers of online pornography. To encourage compliance, the BBFC has engaged with industry and charities and undertaken a public consultation on its regulatory approach. Furthermore, the BBFC will ensure that it takes a proportionate approach to enforcement and will maintain arrangements for an appeals process to be overseen by an independent appeals body. This will help reduce the risk of potential legal action against the BBFC.
However, despite the effective work with industry, charities and the public to promote and encourage compliance, this is a new law and there nevertheless remains a risk that the BBFC will be exposed to legal challenge on the basis of decisions taken as the age verification regulator or on grounds of principle from those opposed to the policy.
As this is a new policy, it is not possible to quantify accurately the value of such risks. The Government estimate a realistic risk range to be between £1 million and £10 million in the first year, based on likely number and scale of legal challenges. The BBFC investigated options to procure commercial insurance but failed to do so given difficulties in accurately determining the size of potential risks. The Government therefore will ensure that the BBFC is protected against any legal action brought against the BBFC as a result of carrying out duties as the age verification regulator.
The contingent liability is required to be in place for the duration of the period the BBFC remains the age verification regulator. However, we expect the likelihood of the contingent liability being called upon to diminish over time as the regime settles in and relevant industries become accustomed to it. If the liability is called upon, provision for any payment will be sought through the normal Supply procedure.
It is usual to allow a period of 14 sitting days prior to accepting a contingent liability, to provide Members of Parliament an opportunity to raise any objections.