Can't we require that a local definition be more indented than the enclosing definition? That way my code would've been rejected by the compiler, and the error message (something like "Empty where-clause on line xxx") can actually be helpful.

The Haskell definition *does* require that nested definitions be more indented than the enclosing scope, and empty where declarations are legal. Hugs doesn't follow the report here. Thanks for providing some evidence to support my view that this restriction on the layout rule is The Right Thing :-) Cheers, Simon