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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> The Durham Company Ltd (t/a Max Recycle) v Durham County Council [2020] EWHC 3200 (Ch) (25 November 2020) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2020/3200.html Cite as: [2020] EWHC 3200 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMPETITION LIST (ChD)
Rolls Building, Fetter Lane London, EC4A 1NL |
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B e f o r e :
SITTING AS A JUDGE OF THE HIGH COURT
____________________
THE DURHAM COMPANY LIMITED (trading as MAX RECYCLE) |
Claimant |
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- and - |
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DURHAM COUNTY COUNCIL |
Defendant |
____________________
Aidan Robertson QC (instructed by DWF Law LLP) for the Defendant
Hearing date: 18 November 2020
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Crown Copyright ©
Covid-19 Protocol: This judgment was handed down remotely by circulation to the parties' representatives by email and release to BAILII. The date and time for hand-down is deemed to be 10 a.m. on Wednesday 25 November 2020.
JUDGE KEYSER QC:
"As an EU Member State, the UK was part of the EU state aid regime that limits trade-distorting government support to businesses. Having left the EU, the government is setting up for an independent UK state aid or 'subsidy control' regime, based on WTO rules. The EU state aid framework will cease to apply after the end of transition on 31 December 2020, but the discussion is ongoing about what will replace it.
This briefing describes how the UK government's approach has shifted from remaining in step with EU state aid rules under Theresa May's Government towards regulatory sovereignty and a focus on WTO rules under Boris Johnson's leadership.
…
The UK government's position in the negotiations with the EU has been that developing domestic subsidy controls is separate from a free trade agreement with the EU. UK's international commitments, based on the WTO rules, should only catch subsidies that can distort trade. It's up to the government to tailor the domestic rules, to choose which policy priorities to support and to decide how much funding will be available. But the government has recognised that its domestic choices are influenced by the ongoing negotiations on the UK future relationship with the EU.
As confirmed in the Government statement of 9 September 2020, the UK will follow the WTO subsidy rules. On 29 September the government has laid a statutory instrument which disapplies EU state aid law that would otherwise be retained in the UK by the EU Withdrawal Act 2018. The details of the new regime will be decided after a consultation, which the government has planned for the end of 2020 or 2021. It is not yet known whether the government will legislate to go further with domestic regulation than required under its international commitments on subsidies."
Summary of the facts and of the claim
"(1) It shall be the duty of each waste collection authority—
(a) to arrange for the collection of household waste in its area except waste—
(i) which is situated at a place which in the opinion of the authority is so isolated or inaccessible that the cost of collecting it would be unreasonably high, and
(ii) as to which the authority is satisfied that adequate arrangements for its disposal have been or can reasonably be expected to be made by a person who controls the waste;
(b) if requested by the occupier of premises in its area to collect any commercial waste from the premises, to arrange for the collection of the waste; …
…
(3) No charge shall be made for the collection of household waste except in cases prescribed in regulations made by the Secretary of State; and in any of those cases—
(a) the duty to arrange for the collection of the waste shall not arise until a person who controls the waste requests the authority to collect it; and
(b) the authority may recover a reasonable charge for the collection of the waste from the person who made the request.
(4) A person at whose request waste other than household waste is collected under this section shall be liable to pay a reasonable charge for the collection and disposal of the waste to the authority which arranged for its collection; and it shall be the duty of that authority to recover the charge unless in the case of a charge in respect of commercial waste the authority considers it inappropriate to do so."
"The Claimant has informed me that the prices offered by the Defendant are simply unsustainable for a private company given the costs and overheads involved in waste collection and disposal. The Claimant is not able to compete with the Defendant on price, despite having attempted to do so on countless occasions. The Claimant believes that the reason that the Defendant is able to offer such low prices and therefore win business is due to the fact that it utilises the same infrastructure and resources for collection of commercial waste as it does for household waste; infrastructure and resources which are at least in part, if not entirely, funded by the tax payer. In addition to the infrastructure, the Defendant also benefits from a further tax advantage which is attractive to certain categories of customers, which is the VAT exemption granted to the provision of its services by HMRC."
1) In November 2016 the Council refused a Freedom of Information request from TDC, relating to details about the basis of the commercial waste collections undertaken by the Council, on grounds relating to confidentiality of commercial/industrial interests. Further Freedom of Information requests were made; the evidence is that about 20 such requests in total were made between January 2015 and January 2017. On 6 January 2017 the Council informed TDC that an internal review had deemed the requests to be vexatious.
2) On 31 July 2017 TDC's solicitors wrote to the Council, asking the Council either to acknowledge that it benefitted from State aid with regards to the "commercial trade waste services" it provided or to explain its reasons for saying that it did not benefit from State aid. This led to numerous exchanges of correspondence during 2017.
3) On 21 December 2017 TDC's solicitors wrote to the Council, stating shortly that it was apparent that the Council had provided unlawful State aid to its "waste business", thereby giving that business an unfair competitive advantage that had caused and would continue to cause loss and damage to TDC. The letter sought a response to certain Freedom of Information requests.
4) On 30 July 2018, three weeks after Nugee J's decision, TDC sent a complaint to the European Commission ("the Commission"), alleging a breach of State aid rules by the Council and raising concerns about the manner in which local authorities engage in commercial waste collection activities and the unfair advantage they perceived them to have as a result of also collecting household waste. That complaint was acknowledged on 2 August 2018 by the Office of the Directorate-General for Competition. The Commission has the power to determine the presence of unlawful State aid and to request information from a complainant and from the Member State concerned.
5) On 22 February 2019 the Commission notified the Council of the complaint.
6) On 15 March 2019 the Council acknowledged the complaint and provided to the Commission an overview of its waste management activities.
7) On 11 July 2019 the Council received an email from the Commission, via the Department for Business, Energy and Industrial Strategy, requesting a meeting. The Council provided updated information to the Commission and on 11 September 2019 officers of the Council attended a meeting with the Commission and responded to questions. The Commission informed the officers that it was considering the complaint and would reach a decision in due course.
8) On 16 October 2019 TDC's solicitors sent a pre-action protocol letter to the Council.
9) On 7 November 2019 the Council responded to the pre-action protocol letter. The response denied that the Council's commercial waste collection services were operating in breach of the State aid rules and complained: "Your client has referred the Council to the European Commission and asked them to investigate this very matter. It now appears that your client is unconcerned with the outcome of that investigation and is willing to press ahead with legal action regardless based on little more than speculation. That is notwithstanding the fact that the European Commission are the ultimate arbiters of what does, or does not, amount to unlawful state aid."
10) On 17 January 2020 TDC contacted the Commission to seek an update on progress with its complaint and was informed that the Council had made submissions in response to it.
11) On 22 January 2020 TDC commenced these proceedings.
12) On 12 February 2020 TDC again contacted the Commission to seek a further update and was told that the Commission was removing confidential information from the Council's submissions before providing a copy to TDC. The Commission's email ended: "In addition, you would also obtain a first preliminary assessment from our side."
13) TDC's evidence is that it has received no further information from the Commission regarding its complaint. So far as I am aware, no further enquiry as to progress has been made of the Commission.
14) The Council filed its application on 20 May 2020. Statements of case have been exchanged but no further steps have been taken in the proceedings, save in connection with the application.
"Article 107
(1) Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
(2) The following shall be compatible with the internal market:
(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;
(b) aid to make good the damage caused by natural disasters or exceptional occurrences;
(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.
(3) The following may be considered to be compatible with the internal market:
(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;
(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;
(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
(d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;
(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission."
"Article 108
(1) The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market.
(2) If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market having regard to Article 107, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission. If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 258 and 259, refer the matter to the Court of Justice of the European Union direct. On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the internal market, in derogation from the provisions of Article 107 or from the regulations provided for in Article 109, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known. If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case.
(3) The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article 107, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision. [Emphasis added.]
(4) The Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to Article 109, determined may be exempted from the procedure provided for by paragraph 3 of this Article."
1) The Council's provision of household waste collection services (its "Household Waste Business") is and has been funded largely or entirely through council tax revenue.
2) The Council's Household Waste Business has been subsidising its provision of commercial waste collection services (its "Commercial Waste Business"), in particular by giving it access to assets and personnel at a cost less than the market price. As a result, its Commercial Waste Business has gained a commercial advantage over TDC and other private companies providing similar services, because it has been able to set its charges at lower levels by reason of not being required to bear the market costs of providing the commercial waste collection services.
3) The provision of this subsidy by the Council constitutes State aid (the Council being for these purposes an emanation of the State) and is prohibited by Article 107(1) of TFEU unless it is notified to the European Commission under Article 108(3) of TFEU and is declared by the European Commission to be compatible with the internal market: "The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision" (Article 108(3)).
4) As the Council has not obtained a decision under Article 108(3) the State aid that it has provided to its Commercial Waste Business is unlawful in breach of that provision.
5) The prohibition in Article 107(1) and Article 108(3) is directly effective against local authorities, including the Council.
6) By reason of the Council's breach of the final sentence of Article 108(3), TDC has suffered and will continue to suffer loss and damage.
7) The principal relief sought in the prayer is: (a) declarations to the effect that the Council has unlawfully provided State aid to its Commercial Waste Business; (b) a "permanent mandatory injunction requiring the Defendant to set its price for commercial waste collection services so as to cover the costs of providing those services on a standalone basis"; (c) damages, which according to the claim form are expected to exceed £500,000.
- The Council is an emanation of the State for the purposes of the provisions of Article 107(1).
- The measures by which the Council provides commercial waste collection services were put into effect without prior compliance with the procedure in Article 108(3). (Of course the Council denies that it was required to comply with that procedure, because it denies that the measures constitute the grant of State aid.)
- The final sentence of Article 108(3) is directly effective under EU law and generates an obligation on a Member State which may be relied upon by a private party before the courts of that Member State.
- Therefore, if the measures by which the Council provides commercial waste collection services constitute the grant of State aid, the Council was in breach of the requirement of the final sentence of Article 108(3).
Strike-out and summary judgment: the law
"(1) In this rule …, reference to a statement of case includes reference to part of a statement of case.
(2) The court may strike out a statement of case if it appears to the court—
(a) that the statement of case discloses no reasonable grounds for bringing … the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; …
(3) When the court strikes out a statement of case it may make any consequential order it considers appropriate."
The witness statement in support of the application referred also to r. 3.4(2)(b), which concerns abuse of process, but Mr Robertson did not rely on any argument based on abuse of process.
"The court may give summary judgment against a claimant … on the whole of a claim or on a particular issue if—
(a) it considers that—(i) that claimant has no real prospect of succeeding on the claim or issue; … and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
"As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman [2001] 2 All ER 91;
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];
iii) In reaching its conclusion the court must not conduct a 'mini-trial': Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
Summary of the grounds of the application
1) That TDC had not pleaded, and had no real prospect of establishing, matters capable of establishing a right to recover damages from the Council;
2) That TDC had no real prospect of establishing that the matters complained of against the Council constituted the unlawful grant of State aid;
3) That TDC had no real prospect of succeeding in its claim for declaratory and injunctive relief.
The underlying complaint of State aid
"The cumulative result of the Court's interpretation of Article 107(1) is that in order to fall within that Article a measure must satisfy all of the following conditions:
(a) there must be aid in the sense of an economic advantage;
(b) the advantage must be granted directly or indirectly through State resources and must be imputable to the State;
(c) the measure must favour certain undertakings or the production of certain goods ('selectivity'); and
(d) the measure must be liable to distort competition and affect trade between Member States."
1) The Council's defence squarely denies the allegation that its commercial waste collection services operate in breach of the State aid rules. The particulars of claim and the defence set out extensive matters both of fact and concerning the legislative framework within which the Council operates, namely under the EPA 1990. It is permissible but not obligatory to plead matters of law in a statement of case. Accordingly it is in principle open to the Council to advance legal arguments based on matters of fact that have been pleaded or are agreed. Only if it were necessary, for the purposes of those arguments, to rely on additional facts would the arguments be precluded in principle without amendment of the statements of case.
2) However, an application notice is required to "state … briefly, why the applicant is seeking the order" (r. 23.6). Although the grounds must be stated briefly, "they must also be adequate and, in particular, must be stated in a manner that complies with any special provisions relating to the application made": Civil Procedure 2020, para 23.6.1. The specific provisions for applications under Part 24 include requirements for notice of the application (r. 24.4) and for service of evidence (r. 24.5). Rule 24.4(3)(b) requires that a respondent be given at least 14 days' notice of "the issues which it is proposed that the court will decide at the hearing." Practice Direction 24, para 2(3) provides:
"The application notice or the evidence contained or referred to in it or served with it must—
(a) identify concisely any point of law or provision in a document on which the applicant relies, and/or
(b) state that it is made because the applicant believes that on the evidence the respondent has no real prospect of succeeding on the claim or issue or (as the case may be) of successfully defending the claim or issue to which the application relates,
and in either case state that the applicant knows of no other reason why the disposal of the claim or issue should await trial."
3) When r. 23.6, r. 24.4(3)(b) and PD 24 para2(3) are read together, they show clearly, in my judgment, that, if the Council intended to seek summary judgment on the claim on the basis of the argument that the selectivity criterion was not met, it ought to have given notice of the fact; such notice ought properly to have been given in the application notice, but at the very least it ought to have been given not less than 14 days before the hearing of the application. Instead, the only points of which notice was given prior to the week of the hearing were the contentions (i) that no entitlement to damages could be shown, (ii) that there was no real prospect of the grant of injunctive or declaratory relief, and (iii) – a point not ultimately pursued – that the claim was an abuse of process.
4) The best argument in favour of permitting the Council to rely on the selectivity criterion argument at this application is that, despite his protests, Mr Bowsher addressed it substantively in his oral submissions. However, in the exercise my discretion I shall not allow the Council to rely on this ground in support of its application. Counsel in Mr Bowsher's position is on the horns of a dilemma, because he will be understandably reluctant to assume that the judge will rule out the applicant's argument in limine. The fact that he therefore adopts a belt-and-braces approach ought not to count definitively against his primary submission. In the present case, there is substantial litigation in the context of a long-running dispute between the parties. Wherever the merits might lie, the selectivity criterion argument involves a difficult and disputed question of law that goes to the fundamental basis of the claim. To give notice of the point almost six months after the application was filed and only two days before the hearing, with the result that it was first addressed by TDC in a very short supplemental skeleton argument on the day before the hearing, is a substantial unfairness to TDC. There is no good reason why the Council could not have raised the point much earlier and I shall not permit it to do so now.
5) Although I reach my decision on other grounds, I note that the application of the selectivity criterion falls within the scope of the complaint made by TDC to the Commission. It is therefore a matter of which the Commission is already seised and of which it is the final arbiter. In response to my enquiry, counsel did not suggest to me that the involvement of the Commission was a reason why either I at this stage or a judge at trial ought not to engage with the substantive issue of the grant of State aid. However, my ruling on this point does have the collateral advantage of preventing encroachment on a matter that the Commission is dealing with.
The claim for a remedy in damages
"38. Although State liability is thus required by Community law, the conditions under which that liability gives rise to a right to reparation depend on the nature of the breach of Community law giving rise to the loss and damage.
39. Where, as in this case, a Member State fails to fulfil its obligation under the third paragraph of Article 189 of the Treaty to take all the measures necessary to achieve the result prescribed by a directive, the full effectiveness of that rule of Community law requires that there should be a right to reparation provided that three conditions are fulfilled.
40. The first of those conditions is that the result prescribed by the directive should entail the grant of rights to individuals. The second condition is that it should be possible to identify the content of those rights on the basis of the provisions of the directive. Finally, the third condition is the existence of a causal link between the breach of the State's obligation and the loss and damage suffered by the injured parties.
41. Those conditions are sufficient to give rise to a right on the part of individuals to obtain reparation, a right founded directly on Community law."
"51. … Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties."
"28B. For the avoidance of doubt, it is averred that a breach of the last sentence of Article 108(3) TFEU is independently actionable under English law as a breach of statutory duty. It is averred that such English breach of statutory duty claim is not subject to conditions for State liability under EU law, as set out in, inter alia, the Brasserie du Pecheur case (the 'State liability conditions'): see Betws Anthracite Ltd v DSK Anthrazit Ibbenburen GmbH [2003] EWHC 2403 (Comm); by analogy, Garden Cottage Foods Ltd v Milk Marketing Board [1984] A.C. 130 and related cases concerning Article 101 TFEU.
28C. Further or in the alternative, in the event that the State liability conditions apply to the Claimant's claim for damages by virtue of either English or EU law, it is averred that the Defendant's breach of Article 108(3) TFEU is sufficiently serious for at least the following reasons:
a. Article 108(3) TFEU supports an important rule of EU law, namely, the prohibition on State aid;
b. Article 108(3) TFEU is a clear and precise rule of EU law;
c. The Defendant's breach of Article 108(3) TFEU has persisted long after (i) 31 July 2017, when the Claimant first alerted the Defendant to the presence of State aid by cross-subsidy in the conduct of its Commercial Waste Business, by letter from its Solicitors, Tilly Bailey & Irvine LLP, and (ii) 24 October 2018, when the Claimant drew the Defendant's attention to the judgment of 4 May 2018 of the French-Speaking Court of First Instance of Brussels in case 2017/1957/A, holding that arrangements similar to those obtaining between the Defendant's Household and Commercial Waste Businesses amounted to State aid for the purposes of Article 107(1) TFEU;
d. In light of (d) above, the Defendant's breach of Article 108(3) TFEU has been deliberate since at least 31 July 2017; alternatively, since at least 24 October 2018;
The Defendant has persisted in its breach of Article 108(3) in flagrant disregard for the detrimental economic impacts on the Claimant of the cross-subsidy of between the Defendant's Household Waste Business and its Commercial Waste Business on Claimant. The Defendant has been aware of such impacts since 21 December 2017."
Direct claim for breach of statutory duty
"It is common ground between the parties that the last sentence of Article 88.3 [= the last sentence of Article 108(3) of TFEU] has direct effect and parties affected, such as competitors of the entity to whom the aid is being granted, may bring proceedings in the national courts against the State concerned seeking appropriate relief to stop the aid being granted or continued. The Commission has the exclusive right to decide whether aid is compatible with the Treaty, but the national courts have a duty to protect the rights of individuals in cases where there has been a breach of Article 88.3."
The claimant was not suing a Member State for breach of what is now Article 108(3). Its case, as recorded at [27] – and see also, for example, [22] and [28] – was that
"a competitor who has been damaged as a result of the use or misuse of unlawful State aid can sue for compensation for the damage caused to them by the (unlawful) competitive advantage. Preussag is responsible for the unlawfulness. It has an obligation to use the aid conferred on them properly and that obligation is owed to competitors such as Betws. A remedy against the State is not enough: the State may not be at fault; it cannot supervise everything."
Similarly, at [29] Morison J recorded the claimant's submission, on the basis of a decision of the CJEU, that "a party to a contract which was in breach of Article 85 of the EC Treaty 'can rely on a breach of that article to obtain relief from the other contracting party' and Article 85 'precludes a rule of national law under which a party to a contract liable to distort competition within the meaning of that provision is barred from claiming damages for loss caused by performance of that contract on the sole ground that the claimant is not a party to that contract.'"
"Mr Brealey [counsel for the claimant] does not contend that as a matter of English Law the recipient of an unlawful aid, who thereby damages a competitor's business, is liable to the competitor for the damage caused. On the facts, this is not a case which could give rise to one of the economic ['aiming at'] torts which form part of our law. His case is firmly put on the basis of a Community Law tort."
As for the result of the case, at [37] Morison J concluded:
"In my view there is no cause of action in Community Law for the claim advanced by Betws. Specifically, there is no cause of action by Betws against Preussag on the ground that Preussag has used unlawful State aid to the detriment of their competitors including Betws."
1) First, he submitted that the judgment in general and [37] in particular were of assistance because the present case involved two commercial undertakings, namely TDC and the Council in the form of what TDC calls its "Commercial Waste Business". There is nothing in that submission. First, Betws Anthracite did not concern a claim for breach of statutory duty in English law. Second, it found that there was no cause of action for misuse of State aid in EU law. Third, the complaint in the present case is that the Council is in breach of Article 107(1) and Article 108(3) of TFEU; and the duties under those provisions relate to the provision, not the misuse, of unlawful State aid and rest on Member States, not on undertakings.
2) Second, Mr Bowsher relied on [40] – [57], where Morison J considered questions of causation and quantum of damages in case he were wrong in holding that there was no cause of action. Mr Bowsher submitted that it was significant that the judge did not suggest that the Francovich conditions, including the requirement of a sufficiently serious breach, would apply. No significance at all attaches to that point. Morison J was considering what the position would have been if he had held that the claimant had a right of action in EU law for damages against a commercial competitor for misuse of State aid. No question of State liability arose. The conditions established in Francovich and Factortame are State Liability Conditions: that is, they are conditions for the liability of Member States for breach of EU law. Betws Anthracite did not say or imply that the State Liability Conditions do not apply to claims for State liability; it could not have done so, because Factortame has established that they do apply.
"Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between member states. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts."
Lord Diplock (with whose speech Lord Keith of Kinkel, Lord Bridge of Harwich and Lord Brandon of Oakbrook agreed) said at 141C-E:
"This article of the Treaty of Rome (the E.E.C. Treaty) was held by the European Court of Justice in Belgische Radio en Televisie v. S.V. S.A.B.A.M. (Case 127/73) [1974] 1 E.C.R. 51, 62, to produce direct effects in relations between individuals and to create direct rights in respect of the individuals concerned which the national courts must protect. This decision of the European Court of Justice as to the effect of article 86 is one which section 3 (1) of the European Communities Act 1972 requires your Lordships to follow. The rights which the article confers upon citizens in the United Kingdom accordingly fall within section 2 (1) of the Act. They are without further enactment to be given legal effect in the United Kingdom and enforced accordingly.
A breach of the duty imposed by article 86 not to abuse a dominant position in the common market or in a substantial part of it, can thus be categorised in English law as a breach of statutory duty that is imposed not only for the purpose of promoting the general economic prosperity of the common market but also for the benefit of private individuals to whom loss or damage is caused by a breach of that duty."
"… I, for my own part, find it difficult to see how it can ultimately be successfully argued, as M.M.B. will seek to do, that a contravention of article 86 which causes damage to an individual citizen does not give rise to a cause of action in English law of the nature of a cause of action for breach of statutory duty; but since it cannot be regarded as unarguable that is not a matter for final decision by your Lordships at the interlocutory stage that the instant case has reached. What, with great respect to those who think otherwise, I do regard as quite unarguable is the proposition, advanced by the Court of Appeal itself but disclaimed by both parties to the action: that if such a contravention of article 86 gives rise to any cause of action at all, it gives rise to a cause of action for which there is no remedy in damages to compensate for loss already caused by that contravention but only a remedy by way of injunction to prevent future loss being caused. A cause of action to which an unlawful act by the defendant causing pecuniary loss to the plaintiff gives rise, if it possessed those characteristics as respects the remedies available, would be one which, so far as my understanding goes, is unknown in English private law, at any rate since 1875 when the jurisdiction conferred upon the Court of Chancery by Lord Cairns' Act passed to the High Court. I leave aside as irrelevant for present purposes injunctions granted in matrimonial causes or wardship proceedings which may have no connection with pecuniary loss. I likewise leave out of account injunctions obtainable as remedies in public law whether upon application for judicial review or in an action brought by the Attorney-General ex officio or ex relatione some private individual. It is private law, not public law, to which the company has had recourse. In its action it claims damages as well as an injunction. No reasons are to be found in any of the judgments of the Court of Appeal and none has been advanced at the hearing before your Lordships, why in law, in logic or in justice, if contravention of article 86 of the Treaty of Rome is capable of giving rise to a cause of action in English private law at all, there is any need to invent a cause of action with characteristics that are wholly novel as respects the remedies that it attracts, in order to deal with breaches of articles of the Treaty of Rome which have in the United Kingdom the same effect as statutes."
Satisfaction of the "seriousness" condition
"It should not need repeating that Particulars of Claim must include a concise statement of the facts on which the Claimant relies: CPR 16.4(1)(a). The 'facts on which the Claimant relies' should be no less and no more than the facts which the Claimant must prove in order to succeed in her or his claim."
In a claim for damages it will always be necessary to plead the facts that are constitutive of the cause of action and it will usually also be necessary to plead the fact of damage and the causal connection between the wrong and the damage. As a Francovich claim can only succeed upon proof of satisfaction of the second State Liability Condition, the matters relied on to establish satisfaction of that condition ought also to be pleaded. Of course, this will be done as succinctly as possible: as Lord Woolman said at [43], "Abbreviation is encouraged." And it will not be appropriate to plead evidence. But the normal obligation to set out the necessary components of the claim and give fair notice of the matters relied on applies here as elsewhere.
"55. As to the second condition, as regards both Community liability under Article 215 and Member State liability for breaches of Community law, the decisive test for finding that a breach of Community law is sufficiently serious is whether the Member State or the Community institution concerned manifestly and gravely disregarded the limits on its discretion.
56. The factors which the competent court may take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national or Community authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.
57. On any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case-law of the Court on the matter from which it is clear that the conduct in question constituted an infringement."
"139. In my opinion, the decisive factor is whether the error of law at issue is excusable or inexcusable. That characterisation can depend either on the clarity and precision of the legal rule infringed, or on the existence or the state of the Court's case-law on the matter."
"24. The principle of State liability for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible is inherent in the system of the Treaty (judgment in Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECR I-5357, paragraph 35, and judgment in Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur and Factortame, not yet published in the ECR, paragraph 31). Furthermore, the conditions under which State liability gives rise to a right to reparation depend on the nature of the breach of Community law giving rise to the loss or damage (judgment in Francovich and Others, cited above, paragraph 38; judgment in Brasserie du Pêcheur and Factortame, cited above, paragraph 38).
25. In the case of a breach of Community law attributable to a Member State acting in a field in which it has a wide discretion to make legislative choices the Court has held, at paragraph 51 of its judgment in Brasserie du Pêcheur and Factortame, cited above, that such a right to reparation must be recognized where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.
…
28. As regards the second condition, where, at the time when it committed the infringement, the Member State in question was not called upon to make any legislative choices and had only considerably reduced, or even no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach."
"36. … Not every breach of community law involves the exercise of a discretion conferred upon a member state. However, the factors that the court may take into consideration in cases not involving exercise of discretion are the same: see Haim v Kassenzahnarzliche Vereinigung Nordrhein [2002] 1 CMLR 247 at para 43. Where no discretion is conferred, the mere infringement of a rule of community law may of itself constitute a sufficiently serious breach, but it will not necessarily do so: Hedley Lomas (above), para 28; Haim, para 41.
…
40. As Carnwath LJ observed in Byrne v Motor Insurers' Bureau [2009] QB 66 at paragraph 45, the 'sufficiently serious' criterion for Francovich liability is not a hard-edged test, but requires a value judgement by the national court, taking account of the factors listed by the Court of Justice in, inter alia, Brasserie du Pêcheur (above). It is clear from the Luxembourg jurisprudence that in a case such as the present one which does not involve the exercise of a discretion, it is not necessarily enough to give rise to state liability that an error of law has been made. More may be required, and other factors must be considered. …"
"Where does all this lead? In my judgment, it demonstrates that, although there will be some cases where a failure to transpose a specific provision at all by a required date may, without more, amount to a sufficiently serious breach, a bona fide attempt at transposition will attract a more nuanced approach. I am entirely satisfied that the breach of EU law with which we are concerned in the present case does not entitle Mr Negassi to say that he is automatically entitled to reparation. On any view, the United Kingdom's breach was unintentional. It arose from a genuine misapprehension of the true legal position. Whatever may be the reach of automatic entitlement, it does not extend to this case."
"It follows that Mr Negassi's claim for damages must be assessed by reference to the multifactorial test for sufficient seriousness, the essence of which is apparent from British Telecommunications [1996] 2 CMLR 217 and Haim [2002] 1 C.M.L.R. 11. In the domestic context, it was the subject of helpful guidance in the speech of Lord Clyde in R. v Secretary of State for Transport Ex p. Factortame Ltd (No.5) [1999] 3 CMLR 597; [2000] 1 AC 524, at pp.554–556. He identified the following as potential factors: (1) the importance of the principle which has been breached; (2) the clarity and precision of the rule breached; (3) the degree of excusability of an error of law; (4) the existence of any relevant judgment on the point; (5) whether the infringer was acting intentionally or involuntarily or whether there was a deliberate intention to infringe as opposed to an inadvertent breach; (6) the behaviour of the infringer after it has become evident that an infringement has occurred; (7) the persons affected by the breach or whether there has been a complete failure to take account of the specific situation of a defined economic group; (8) the position taken by one of the Community institutions in the matter. He added (at p.554B-D) that the application of the 'sufficiently serious' test 'comes eventually to be a matter of fact and circumstance'.
'No single factor is necessarily decisive. But one factor by itself might, particularly where there was little or nothing to put in the scales on the other side, be sufficient to justify a conclusion of liability.'"
"The evaluation of the seriousness of the breach in the present case seems to me to be quite finely balanced. I have come to the conclusion that, notwithstanding the points in Mr Negassi's favour (the most striking of which was the total exclusion of the subset of applicants for asylum of which he was one), the breach was not of sufficient seriousness to satisfy the test. It was not deliberate. It was the result of a misunderstanding of new provisions in an area of recent EU concern. It was not a cynical or egregious misunderstanding. It was not confined to the Secretary of State. It was shared, as a matter of first impression, by a number of judges. Whilst now all is clear, I do not think that it can be said to have been self-evidently so before the conclusion of ZO. Mr Negassi's fallback position is that at the very least it had become so by the time of the decision of the Court of Appeal in ZO and yet almost another year was to pass before the Secretary of State yielded on the grant of indefinite leave to remain. However, this gives insufficient recognition to the fact that the Secretary of State sought and obtained permission to appeal to the Supreme Court."
"87. In determining whether any infringement of Article 108(3) is sufficiently serious to give rise to a claim for damages under the Francovich principle, a multi-factorial assessment must be undertaken. The criteria to take into account and weigh up were summarised by the Court of Appeal in R. (on the application of Negassi) v Secretary of State for the Home Department [2013] EWCA Civ 151, [2013] 2 CMLR 45, at [14] as:
'…(1) the importance of the principle which has been breached; (2) the clarity and precision of the rule breached; (3) the degree of excusability of an error of law; (4) the existence of any relevant judgment on the point; (5) whether the infringer was acting intentionally or involuntarily or whether there was a deliberate intention to infringe as opposed to an inadvertent breach; (6) the behaviour of the infringer after it has become evident that an infringement has occurred; (7) the persons affected by the breach or whether there has been a complete failure to take account of the specific situation of a defined economic group; (8) the position taken by one of the Community institutions in the matter'.
88. In Byrne v Motor Insurers Bureau [2009] QB 66 at [45] Carnwath LJ noted that the 'sufficiently serious' test is not hard-edged. It requires a value judgment by the national court, taking into account the relevant factors.
89. Clearly, the State aid rules are important. There is also no discretion conferred on Member States in relation to compliance with them. As regards criteria (2) to (4), it is worth remarking that the limited period for which a tax is in force has not previously been held to be State aid. It is a novel argument, which was presumably not immediately apparent to anyone (bearing in mind that Credit Suisse's own claim was only made in August 2016). Although the BPT rules were announced with immediate effect, rather than after prior consultation, that was done for obvious reasons relating to forestalling risk, and there was a period following announcement when representations were considered and various changes were made to the scope of the rules to take those representations into account. This point was not raised, and the evidence indicates that it was only after the end date of 5 April had been confirmed, and the Finance Act 2010 had been enacted, that the four banks named at [22] above contacted HMRC to explain that they considered that BPT did not apply to them or had limited effect.
90. As regards criterion (5), whilst the legislation was obviously intentional, and resulted from deliberate policy choices, there was clearly no deliberate intention to infringe, and indeed advice was taken from experienced Counsel about the possible State aid risk in respect of other aspects of the rules, without the point being picked up. Importantly, there was clearly no intention to confer an advantage on Untaxed Banks, unlike, for example, the facts of R. v Secretary of State for Transport Ex p. Factortame Ltd (C-48/93) [1996] 1 CMLR 889, where the Government's intention was to protect fishing communities.
91. Mr Robertson submitted that Mr Peretz's advice (privilege in respect of which had been waived) was that the State aid position was not risk free, and therefore the proper course was to notify the Commission. I disagree. First, the point does not assist Credit Suisse because the risks being considered related to other aspects of the rules. Secondly, as confirmed by Ms McGeehan's evidence the Government takes a risk-based approach in relation to State aid, and will not notify a measure just because it is told that there is some element of risk. That seems to me to be a reasonable and proportionate approach to take where substantial risk is not identified. Ms McGeehan's recollection was that they had concluded based on the legal advice, and taking account of the rationale for the tax, that notification was not required.
92. As regards (7), there was no failure to take account of the position of the Taxed Banks: banks paying bonuses during the period of operation of BPT were the target of the measure. As regards (8), it appears that Credit Suisse have not complained to the Commission. In any event the Commission has expressed no view.
93. In all the circumstances I would conclude that, if there were State aid, there would be no 'sufficiently serious' breach to justify an award of damages for consequential losses, and would therefore decide Issue 4 in favour of HMRC."
"As can be seen from this, there are a number of elements to selectivity. In particular:
a) it must be determined whether the measure favours certain undertakings (or sectors) over others;
b) those undertakings must be in a 'comparable factual and legal situation';
c) whilst a tax advantage can constitute State aid, it will not do so if it results from a general measure applicable without distinction to all economic operators;
d) the starting point is to identify the ordinary or 'normal' tax system, and then determine whether the tax measure is a derogation from that system;
e) the question whether undertakings are in a comparable factual and legal situation must be determined in the light of the objective pursued by the ordinary tax system; and
f) even if a measure is a priori selective, there will be no State aid where the Member State shows that the differentiation in treatment flows from the 'nature or general structure' of the system."
"Despite the number of cases which have addressed the selectivity condition, it remains the most difficult of the State aid conditions to apply in practice, and the assessment of selectivity has thus been described as 'a difficult exercise with an uncertain outcome'. The basic problem is that not every measure that can be described as producing an advantage for one or more groups of undertakings over others is regarded as selective within the meaning of Article 107(1). Rather, the case-law of the Court has distinguished two particular situations where a measure with differential effects may nevertheless escape classification as aid on the basis of a selectivity analysis: the favoured undertakings may not be comparable, properly speaking, to the non-favoured group; and the different treatment may be justified by the nature and scheme of the relevant system. To address those issues a three stage analysis of selectivity has emerged for complex cases (particularly tax cases). First, the relevant reference system must be identified. Secondly, it must be established whether the measure is prima facie selective, in light of that reference system. The third question is whether the measure is justified by the nature of the scheme. … It should be emphasised, however, that it is not necessary to address all three stages in every case: in most cases, the prima facie selectivity of the measure will be obvious without having to look at a reference framework; and the 'nature or scheme' issue will only arise to the extent that this is advanced as a justification by the relevant Member State."
"54. … [I]t must be recalled that Article 107(1) TFEU prohibits State aid 'favouring certain undertakings or the production of certain goods', that is to say, selective aid (the judgment in Mediaset v Commission, C-403/10 P, EU:C:2011:533, paragraph 36).
55. It follows from the Court's settled case-law that Article 107(1) TFEU requires an assessment of whether, under a particular legal regime, a national measure is such as to favour 'certain undertakings or the production of certain goods' in comparison with others which, in the light of the objective pursued by that regime, are in a comparable factual and legal situation (the judgment in Mediaset v Commission, EU:C:2011:533, paragraph 36).
…
61. It follows [i.e. from the facts set out] that Black Cabs and minicabs are in factual and legal situations which are sufficiently distinct to permit the view that they are not comparable and that the bus lanes policy therefore does not confer a selective economic advantage on Black Cabs.
…
63. In the light of all the foregoing, the answer to the first and second questions is that the practice of permitting, in order to establish a safe and efficient transport system, Black Cabs to use bus lanes on public roads during the hours when traffic restrictions relating to those lanes are operational, while prohibiting minicabs from using those lanes, except to pick up and set down passengers who have pre-booked such vehicles, does not appear, though it is for the referring court to determine, to be such as to involve a commitment of State resources or to confer on Black Cabs a selective economic advantage for the purpose of Article 107(1) TFEU."
"Where a local authority ['LA'] that is a Waste Collection Authority ['WCA'] for the purposes of the Environmental Protection Act 1990 ['EPA 1990'] is making supplies of trade waste collection services to business customers (i.e. entities occupying non-residential property) in its area, are those supplies by the LA 'activities in which it is engaged as a public authority' within the meaning of section 41A(1) of the Value Added Tax Act 1994 ['VATA 1994'] and/or Article 13(1) of the Principal VAT Directive ['Article 13(1)' and 'PVD']?"
"TDC contends that the LAs engaging in the activity of trade waste collection services are not doing so 'as public authorities' within the meaning of Article 13(1). In accordance with the case law of the CJEU, that phrase has been interpreted to mean that the authority must be acting under what it has described as a 'special legal regime'. TDC contends that a LA which has chosen effectively to 'go into the business' of providing trade waste collection services, doing so in competition with private sector operators, is not thereby acting in its capacity as a local authority, but rather is engaging in an activity which is equally open to a private sector operator under the same (or essentially the same) legal conditions."
Warren J noted the differences between the positions of local authorities and commercial operators. At [35] he referred to evidence, which was not subject of challenge, from North Lincolnshire Council, that "the Council's commercial waste collection therefore sits within a framework of environmental obligations and objectives. The Council does not seek to make a profit and does not seek to increase waste collections. Rather, it encourages residents to reduce waste." At [63] he said: "A LA has wide social responsibilities which a private sector operator does not, responsibilities which include statutory duties. Its purposes in providing a particular service may be to fulfil those responsibilities. The service is not, in those circumstances a commercial purpose." At [97] Warren J said:
"… I consider that LAs have no power to provide commercial waste collection services on a commercial basis other than through a company. … If LAs are acting within their powers in providing directly, and not through a company, the services which they have, then the only available power is to be found in section 45(1)(b) EPA 1990."
At [102] he referred to the "essential element of the jurisprudence of the CJEU" that "the only criterion making it possible to distinguish with certainty between those two categories of activity [commercial activity and activity as a public authority] is the legal regime applicable under national law". The following parts of his judgment show material parts of his consequent reasoning:
"103. I have no doubt that section 45(1)(b) EPA 1990 is, or at least is capable of being, a 'special legal regime'. This is demonstrated by consideration of a LA which provides a commercial waste collection service only if requested to arrange for such collection by an occupier of premises and does so for a reasonable charge which, taking the provision of the service to occupiers generally, results only in cost recovery and no surplus. … Indeed, TDC itself does not deny that a LA that is actually arranging a collection in response to a request under section 45(1)(b), and then levying a charge under section 45(4) for the reasonable costs of that collection, may be 'acting as a public authority'.
104. Since it cannot be said that section 45(1)(b) is not ever capable of constituting a special legal regime, it must follow, even on TDC's case, that whether any particular LA is acting as a public authority will depend on the facts relevant to that LA. …
105. It is therefore impossible, even on TDC's case, to answer the preliminary issue with the answer 'No' (so that the VAT derogation does not apply) since there are at least some, and may be many, LAs who are not to be regarded as taxable persons in relation to supplies of commercial waste collection services. The answer, on TDC's case, would have to be 'it all depends'.
106. However, once it is accepted, as it must be, that section 45(1)(b) EPA 1990 is capable of constituting a special legal regime in some cases, then in my view any activities carried out by a LA pursuant to that special legal regime fall within the VAT derogation, subject always to the competition proviso. As the cases show, the only criterion making it possible to distinguish with certainty between activities as a public body and activities subject to private law is 'the legal regime applicable under national law'. I accept, of course, that not every activity carried on by a LA is subject to a special legal regime simply because some statutory basis has to be found for that activity. But once a legal regime has been identified as a special legal regime in accordance with the case-law, it would defeat the purpose of that clear criterion – namely to provide a clearly and readily applicable test – to require national courts to enter into a further enquiry as to whether particular activities within that legal regime are entitled to the benefit of the VAT derogation. …
…
109. The preliminary issue is to be answered in the sense that, where a LA is making supplies of trade waste collection services to business customers in its area and does so in the performance of its duties under section 45(1)(b) EPA 1990, the supplies are 'activities in which it is engaged as a public authority' within the meaning of section 41A(a) VATA 1994 and Article 13(1). Whether a LA is in fact providing its commercial waste collection services under section 45(1)(b) is a matter to be determined on the facts of each case."
The claim for declaratory and injunctive relief
"(1) A declaration that the Defendant has granted aid within the meaning of Article 107(1) TFEU to its Commercial Waste Business and some of its customers in the form of access to relevant employees, assets and contracts for disposal at below market value;
(2) A declaration that the aid referred to in (1) was implemented in breach of Article 108(3) TFEU;
(3) A permanent mandatory injunction requiring the Defendant to set its price for commercial waste collection services so as to cover the costs of providing those services on a standalone basis".
(There is also a prayer for "Further or other relief as the court deems fit", but no one has suggested any such further or other relief that might be awarded, and I can think of none, save possibly for declarations or injunctions in slightly different terms.)
Conclusion