UK: The Law of Unintended Consequences – The Risks Of Challenging Administrative Law Decision-Making

Last Updated: 29 July 2011
Article by Nicola Williams and Trish D'Souza

Originally published 21 July 2011

A recent case involving Tate & Lyle Sugars Limited ("Tate & Lyle") illustrates some of the potential unintended consequences of reopening administrative decision-making.  In this case, there was a planned review of a scheme that affected Tate & Lyle, but once this review was underway, the changes made were broader in scope than the Claimant had anticipated and  led to further changes being made which worked to the Claimant's detriment.

Background – the Renewable Obligations Certificate scheme

In this case Tate & Lyle were seeking to challenge the Secretary of State for Energy and Climate Change in relation to his decision to conduct a review of the bandings under the Renewable Obligations Certificate scheme ("ROC"). The Renewables Obligation ("RO") was introduced in the UK on 1 April 2002 and this imposes an obligation on licensed UK electricity suppliers to source a certain amount of their energy from renewable sources.  To demonstrate to Ofgem that they have met this obligation, licensed electricity suppliers must present ROCs. ROCs can be obtained either by the supplier generating electricity from renewable sources themselves, or by purchasing ROCs in the market from other renewable energy generators. If the suppliers fail to provide the required number of certificates, they must pay a "buy out price" with respect to the shortfall, which is akin to a fine.

In 2009 the Government adopted a system known as 'banding' which involves placing different technologies in different bands, in order to incentivise the use of particular renewable technologies. The rate of subsidy varies so that some technologies receive only 0.25 ROCs per megawatt hour (0.25 ROC/MWh), whereas others receive up to 2 ROC/MWh. The ultimate holder (normally the supplier) is paid a fixed sum of money for each ROC.

Tate & Lyle were a renewable energy generator involved in developing electricity and heat generated by "co-firing of biomass with combined heat and power" ("CoCHP"). This type of energy generates electricity partly from biomass, products of animal and plants – and partly from fossil fuels, where the fossil fuel and biomass have been burned in separate boilers.

Scope of the Early Review

The Secretary of State for Energy and Climate Change was due to review the banding provisions of the ROC Scheme in October 2010 but following the discovery of an error in the Government's costs assessment in the calculation of ROC/MWh, he ordered an early review of the banding. During the review, it was noted that wholesale electricity prices had increased substantially since the original assessment was made. As a result this improved the revenue position and therefore reduced the level of subsidy that would be necessary.

The previous error in the Government's costs assessment resulted in Tate & Lyle receiving 1.5 ROC/MWh. However, following the review and once the correct costs information was taken into account the Government decided that Tate & Lyle should only be entitled to 1 ROC/MWh. Tate & Lyle were concerned that other generators of renewable technology might receive a greater subsidy because the assessment of the appropriate banding for them were based on the older, incorrect information and not the new information that was applied in Tate & Lyle's case. The bandings for other technologies were not subject to an early review.

Tate & Lyle argued that the early review should have been limited to a substitution of the proper costs figure for that originally employed and no other factors, such as the bandings applicable to various renewable energy generators, should have been altered. Tate & Lyle further argued that fairness required that its technology should have been assessed in the same manner as other technologies that had not been subjected to an early review.

The Secretary of State argued that his error in the previous costs assessment triggered the need for the review but that it did not dictate the terms of the review. The purpose of the review was to assess the appropriate band for a particular technology in order to provide the requisite level of subsidy for that technology, and it was not appropriate to treat Tate & Lyle's case as exceptional. 

Tate & Lyle's challenge failed

Tate & Lyle's judicial review challenge failed in the High Court as the judge was concerned that if the Secretary of State was obliged not to take into account the new correct information, this might lead to Tate & Lyle being over-subsidised which would be a breach of the prohibition against competitive distortion attributable to state aid.

Tate & Lyle sought an appeal before the Court of appeal. The Court of Appeal, in considering what was fair and in the wider public interest, held that as a consequence of the review Tate & Lyle were not being treated unfairly. They were receiving the appropriate subsidy for someone incurring costs involved in developing CoCHP, it was just that they did not obtain the windfall they had expected from the increase in electricity prices which they would have received if no error had been made by the Government.

The Court also found that once the Secretary of State had decided to conduct a review it was open to him to approach the case by considering up-to-date materials. It was only after reviewing this that the Secretary of  State was able to determine that the 1.5 banding would constitute an unjustified subsidy for Tate & Lyle which was not in the wider public's interest. Therefore Tate & Lyle's appeal also failed.

Conclusion

This case highlights that when being asked to intervene in a Government decision to review the basis of a subsidy scheme the Court will consider what is fair in the circumstances and how this will impact both on the Claimant and the wider public interest. It is clear that the Court does not consider it is necessarily unfair for a party to be treated differently, if that party's interest would jeopardise the interest of the wider public. Therefore it was entirely reasonable for Tate & Lyle to receive a lower subsidy for its generation of renewable energies for its CoCHP technology even though the bandings for other technologies was not subject to an early review. For Tate & Lyle to receive the "erroneous" higher banding would be a detriment to the public interest. Claimants should take note that once a decision has been "unwound" by the Court, the entire process of decision-making has to be undertaken afresh but in light of the circumstances prevailing at the date of the fresh decision, and that, as with the review affecting Tate & Lyle, the outcomes of the new process may contain new content in unexpected ways. In Tate & Lyle's case, it was simply unfortunate that the outcome was not helpful to the Claimant's interests, but in many cases the process of going through the decision-making again may in fact lead to a more beneficial outcome for Claimants.

Nicola Williams
Partner
Tel: 0845 498 7231
nicolawilliams@eversheds.com

Trish D'Souza
Solicitor
Tel: 0845 498 7354
trishdsouza@eversheds.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.