Infinis Energy Holdings Ltd v HM Treasury & Anor

This is the judgment of the court to which all members of the court have contributed.

This is an appeal by Infinis Energy Holdings Ltd (“the Appellant”) from the dismissal by Jay J of an application by Infinis and Drax Power Ltd (Drax”) (together “the Claimants”) for judicial review of the removal, with effect from 1 August 2015, of the exemption for renewable source electricity (“the RSE Exemption”) from the Climate Change Levy (“the CCL”). Drax has not appealed.

The removal of the RSE Exemption was announced by the Chancellor of the Exchequer in his Summer Budget Statement delivered to the House of Commons on 8 July 2015 and took effect from 1 August 2015. The Judge described it as “an untrailed and extremely rapid change in the law”, mitigated only to a modest extent by a transitional period to allow suppliers to utilise existing stocks of Levy Exemption Certificates (“LECs”) relating to electricity generated prior to 1 August 2015.

The Summer Budget Statement had no immediate legal consequences. The decision which is challenged is the implementation of the removal of the RSE Exemption by a resolution of the House of Commons passed on 14 July 2015, which by virtue of section 1 of the Provisional Collection of Taxes Act 1968 had temporary statutory effect. In due course the removal of the RSE Exemption found its way into section 49 of the Finance (No 2) Act 2015, which came into force on 18^th November 2015 and amended paragraph 19 of Schedule 6 to the Finance Act 2000.

The Appellant is the leading independent renewable energy generator in the UK with a 5% market share as at the end of 2014. It is the largest landfill gas operator in the UK and one of the leading onshore wind generators in the country.

The decision is challenged on the grounds that it violates (1) the EU law principle of foreseeability, legal certainty and protection of legitimate expectations; (2) the EU law principle of proportionality; and (3) the Claimants' rights under Article 1 Protocol 1 of the European Convention on Human Rights (“A1P1”) as incorporated into domestic law by the Human Rights Act 1998. In broad terms, the Appellant challenges the method of implementation of the withdrawal of the RSE Exemption by its practical immediacy with only 24 days’ notice from 8 July 2015.

The background is set out with considerable detail and care in the judgment of Jay J. We gratefully take from his account the following summary, which is sufficient to understand the context for our judgment. For a fuller statement of the factual context, reference should be made to the judgment of Jay J.

Renewable sources of energy production do not entail significant production of carbon, carbon dioxide and related gases in the atmosphere.

In 2001 only 2.5% of the UK's electricity needs were derived from renewable sources. Under the Kyoto Protocol, which was ratified by the UK and the EU in 2002 and entered into force in 2005, the EU and its Member States are jointly responsible for achieving an emissions reduction target of 20% for the period ending in 2020.

EU Directive 2003/96/EC (“the ETD”) of 27 October 2003 was promulgated by the Council of the EU to achieve the objectives of the Kyoto Protocol. All Member States are required under the ETD to have an energy tax on energy products and electricity, imposed at a single rate at or in excess of a specified level. Pursuant to Article 15, Member States are permitted to apply exemptions or reductions in tax to, amongst other things, electricity of renewable origin.

EU Directive 2009/28/EC (“the RED”) promulgated on 23 April 2009 by the European Parliament and the Council of the EU imposes an obligation to ensure that, by 2020, at least 15% of all energy comes from renewable sources. One of the specified means of achieving this goal is through “support schemes”.

The CCL is an environmental tax levied on electricity, gas, solid fuels and liquefied petroleum gas supplied to business and the public sector. It was announced in the 1999 Budget, and it was formally introduced with effect from 1 April 2001 by operation of the provisions of section 30 of and Schedule 6 to the Finance Act 2000. The RSE Exemption was introduced at the same time. Although the CCL antedated the ETD, the negotiations on the ETD were well advanced whilst the CCL was being designed and the design therefore reflected the anticipated requirements of the ETD. The CCL remains an integral part of the UK's climate and energy change and energy policy framework and assists in meeting the UK's targets.

In considering the features of the CCL scheme, it is to be borne in mind that there are in effect three separate links in the relevant chain of supply: (1) from fuel supplier to electricity generator; (2) from electricity generator to supply company; and, (3) from supply company to business customer. Use by domestic consumers is excluded from the CCL. The present case is concerned with the second link.

Supplies by electricity utilities are subject to the CCL. They must register with HMRC, submit regular returns, and charge CCL to their customers when making relevant supplies. They are saved from this obligation when making exempt supplies.

The RSE Exemption from the CCL is effected through the LECs. Once electricity enters the distribution grid (upon generation), it becomes impossible to identify its origin, as an electron from a renewable source is indistinguishable from an electron from a “brown” source. LECs were introduced to help identify quantities of generated electricity that qualify for the CCL RSE Exemption, with one LEC being issued for each megawatt of qualifying electricity generated. The LEC is simply a registration/serial number that is allocated to the appropriate party on “issue” or “transfer” and then cancelled on redemption.

The supplier must have entered into a renewable source contract with its business customer. When the system was introduced, it was anticipated that LECs would follow the supply of electricity from the generator to the supplier, who would then redeem the LEC associated with it and claim the value of the exemption on behalf of their business customers. So, in the present case, pursuant to its contractual arrangements with the supply companies, the Appellant sold LECs to the supply companies, who would then redeem them against the renewable electricity supplied, and claim their value.

The practical reality, however, is that it is very difficult to prove that a particular LEC is other than related to a qualifying source, and consequently what may be described as “floating” certificates, namely those separated from the electricity to which they were originally associated, have been honoured by the authorities for the purposes of triggering the entitlement to the RSE Exemption. A collateral market in the trade of LECs has formed, with approximately 46% of the market being sold from generators directly to suppliers, 44% between vertically integrated suppliers and 10% from third-party or “over the counter” trades. This has led to a spreading of the financial benefits of the RSE Exemption between generator, supplier and customer.

The fiscal support being given to the generators is, therefore, indirect rather than direct in that the value of the LEC is received by the generators not in the form of a direct subvention but as additional consideration under the various contractual arrangements made with their suppliers. Owing to market forces, this additional consideration is lower than the LECs' true value (in 2015, in the region of £5.54 per certificate). For similar reasons, to the extent that LECs are being traded in the market, this would be reflected in a discount against their true value in order to reflect commercial risk.

The revenue yield from the main rates of CCL has historically been substantial, namely £471 million in 2014/15. The cost of the RSE Exemption for that year was £381 million. In June 2015 HMT estimated that the RSE Exemption would cost the Exchequer £485 million in 2015/16, and £535 million in 2016/17 (although these are indicative figures only).

As the cost of generating renewable energy decreases, so will the value of the RSE Exemption. In 2015 it was estimated that the value of the LECs would dwindle to zero by 2020.

The UK's renewables framework has developed substantially since the CCL was introduced, owing to technological, qualitative and quantitative enhancements.

A number of other schemes have been used to incentivise the use of renewable sources. They are relevant and can be briefly described as follows:

In very brief summary, the Appellant’s case is that (1) EU law is engaged; (2) the EU law principles of foreseeability, legal certainty and protection of legitimate expectations are violated in that a withdrawal without notice of the RSE Exemption would not have been foreseeable by a prudent and circumspect economic operator; (3) the practical immediacy of the removal of the RSE Exemption also violated the EU law principle of proportionality and so there was wrongful interference with the Appellant’s property rights protected under Article 17 of the EU Charter; and (4) there was a wrongful interference with the Appellant’s right to peaceful enjoyment of its possessions under A1P1 both in respect of its concluded contracts with suppliers as well as the future revenue stream which it had a legitimate expectation would continue until the expiration of a proper lead time for the withdrawal of the RSE Exemption, and so the Appellant is entitled to compensation so as to put it in the position it would have been had there been such a proper lead time.

The critical parts of the Judge’s admirably comprehensive and clear judgment may be briefly summarised as follows.

The Judge rejected (at para. [66]) the Respondents’ submission that EU law has no application to the RSE Exemption at all and that therefore the claim must fail because at the national level legitimate expectations cannot be raised against a sovereign Parliament. He concluded (at para [71]) that the amendments to para. 19 of Schedule 6 to the FA 2000 are within the scope of EU law.

He noted (at para [72]) that the EU law principle of legal certainty, and its corollary the protection of legitimate expectations, require that the application of rules of law must be foreseeable by those subject to them, and that a breach of the EU law principle of foreseeability would also be a breach of domestic law on account of the European Communities Act 1972.

The Judge rejected the Claimants’ case that the legal test as to whether there had been a breach of the EU law principles of legal certainty and protection of legitimate expectations in the present case is reducible to the question whether a prudent and circumspect economic operator could have foreseen the possibility of a without notice withdrawal of the RSE Exemption in all the circumstances.

Having reviewed the EU jurisprudence, the Judge said (at para [97]) that it is not possible to reconcile the various strands of jurisprudence emanating from the European Court of Justice. He said (at para [99]) that the Claimants could not succeed unless they established to his satisfaction that the Respondents promoted (the Judge’s emphasis) a legitimate expectation of there being no withdrawal of the RSE Exemption without a two year time limit (for which the Judge understood the Claimants to be contending), or equivalent fiscal benefit in lieu. He said (at para [100]) that what was required was an express assurance by the Government that any withdrawal of the RSE Exemption would be coupled with the specific two year lead time, or that that might irresistibly be inferred from what Government had said and done such that the giving of such an assurance might be implied; in other words, the giving of something tantamount to an express assurance.

The Judge found (at para [108]) that a prudent and circumspect operator, equipped with all the information, knowledge, experience and understanding reasonably to be attributed to such an individual, could not and should not have drawn the inference from the materials relied upon by the Claimants that the RSE Exemption would not be removed without a two-year lead time. The Judge concluded (at para [118]), accordingly, that the Respondents did not promote any legitimate expectation on the part of the Claimants to the effect that the RSE Exemption would not be withdrawn without providing a lead time of two-years, or equivalent value.

Although that was sufficient to dispose of the Claimants’ first ground, the Judge went on to consider two subsidiary matters. First, he accepted the argument of counsel for the Respondents that it was incumbent on the Claimants to prove that they relied on any promise or assurances given by the Government. He said (at para [122]) that the Claimants would have surmounted that hurdle of reliance (had their case been successful at all anterior stages), having regard to the fact that their business plans reflected the continued revenue stream, the sums of money involved were plainly substantial and the Claimants’ witnesses had clearly explained how their respective companies relied on the maintenance of the status quo in their short-term commercial decisions.

Secondly, the Judge said (at para [123]) that, even if a legitimate expectation can be invoked, there must be circumstances in which the private rights, including the legitimate expectations, of economic operators should succumb to the wider public good, provided that this is strictly required by the objectives to be attained. The Judge considered (at para [124]), however, that the burden of justification would be high; and the issue was whether the Government could demonstrate that the legislative amendment was required (the Judge’s emphasis) with immediate effect notwithstanding that entrenched private interests would be harmed. He said that was not the exercise that had been carried out by the Respondents.

Turning to the Claimants’ second ground, proportionality, the Judge said (at para [128]) that the concept of proportionality is that enshrined in Article 5(4) of the Treaty on European Union and Article 52(1) of the EU Charter of Fundamental Rights. The Judge proceeded to consider this ground on the premise that his rejection of the Claimants’ first ground was correct in law.

He said (at para [130]) that it was common ground between the parties that the relevant principles were those expressed and explained by the Supreme Court in R (on the application of Lumsdon) v Legal Services Board [2015] UKSC 41, [2016] AC 697. Having regard to all the evidence, the Judge concluded (at para [143]) that there was no evidential basis on which to conclude that this had been a poorly conceived, rushed decision made largely on political grounds and without proper reference to the merits.

The Judge summarised the Respondents’ reasons for withdrawing the RSE Exemption as including the following: (1) Government has been moving away from a system of indirect to direct support, which is more efficient and cost-effective; (2) if the RSE Exemption did not represent good value for money, logic would not (and did not) require its pro tanto substitution elsewhere; (3) in any event, removal of the RSE Exemption left domestic generators in a position in which they are still in receipt of very significant incentives and support, far outweighing its lost value; (4) the RSE Exemption benefited foreign generators; (5) expanding the application of the CCL maintains the price signal for energy efficiency, encouraging the efficient use of energy from both renewable and non-renewable sources; (6) the impact on the Claimants, and others, was specifically considered, both before and after 8 July 2015, but it was decided that it was outweighed by the public interest and the maintenance of the other valuable benefits to which the Claimants remained entitled; (7) specific consideration was given to the issue of transitional relief, and/or a lead time but the lost savings to the Exchequer were too large, the policy objectives for the withdrawal were too pressing and would have been undermined by delay, and there would have been a risk of forestalling.

The Judge concluded (at para [149]) that the Respondents had advanced a reasonably compelling case that the reform was justified in the public interest, notwithstanding its evident harm to the private interests of the Claimants and that, within the appropriate margin of discretion, the Respondents’ reasonably compelling case was sufficient for the Respondents’ purposes.

In reaching that conclusion, the Judge rejected the suggestion of counsel for the Claimants that the Respondents could remove foreign generators from the scope of the RSE Exemption without the EU Commission objecting on the basis that this was State aid, and that this would clearly have been a less onerous means of achieving the Respondents’ stated objectives. The Judge stated (at para [150]) that he was unable to conclude that the Respondents had exaggerated the risk that the Commission would object that it was State aid. He considered that, at the very least, the lengthy State aid notification procedure would have resulted in unacceptable delay, such as to undermine the strong policy reasons for effectuating the reform with close to immediate effect. Accordingly, he found that the Respondents had not acted disproportionately in that regard.

Turning to the third ground, A1P1, the Judge considered that this added little to the second ground. He briefly addressed three points. First, he said that, in the circumstances of the present case, the breadth of the margin of appreciation is similar for both the EU proportionality analysis as well as under A1P1. Secondly, he said that the A1P1 rights in issue include the Claimants’ concluded contracts, as well as the marketable goodwill of the Claimants’ businesses linked to such contracts, but in principle did not include the hope of future contractual income. Thirdly, the Judge rejected the submission of counsel for the Respondents that the existence of change of law clauses in the Claimants’ contract meant that they could not demonstrate an interference with their contractual rights for A1P1 purposes. Having made those three points, the Judge said (at para [157]) that his conclusion on the Claimants’ second ground must equally apply to the Claimants’ third ground.

Only Infinis has appealed the Judge’s dismissal of the claim for judicial review.

The grounds of appeal are that the Judge erred in law in concluding that the decision to withdraw the RSE Exemption did not violate (1) the EU principle of foreseeability, legal certainty and protection of legitimate expectations; (2) the EU law principle of proportionality; and (3) the Appellant’s rights under A1P1, including their legitimate expectations.

The Respondents have served a Respondents’ Notice to uphold the Judge’s order on a number of additional grounds. In effect, the Notice seeks to challenge all his findings and conclusions adverse to the Respondents, other than his conclusion that EU law is applicable.

There is no need to set out here the detailed arguments of the Appellant and the Respondents. We shall state and consider them in the following discussion of the merits of the appeal.

Legitimate Expectation

It is common ground that EU law contains principles of legal certainty and protection of legitimate expectation, which also impose certain standards of foreseeability in the application of the law. There is considerable authority to this effect. The central issues in dispute between the parties are as to what standards of foreseeability and legal certainty EU law requires in the context of changes to the tax regime and what requirements have to be satisfied to generate a legally protected legitimate expectation.

Mr Fordham QC for the appellant submits that by the very fact of the relevant legislation providing for the RSE Exemption being in place, especially when it had been maintained for many years, the Appellant was led to expect and encouraged to plan its business on the footing that it would continue in place and that reasonable notice of not less than one complete financial year would be given before it was removed. The Respondents must have contemplated that renewable energy suppliers would plan their business and make investment decisions based on the expectation of cash flow from sale of the LECs issued under the RSE Exemption scheme and would enter into contracts with supply companies with financial terms structured around the transmission of LECs in association with the supply of electricity. Mr Fordham submits that in the present context these features were sufficient to generate a protectable legitimate interest of the Appellant and to bring its complaints within the scope of the principles of legal certainty and foreseeability.

Mr Eadie QC for the Respondents, on the other hand, submits that in the context of a national tax code set by the legislature of a Member State, these features are insufficient to give rise to a legitimate expectation or to bring the Appellant’s case within the scope of the principles of legal certainty and foreseeability. As a general principle, the democratic legislature is entitled to change tax law with prospective effect, as here, without giving advance notice. It has responsibility for working out from time to time how best to raise taxes in order to meet public expenditure requirements and what social objectives should be promoted by use of tax incentives and penalties. All citizens understand this. Before a legitimate expectation could arise to prevent a change in tax legislation or to require a notice period to be given in advance of such a change being implemented, there would need to be conduct by the relevant public authorities involving specific assurance being given to that effect; and there was an absence of any such conduct in this case.

The Judge reviewed European authority and concluded at para. [97] - “it is not possible to reconcile the various strands of jurisprudence emanating from the CJEU.” We do not agree with this assessment. On the contrary, we accept the submission of Mr Eadie that there is a clear and consistent line of EU authority that what is required for a protected legitimate expectation to arise in a context such as the present is the promotion by the public authority in question by means of the giving of a precise, unconditional and unambiguous assurance, whether by words or conduct, of an expectation as to how it will behave in future. We further agree with Mr Eadie that this same standard governs the application of the related principles of legal certainty and foreseeability. Otherwise, EU law would not be coherent.

In reviewing the European authorities in his reply, Mr Fordham sought to suggest that there are different and distinct tests between, on the one hand, an administrative act which is challenged and the change to a rule of law, such as that in the present case. In the former context a clear and precise assurance is required for there to be a legitimate expectation, but in the latter, so he contends, the test is whether a prudent and circumspect economic operator could have foreseen the possibility of the change. We do not accept the submission that there is such a distinction to be drawn. The EU authorities set out a uniform set of rules governing the actions of EU institutions and public authorities of Member States, whether they might be classified as being in the administrative sphere or in the legislative sphere. EU law controls both administrative action and legislative action, so it would perhaps be surprising if that were not the case. Indeed, we agree with Mr Eadie that, if anything, one would expect the requirements governing constraints upon exercise of democratic legislative power by a Member State to be even more difficult to satisfy than in relation to the mere exercise of administrative power. The formulations used in the authorities generally refer simply to “measures” taken by relevant authorities, whether administrative or legislative in nature.

In our view, the EU authorities speak with one voice. In Case C-265/85 Van den Bergh en Jurgens BV v Commission [1987] ECR 1155, the ECJ (as it then was) dismissed a claim of breach of the principle of protection of legitimate expectations made against the Commission in relation to changes it introduced in the Community’s subsidy scheme for butter on the basis that: “[I]t has not been shown that the Commission gave an undertaking, before the adoption of the contested measure, never again to have recourse to schemes such as the Christmas butter scheme” (para. 45, emphasis supplied).

In Case T-70/99 Alpharma Inc v Council [2002] ECR II-3495, the Court of First Instance said this: “[A] person may not plead a breach of [the] principle [of the protection of legitimate expectations] unless he has been given precise assurances … Likewise, where a prudent and discriminating trader could have foreseen the adoption of a Community measure likely to affect his interests, he cannot plead that principle if the measure is adopted” (para. 374, emphasis supplied).

Again, in Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport v Ministero del Commercio con l’Estero [2004] ECR I-6911, the ECJ said: “Any trader on the part of whom an institution has promoted reasonable expectations may rely on the principle of the protection of legitimate expectations. However, if a prudent and circumspect trader could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot plead that principle if the measure is adopted” (para. 70, emphasis supplied). This statement was repeated in similar terms in Case C-310/04 Spain v EU Council [2006] ECR I-7285 at para. 81, where Di Lenardo was cited.

In Case C-47/07 P Masdar (UK) Ltd v Commission of the European Communities [2009] 2 CMLR 1, the Grand Chamber of the CJEU emphasised the same point at para. 81 (“… settled case law according to which a party may not plead breach of [the] principle [of the protection of legitimate expectations] unless it has been given precise assurances by the administration” - emphasis supplied) and again at para. 86 (there cannot be reliance on “vague indications to claim …a legitimate expectation … [but] a legitimate expectation can arise only from precise assurances …” – emphasis supplied).

Both sides made particular reference to Case C-201/08 Plantanol GmbH & Co. KG v Hauptzollamt Darmstadt [2009] ECR I-08343 (Third Chamber). In our view, the principles identified in Plantanol are fully in line with the statements in the other authorities to which we have referred.

At para. 44 the Chamber said:

“It is for the referring court alone to determine whether … [national] rules [which are intended to transpose the provision of Directive 2003/30 and 2003/96 into the domestic legal order] comply with [the] principles of legal certainty and protection of legitimate expectations … the Court, in a reference for a preliminary ruling … being solely competent to provide the national court with all the criteria for the interpretation of Community law which may enable it to determine the issue of compatibility.”

The Chamber proceeded to provide guidance. At para 46 it said: “the principle of legal certainty, the corollary of which is the principle of the protection of legitimate expectations, requires, on the one hand, that rules of law must be clear and precise and, on the other, that their application must be foreseeable by those subject to them.” In the present case, both the old legislative rules which set out the RSE Exemption and the new ones which removed it were clear and precise and, when in place, their application was foreseeable by those subject to them. The question which arises is whether the Respondents and, ultimately, Parliament were obliged to give notice of a transition between the two clear, precise and foreseeable regimes.

The relevant guidance so far as that issue is concerned is contained in para. 53 of the judgment. That contains a statement of the principle of the protection of legitimate expectations which is entirely consistent with the line of case law set out above, and indeed cites Di Lenardo and Spain v EU Council as authority, as follows:

“53.

It is clear from the Court's settled case-law that any economic operator on whose part the national authorities have promoted reasonable expectations may rely on the principle of the protection of legitimate expectations. However, where a prudent and circumspect economic operator could have foreseen that the adoption of a measure is likely to affect his interests, he cannot plead that principle if the measure is adopted. Furthermore, economic operators are not justified in having a legitimate expectation that an existing situation which is capable of being altered by the national authorities in the exercise of their discretionary power will be maintained (see, to that effect, in particular, Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport [2004] ECR I6911, paragraph 70 and the case-law cited, and Case C-310/04 Spain v Council [2006] ECR I7285, paragraph 81).” (emphasis supplied)

In our judgment, the Appellant in the present case cannot bring itself within the principle of protection of legitimate expectations according to this test. The Respondents had made no promise and given no assurance that the RSE Exemption would be maintained indefinitely, nor that it would be subject to the giving of a period of notice before being changed. In the context of establishing and changing the rules of a national tax regime, a prudent and circumspect economic operator would appreciate that the tax authorities and the national legislature might change the tax code without giving notice. They are entitled to do so, as it is their function in a democratic society to manage the public finances by weighing up all the competing demands on the public purse against all the possible, conflicting ways of raising tax revenue and adjusting the elements on both sides of the equation as they see fit, in accordance with the policy they think should be pursued. Further, the Appellant was not entitled to expect that the existing situation involving having the RSE Exemption in place would continue, because, absent any precise assurance given to the contrary, the tax authorities and Parliament had a general discretion to alter the tax regime as they saw fit.

The Judge thought that there was a tension between para. 53 and para. 57 of the judgment in Plantanol. We do not agree. In para. 57, the Chamber said that it was for the national court to determine whether a prudent and circumspect economic operator could have foreseen the possibility of such a withdrawal “in a context such as that of the main proceedings”. Similar language is used in para 60. The context in Plantanol was that five months before the withdrawal of the relevant tax exemption or reduction scheme for biofuels such as the product at issue in the main proceedings, the German legislature, by the Law on the Taxation of Energy, in the version which entered into force on 1 August 2006, confirmed 31 December 2009 (the date previously set by legislation enacted in December 2003) as the date at which the scheme would end, although providing at the same time that the withdrawal in respect of products which, like the one at issue, were composed of vegetable oils would be gradual, with the rate of exemption being reduced in stages between 1 January 2008 and the end of 2012. But contrary to the apparent precise assurance about the date to which the exemption or reduction would continue, as given on the face of the legislation, the exemption was in fact removed without any significant warning with effect from 1 January 2007 by a legislative amendment made on 18 December 2006. This feature of the case was emphasised by the Chamber, including in particular at para. 51. The Chamber said at para. 65 that it was for the national court to assess the extent to which the confirmation in the middle of 2006, which reflected the wish of the national legislature, to maintain the tax exemption system at issue in force could constitute an indication, for a prudent and circumspect operator, that the scheme in question would continue to apply at least until the expiry date initially laid down, namely 31 December 2009, or even, in part, until 2012. There were other circumstances which suggested that perhaps it might not, but it was for the national court to make an overall assessment.

We reject Mr Fordham’s submission, focusing on para. 57, that the case introduces a different test for legitimate expectation where there is a change in legal rules, which focuses solely on whether the possibility of change could have been foreseen by a prudent and circumspect economic operator without it having to be shown that any precise assurance had been given by the relevant public authorities. The judgment is entirely consistent with the previous line of authority which we have set out above. It evidences neither expressly nor implicitly any intention to deviate from that line of authority, the effect of which is that the principles of legal certainty, foreseeability and protection of legitimate expectations (1) are never infringed by a change, the possibility of which could have been foreseen by a prudent and circumspect economic operator, and (2) can only be invoked if the authority in question has promoted a reasonable expectation that there will be no change by precise assurances given to that effect. Indeed, it seems to us that these points run together: one should test whether precise assurances have been given that there will be no change or that a period of notice will be given before there is a change by looking to see whether a prudent and circumspect economic operator would regard whatever has been said or done by the relevant authorities as precise assurances in the requisite sense.

ADJ Tuna Ltd v Direttur ta-Agrikoltura u s-Sajd [2011] ECR I-1655 makes clear that the need is indeed for these requirements to be satisfied, at paras. 71 and 72:

“71.

It should be noted that the right to rely on the principle of the protection of legitimate expectations extends to any individual in a situation in which it appears that the Community administration has led him to entertain reasonable expectations (see, to that effect, Case 265/85 Van den Bergh en Jurgens and Van Dijk Food Products (Lopik) v EEC [1987] ECR 1155, paragraph 44, and Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport [2004] ECR I-6911, paragraph 70).

72.

In whatever form it is given, information which is precise, unconditional and consistent and comes from authorised and reliable sources constitutes such assurances (see Case C-537/08 P Kahla Thüringen Porzellan v Commission [2010] ECR I-0000, paragraph 63). However, a person may not plead breach of that principle unless he has been given precise assurances by the administration (see Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 v Commission [2006] ECR I-5479, paragraph 147, and judgment of 25 October 2007 in Case C-167/06 P Komninou and Others v Commission, paragraph 63)” (emphasis supplied).

In Case C-681/11 Bundeswettbewerbsbehorde v Schenker & Co AG [2013] 5 CMLR 25 the Advocate General and the Grand Chamber of the CJEU repeated the need for precise assurances and confirmed that vague assurances are not enough: see footnote 53 to para. 91 of the Opinion of the Advocate General and para 41 of the Court’s judgment.

The other case on which Mr Fordham particularly relies is Case C-98/14 Berlington Hungary v Magyar Állam (judgment of 11 June 2015). Mr Fordham focused on one part of the complaints in that case which concerned the sudden introduction of a five-fold increase in the rate of tax to be paid on slot machines operated in amusement arcades, although the tax regime applicable to that activity had not been the subject of any legislative change for nearly 20 years. The applicants complained that because of a lack of an appropriate adaptation period, operators who were planning to open new amusement arcades found themselves unable to make the necessary arrangements in time to defer the implementation of their project or to abandon it. It was claimed that the increase in the amount of taxes in respect of the operation of slot machines in amusement arcades also compelled many operators to cease that activity. Mr Fordham’s suggestion was that, because this aspect of the judgment appeared to be concerned with a simple change of tax rates, introduced without warning, in a context where no precise assurances had been given by the tax authorities and because the Court referred this aspect of the case back to the national court to make an assessment (see paras. 82 and 83 of the judgment), it must follow that the Court intended to introduce the wider notions of legal certainty, foreseeability and legitimate expectations for which he contended.

We reject this submission. There is quite simply no statement of law in Berlington which indicates in any way a deviation from the consistent line of authority to which we have referred. Plantanol is cited twice (in paras 79 and 80). The fact that the Court did not dismiss the application is of no significance since, as was made clear in the judgment, as it had been in Plantanol, it was for the national court alone to decide whether the national legislation complied with the principles of legal certainty and the protection of legitimate expectations, the ECJ’s competence being limited to providing the referring court with the criteria for the interpretation of EU law which would enable it to determine the issue of compatibility (see para. 80, and Plantanol, para 45). Paragraph 83 of the judgment cannot bear the weight placed on it by Mr Fordham. All that the Court did there was to send the case back for investigation by the national court to see whether certain features appearing from the case file, in particular the fact that the tax exemption had been maintained in place for 20 years, might reflect some underlying promises or assurances by the national authorities which could satisfy the requirements of the EU principles which the applicants sought to rely upon, in accordance with the statements in the CJEU’s case-law set out above.

That Plantanol did not establish any different test is also clear from Case T-79/13 Accorinti v ECB (judgment of 7 October 2015), in which the usual conditions necessary for invoking the principle of the protection of legitimate expectations were set out and the Court referred to, among other cases, Plantanol, as follows:

“75.

The Court has repeatedly held that the right to rely on the principle of the protection of legitimate expectation extends to any person in a situation where an EU authority has caused him or her to have justified expectations. Nevertheless, the right to rely on that principle requires that three conditions be satisfied cumulatively. First, precise, unconditional and consistent assurances originating from authorised and reliable sources must have been given to the person concerned by the EU authorities. Second, those assurances must be such as to give rise to a legitimate expectation on the part of the person to whom they are addressed. Third, the assurances given must be consistent with the applicable rules …” (emphasis supplied)

76.

Furthermore, it should be borne in mind that while the possibility of relying on the protection of legitimate expectations, as a fundamental principle of EU law, is available to any economic operator whom an institution has caused to have justified expectations, the fact remains that, where a prudent and circumspect economic operator is able to foresee the adoption of an EU measure likely to affect his interests, he cannot rely on that principle if the measure is adopted. Nor can economic operators have a legitimate expectation that an existing situation which is capable of being altered by the EU institutions in the exercise of their discretion will be maintained, especially in an area such as monetary policy, the subject-matter of which is constantly being adjusted according to variations in the economic situation (see, to that effect and by analogy, judgments of 10 September 2009 in Plantanol, C-201/08, ECR, EU:C:2009:539, paragraph 53 and the case-law cited; in AJD Tuna, cited in paragraph 75 above, EU:C:2011:153, paragraph 73; …)”

Finally, the established test has been confirmed recently yet again in Case C-526/14 Kotnik and others v Drzavni zbor Republike Slovenije, CJEU Grand Chamber, judgment of 19 July 2016. As Mr Eadie submitted, the statements in this case, post-dating the judgments in Plantanol and Berlington, show that the CJEU did not intend in those judgments to indicate any departure from the well-established approach laid down in the case-law referred to above.

In his Opinion, Advocate General Wahl clearly tied together the two limbs of the test in para. 68, where he said that: “Failing any clear and express engagement by the Commission, a prudent and circumspect investor cannot have any expectation that an existing situation which is capable of being altered by the competent authorities in the exercise of their discretionary powers will be maintained”; and he cited Plantanol as the authority for this proposition.

The Court itself set out the conventional test at para. 62 of its judgment:

“62.

As regards, first, the principle of protection of legitimate expectations, in accordance with settled case-law, the right to rely on that principle presupposes that precise, unconditional and consistent assurances, originating from authorised, reliable sources, have been given to the person concerned …” (emphasis supplied)

Where a Member State is accorded a wide discretion under EU law, for example in relation to fiscal matters which are constantly being adjusted to reflect changes in economic and other circumstances, the mere fact of a change after a long period without change cannot of itself give rise to a breach of a legitimate expectation based on EU law: Joined Cases C-487-01 and C-7/02 Gemeente Leusden v Staatssecretaris van Financiën [2004] ECR I-5337, at para. 81; Di Lenardo at para. 70; Plantanol at para. 54; Accorinti at para. 76; Kotnik at para. 66.

Accordingly, although we differ from the Judge somewhat in our analysis of the European authorities, in our judgment the Judge was correct to say at para. [100] that what is required in order for the Appellant to bring itself within the principles of legal certainty, foreseeability and protection of legitimate expectations is “either that the Government has given an express assurance that any withdrawal of the RSE Exemption would be coupled with this specific lead time [2 years], or that this may irresistibly be inferred from what the Government has said and done such that the giving of an assurance may be implied: in other words the giving of something tantamount to an express assurance.”

Our rejection of Mr Fordham’s principal submission that the Judge erred in identifying the test to be applied leaves the Appellant in difficulties so far as the facts of the case are concerned. Having directed himself properly on the law, the assessment of the facts was primarily for the Judge. He cannot be said to have erred in his assessment that, on the facts, no express assurance or implied assurance of the requisite precision could be identified as having been given.

In relation to the present case, Mr Fordham accepted at the hearing of the appeal that it was foreseeable that there might be a substantive change in the CCL and RSE Exemption regime. However, he submitted that it was not foreseeable that this would be introduced with negligible notice. He contended that a notice period was reasonably to be expected.

The case advanced below seems to have been variably that the legitimate expectation was of a notice period of not less than 2 years (see, for example, para. 19 of the Grounds for Judicial Review, the Appellant’s calculation of loss, and para. [101] of the judgment) or of a slightly shorter period ending in April 2017 (in oral submissions to the Judge). In the Appellant’s skeleton argument in this court the Appellant again asserts that two years was the minimum permissible lead time for the introduction of the change. In his oral submissions in this court, however, Mr Fordham said that the lead time should have been not less than a complete fiscal year. Like the Judge, we think that this lack of consistency in formulating the asserted notice period is revealing, indicative as it is of an absence of any clear understanding on the part of the Appellant as to how an admittedly permissible change in the tax regime might be introduced. It also reflects the absence of any clear and precise assurance given by the tax authorities about what might happen with the CCL and the RSE Exemption in the future.

On the facts, there was no precise assurance given by the tax authorities or contained in the pre-withdrawal legislation that the RSE Exemption would not be withdrawn with immediate effect. The present case is therefore clearly different from Plantanol, which was concerned with a situation in which there was (arguably) such a precise assurance set out on the face of the legislation in issue.

The Appellant makes the broad submission that, until the peremptory withdrawal of the RSE Exemption, there had been a settled practice in this area of giving warning and lead times of at least two years before changes in the CCL regime and in other similar renewable energy schemes were introduced, thereby creating an expectation of a stable and durable statutory scheme in relation to the maintenance of the RSE Exemption. Mr Fordham pointed out that the discounted rates of CCL for high usage were always set with a full financial year’s notice, and that other changes to the tax scheme were similarly made with not less than a full financial year’s notice. He also relied on various public notifications, for example in 2010, indicating that the RSE Exemption was going to continue.

In fact, however, there was not a consistent practice regarding periods of notice for introduction of changes in renewable subsidy regimes. One regime particularly relied upon by Mr Fordham as analogous was that in relation to the ROCs. But the documentation in relation to that regime shows that changes in subsidiary rates for new installations were introduced with lead times much less than a full fiscal year.

Further, despite all the outward signs that the ROC scheme would close to new generating capacity in 2017, the Department for the Environment and Climate Change (“DECC”) indicated in a consultation paper published on 13 May 2014 that the closure date for new solar farms would be on 1 April 2015. That indication was carried through in practice. That gave, therefore, less than the full financial year’s notice asserted in the present case. The Court held that there was no legitimate expectation that the Government would not change its policy with regard to the March 2017 closure date, and thereby impact those who had made investments on the basis of that date, and a challenge by judicial review was rejected: Solar Century Holdings Ltd v Secretary of State for Energy and Climate Change [2016] EWCA Civ 117.

More fundamentally, none of the matters of practice relied upon by the Appellant is sufficient to amount to a clear, precise and unconditional assurance as to the lead time for any changes to the CCL and RSE Exemption regime.

The Appellant relies on the removal of the CHP Exemption, which was announced by the Chancellor in March 2011 and removed in April 2013. As the Judge pointed out at para. [117], however, this does not assist the Appellant since the exemptions are significantly different in a number of respects.

Mr Fordham relied on the fact that when assessing the expected revenues of renewable electricity generators in the context of other support schemes the DECC made assumptions as to the value of the LECs that are based on the continuity of announced Government policy: (1) the banding review for the ROC scheme in July 2012 for the period 1 April 2013 to 31 March 2017 assumed that the income stream from the RSE Exemption would be continuing; and (2) this income was also factored into the fixing of the strike price for the CfDs for the period to 31 March 2019. The ROC subsidy bands and the strike prices would have been commensurately higher had the RSE Exemption not been available.

Those assumptions were made, however, and had to be made in the modelling because there had been no announced policy change. We agree with the Judge’s statement at [109] that:

“the prudent and circumspect operator would and should have understood the modelling to have been undertaken, perforce, on the premise of current Government policy, and as it happens then current power prices, with no inferences capable of being drawn one way or another as to the future direction of policy. This was the only honest, straightforward basis on which such modelling could have been undertaken, and that too would and should have been understood.”

Certainly, this feature of the modelling did not constitute a clear, precise and unconditional assurance that the RSE Exemption would not be withdrawn without notice, let alone that any particular period of notice would be given. In that regard, it is revealing that it is not the Appellant’s case that the effect of the modelling and assumptions made in the modelling was that the RSE Exemption could not be withdrawn before 31 March 2017 or 31 March 2019, even though the modelling showed it continuing through until then. Various other points were made by the Respondents on the modelling and on the assumptions and qualifications made in relation to worked examples reflecting the modelling, but it is not necessary to refer to them.

In the absence of any precise assurance, it was always inherently foreseeable that there was the possibility of an immediate withdrawal. The RSE Exemption was part of a fiscal regime and, like all fiscal regimes, subject to change in the discretion of the Government of the day and Parliament in the light of current economic conditions. Mr Nico Helsop, the deputy Director of the Energy and Transport Tax team in HM Treasury, has given several examples in his second witness statement of changes by Government to tax regimes at very short or no prior notice.

Proportionality

Proportionality is a general principle of EU law. It is enshrined in Art 5(4) of the Treaty on European Union (TEU):

In R (Lumsdon) v Legal Services Board [2015] UKSC 41, [2016] AC 697, Lord Reed and Lord Toulson JJSC, with whom the other members of the Supreme Court agreed, explained (at paras. [24] and [25]), referring to Article 5(4) TEU and Article 3(6) EU, that proportionality is a general principle of EU law but (citing R (British Sugar plc) v Intervention Board for Agricultural Produce (Case C-329/01) [2004] ECR I-1899, paras. 59-60) it only applies to measures interfering with protected interests, including the fundamental freedoms guaranteed by the EU Treaties.

The Appellant relies upon what it says is interference with its protected interest in the form of the right to property set out in Article 17 of the EU Charter of Fundamental Rights. Article 52 of the Charter sets out the scope of application of the rights in it. The Appellant says that it has relevant property rights in the form of already concluded contracts for the supply of electricity by it to supply companies, under which part of the consideration was to be by way of payment for LECs which it would transfer to them. The Appellant also says that it has a relevant legitimate expectation that the RSE Exemption would not be withdrawn and that this also constitutes property for the purposes of Article 17.

We have already dismissed the Appellant’s appeal on the legitimate expectation point. It is an open question whether the mere termination of a Government scheme operating by way of the issue of LECs which might be traded in the market constitutes an interference with a contract under which part of the consideration payable would only be due if a LEC were transferred. We heard little argument on this point and were not taken to authority on it. It is unnecessary for us to decide it, however, as we dismiss the appeal against the Judge’s ruling on proportionality in any event.

The Supreme Court gave this guidance on the EU principle of proportionality in Lumsdon at para. [33]:

It is common ground that, for the purposes of the present dispute, the Appellant's rights under Articles 17 and 52 of the Charter are in all material respects similar to its rights under A1P1 (on which the Appellant seeks to rely for its damages claim), and that, even though the precise approach of the court to the issue of proportionality may not be identical (see Lumsdon at para. [26]), if the Appellant fails under Article 17 of the Charter it cannot succeed under A1P1: cf Breyer Group plc v DECC [2015] EWCA Civ 408, [2015] 1 WLR 4559.

On the issue of proportionality the focus of the Appellant's argument was on the practically immediate effect of the withdrawal of the LEC scheme (although, to be entirely accurate, an HMRC policy paper was published on 8 July 2015 announcing the removal of the RSE Exemption at midnight on 31 July 2015, subject to a transitional period for exempt RSE generated before 1 August 2015). The Appellant accepts that the Government could properly withdraw the RSE Exemption, but challenges the method of the implementation of the decision, i.e. that it was done with almost no notice. The Appellant's case is that, to succeed on proportionality, it does not have to specify a minimum period of notice but, if it had to, Mr Fordham submitted in line with his case on legitimate expectation that the period of notice should have been not less than one full tax year based on the previous pattern of conduct by the Government.

The decision of the Judge on proportionality was a multi-factorial assessment which involved no error of principle and was not plainly wrong. Accordingly, this court should not interfere with it. In any event, in our view it was correct.

The context is that the Appellant has failed to establish a legitimate expectation that the RSE Exemption would remain or that it would remain for any particular period or that any particular period of notice of its withdrawal would be given. This is, as the Judge noted at para. [141], an important part of the context.

The evidence clearly shows that the withdrawal was pursuant to a legitimate object, in that, following the General Election on 7 May 2015, the Government considered, as it was entitled to do, that direct support of electricity generators using renewable energy was a more efficient and cost effective way of incentivising the generation of energy using renewable power and achieving national targets for green energy than the RSE Exemption. The RSE Exemption applied a flat rate, the benefit of which was spread across the supply chain (being shared between the customer, supplier and generator) and it was comparatively crude, in that it did not apply different rates to different types of technology so as to provide more targeted incentives for better forms of energy generation.

By contrast the CfD and FITs schemes are subsidies which go directly to generators and so incentivise production rather than consumption; and the ROC scheme acts in a similar way in that it puts a direct obligation on suppliers to source a defined amount of renewable source energy. The subsidy delivered under the ROC scheme differentiates between different forms of generation, and is thus more targeted and represents better value for money.

The Appellant emphasises that the LECs were also a feature of the modelling for the ROC scheme and CfDs, as referred to above. They were, however, only a minor proportion of the benefit under those schemes, and their provision alongside those schemes did not mean that withdrawal of the RSE Exemption could not properly be regarded as a desirable objective. The fact is that, at the time of its withdrawal, the RSE Exemption was a relatively small part of the overall framework of incentives for the generation of renewable energy and was diminishing in value as more renewable electricity was being generated.

At paras. [134] to [137] the Judge sets out the Claimants' criticisms of the Respondents’ consideration of the withdrawal of the RSE Exemption as appearing from the Respondents’ internal contemporaneous documentation. Then, at paras. [137] to [140] the Judge sets out the Claimants' criticism of the Respondents’ motivation arising from their concern that a significant proportion of the value of the RSE Exemption went to overseas generators (an estimated £170 million in 2015/2016, rising to £1.4 billion over the next five financial years), and thus did not go to assist the UK meet its own Kyoto targets for renewable energy generation. The Claimants’ point was and the Appellant’s point remains that the Respondents could remove foreign generators from the scope of the RSE Exemption without the EU Commission objecting on the basis that this was State aid, and so there was clearly a less onerous means of achieving the Respondents’ stated objectives.

The Judge addressed those criticisms in paras. [141]-[150]. 

Having regard to the totality of the evidence, some of which was set out in paras. [48] to [55] of the judgment, the Judge concluded (at [143]) that “there is no evidential basis on which to conclude that this was a poorly conceived, rushed decision made largely on political grounds and without reference to the merits.”  That was a finding of fact, which the Judge was entitled to make on the evidence. There is no proper basis on which it can be challenged on this appeal.    

As to the issue of State aid if foreign generators were removed from the RSE Exemption, the Judge concluded (at [150]) that there was a reasonably compelling case that the Commission would view the State aid point with disfavour if that had been done. He accepted the evidence of the Respondents’ witness, Nicola Stinton, the leader of HMRC’s Energy Taxes Team, Indirect Tax directorate, that it could not be predicted with certainty that the Commission would find that there was no issue of State aid, and that serious issues arose, and that the lengthy State aid notification procedure would have resulted in unacceptable delay. He concluded that the Respondents had not exaggerated the risk and acted disproportionately in that regard. We do not consider that the Appellant has made out a case that those conclusions involved any error of principle or law or were otherwise plainly wrong.

In any event, the diversion of the value of the RSE Exemption to foreign states was only part of the reason for its withdrawal. The tax authorities needed to raise revenue to meet other public policy objectives, in particular as a contribution to reduction of the national deficit, and considered that the RSE Exemption was no longer justified, was not a good or necessary way for providing subsidy to promote the use of renewable power, and was poor value for money in that respect. Looking at the matter more broadly, and focusing on the issue of implementation without a period of notice, the Judge was both entitled and right to conclude that the alleged (and, in this judgment, assumed) interference with the Appellants’ property interests was proportionate notwithstanding that it was immediate. Any delay in withdrawal would have represented loss of revenue by the exchequer which the Government and Parliament considered was urgently required. It cannot be said in these proceedings that this assessment was illegitimate or wrong. It is the kind of assessment which, in a democratic society, is primarily for the Government and Parliament to make.

It is not possible sensibly to separate out the Appellant’s claim that it was disproportionate for the RSE Exemption to be withdrawn immediately and its claim that there should have been a minimum of one fiscal year’s notice. Since the withdrawal was notified in July 2015, that means in practice a delay of 20 months, on the Appellant’s case, before it could be implemented.

The court is thus invited, by invocation of the principle of proportionality, to effect an alteration of a fiscal measure by Parliament, which had to weigh up a number of macro-economic considerations. They included the most effective and cost efficient way to secure the national targets for green energy (which take into account the Kyoto Protocol, the 2009 RED and the 2012 Energy Efficiency Directive), the extent to which the RSE Exemption benefited foreign generators (as to which the evidence was £1.4bn over 5 years) which did not assist the achievement of national targets, the danger of forestalling by foreign generators if the withdrawal was not immediate (viz. a rush for accreditation by eligible foreign generators and a consequential significant rise in LECs being issued to overseas generators and impact on the cost of the RSE Exemption), the balancing of different fiscal and economic requirements at a time when cost reduction was a major public priority, the need to put public finances in order and reduce the deficit, the substantial amount of the tax saving that would be lost by deferral for the minimum period put forward by the Appellant (the RSE Exemption having been predicted at the time of its withdrawal to cost £3.9 billion over the following five financial years), and the extent to which business could and would be boosted by other tax changes (including future reductions in the rate of corporation tax). In our view, the court should be very slow to second guess the decision of Parliament in relation to such an assessment. There is no simple, objective standard which the court can apply in order to draw the conclusion that the effect of the withdrawal of the RSE Exemption, taking account of the complexity of the overall context and the fact that other benefits might replace it to some degree, was disproportionate to the multiple objectives which Parliament and the Government sought to promote thereby.

In considering proportionality of implementation, it is also relevant and significant that withdrawal of the RSE Exemption left a large and valuable series of financial incentives in the form of the Carbon Price Floor, the Renewables Obligation, Contracts for Difference and Feed-in Tariffs for the production of renewable energy (£5.1 billion in 2015/16 compared to £200 million to UK generators provided by the RSE Exemption). Furthermore, although the withdrawal of the RSE Exemption was practically immediate, LECs already generated were to remain valid. To that extent, the withdrawal was prospective.

The evidence shows that the impact on the Appellant, Drax and others was specifically considered, both before and after 8 July 2015, but it was decided that it was outweighed by the public interest and the continuance of other financial incentives available to generators of renewable energy. It cannot be said that the Government and Parliament have overlooked the interests of undertakings operating in the renewables field, nor failed to appreciate the likely impact the withdrawal of the RSE Exemption would have on them in terms of loss of one revenue stream through sale of LECs.

The Appellant had prepared its budgets on the assumption the RSE Exemption would continue. The loss of income to the Appellant from its withdrawal was substantial. On the other hand, the Appellant’s evidence does not indicate any particular loss or liability that it could and would have avoided, or that any particular project would not have gone ahead, if it had been given the notice which it says should have been given. The Judge considered the issue of reliance in the context of legitimate expectation at para. [122] of his judgment. He considered that it was sufficient that the business plans of the Claimants reflected the continued revenue stream, and that the evidence of Andrew Koss (chief executive of Drax) and Steven Hardman (the Appellant’s commercial director) explained how their respective companies relied on maintenance of the status quo in their short-term investment decisions.

In our judgment, however, there was on proper analysis no real detrimental reliance by the Appellant on any expectation that there would be a notice period of about two years or so before the RSE Exemption would be withdrawn. The evidence referred to by the Judge indicates no more than that a fiscal alteration has reduced the income of the Appellant, which is always the case when Parliament increases a tax liability, whether by increasing rates of tax, withdrawing a tax exemption or imposing a new tax. In Joined Cases C-487-01 and C-7/02 Gemeente Leusden v Staatssecretaris van Financiën [2004] ECR I-5337 the ECJ said this at para. 82:

“The repeal of legislation from which a taxable person has derived an advantage in paying less tax, without there being any abuse, cannot as such breach a legitimate expectation based on Community law.”

Since we have found that no legitimate expectation arose in this case, it is not necessary to consider whether, as the Respondents claim, the Judge was wrong in his approach to reliance in the context of the case based on legitimate expectation. In the context of proportionality, and in the absence of any legitimate expectation, however, a reduced income of this kind has little, if any, weight when set against the public interest as judged by Parliament. A mere change of income for individuals or companies because of a change in the tax regime cannot be regarded as something which indicates disproportionality in a tax measure adopted by a state.

Parliament, as the democratically elected legislative body for the UK, had a wide margin of discretion in balancing all the various factors referred to above when deciding whether and at what time the tax code should be changed as it was in this case.

A1P1

Mr Fordham made it clear that the Appellant’s case based on A1P1 only arose if the Appellant succeeded under the headings of legitimate expectation or proportionality above. A1P1 was relied upon for remedial purposes if the Appellant was successful on its arguments based on EU law. Since we have dismissed the Appellant’s appeal based on those arguments, it is unnecessary to consider A1P1.

For the reasons given above, we dismiss this appeal.