In R (on the application of SSE Generation Ltd) v Competition and Markets Authority  EWHC 865 (Admin), the Court found an error of law on the part of the Competition and Markets Authority (“CMA”) in the context of amendments made to an energy code.
- There is no hierarchy of obligations in legislation, absent contrary language. A breach of one provision is as much of a breach as a breach of another provision.
- Whereas a legal standard must be incorporated correctly as a matter of law, an objective that requires a balance of considerations will be subjected to less scrutiny by the Court.
SSE Generation Limited (“SSE“), an electricity generator, sought judicial review of the decision of the CMA to dismiss SSE’s appeal against two modifications of the Connection and Use of System Code (“the Code“) by the Gas and Electricity Markets Authority (“GEMA“). The Code sets the charges paid by electricity generators to use the national high voltage electricity transmission system.
The modifications, in giving effect to retained EU law, Regulation 838/2010 (“the Regulation“), implemented certain network operator charges within a specified range (“the permitted range“), but excluded from the calculation of that range the charges relating to physical connection to, or the upgrade of, the transmission network itself (“the connection exclusion“).
SSE’s main ground of challenge was that the CMA erred in law in failing to conclude that GEMA had itself erred in law by approving a modification to the Code that did not accurately reflect the connection exclusion.
The Court (Swift J) found in SSE’s favour on the main ground of appeal.
The Court noted that GEMA’s decision and the CMA’s decision accepted that the connection exclusion was not properly implemented into the Code. The exclusion was over-inclusive: depending on how a generator was connected to the network, charges could have been incorrectly included in the exclusion.
The Court examined the CMA’s reasoning for allowing the modification to proceed without the proper implementation of the connection exclusion. The CMA argued that the permitted range was the primary obligation under the Regulation whereas the connection exclusion was a lesser obligation, non-compliance with which did not automatically breach the Regulation.
The Court rejected this contention. As a matter of statutory construction, the connection exclusion affected the kinds of charges that may be included in the permitted range. There was no hierarchy of obligations at play in the Regulation: both the permitted range and the connection exclusion were legally binding and required proper implementation. Failure to give full effect to the connection exclusion thus breached the Regulation.
The Court rejected the CMA’s submission that GEMA’s margin of judgment as an expert regulator prevented an error of law arising in this case. Whilst GEMA indeed enjoyed such room for manoeuvre, this discretion applied where meeting an objective required balancing competing practical considerations. In this case, the relevant objective was compliance with a legal standard. In such circumstances, the answer was binary: the legal standard was either met or it was not. GEMA failed to correctly implement the connection exclusion, so an error of law was found.
The judgment in this case is reflective of the Administrative Court’s willingness to subject a public body’s decision making to searching scrutiny where ‘hard edged’ grounds of claim based on illegality are raised. From a claimant’s perspective it tends to be more difficult to succeed on grounds alleging irrationality.
The judgment also serves as a reminder to parties in judicial review claims of the importance of adhering to the revised page limits for pleadings and skeleton arguments. Practice Direction 54A of the Civil Procedure Rules imposes a limit of 40 pages for pleadings and 25 pages for skeleton arguments in judicial review claims. In this case, both parties significantly exceeded these page limits. The Court emphasised the need for parties to keep to the page limits and stated that it would ‘return’ pleadings or skeleton arguments in excess of the limits set by the Practice Direction.