There is some uncertainty is over the mechanism for input tax recovery on EU and non-EU imports of goods following Brexit. Although a welcome relaxation that VAT will not have to be paid at borders on EU and non-EU imports has been announced, how input tax recovery will work remains to be clarified.
It is often easy to get VAT law wrong. Both parties to a transaction, each registered for VAT, take good advice and consider that a supply made for both sides’ business purposes is exempt. No VAT is charged or accounted for and no VAT invoice is issued. But, a year or two later, a court decides that the supply is standard-rated.
Unpicking the consequences of such mistakes has generated a rich seam of case-law, of which the Court of Appeal’s judgment in Zipvit (a single judgment given by Henderson LJ) is the latest instalment. The effect of Zipvit is that the key requirement is a VAT invoice, and without that, the purchaser is in trouble.
This case concerned the procurement by the Defendant of a public contract relating to the provision of Public Health Nursing Services for persons aged 0-19 in Lancashire. The Claimants were the incumbent providers. On the procurement (which was conducted under the light touch procedure and which therefore was required to comply with Regulations 74-76 of the PCR 2015) the contract was awarded to Virgin Care Services Ltd. In essence, the Trusts challenged the Authority’s evaluation of the bids, the scoring methodology applied, and the transparency of the award criteria. The TCC (Stuart-Smith J) found that the reasons given by the Authority for the scores awarded to the Claimants and to Virgin were insufficient in law. That finding was itself sufficient for the contract to Virgin to be set aside.
Case C-159/17, Întreprinderea Individuală Dobre M. Marius, ECLI:EU:C:2018:161 (judgment of 7 March 2018)
Case C-533/16, Volkswagen AG, ECLI:EU:C:2018:204 (judgment of 21 March 2018)
Case C-8/17, Biosafe v Flexipiso, ECLI:EU:C:2018:249 (judgment of 12 April 2018)
Case C‑81/17, Zabrus Siret SRL, ECLI:EU:C:2018:283 (judgment of 26 April 2018)
The Court of Justice (CJEU) has released four recent judgments concerning compatibility with EU law of national restrictions on the right to deduct input VAT. The judgments confirm the “dominant position” of the right to deduct in the common system of VAT.
The Competition Appeal Tribunal (‘the Tribunal’) handed down its judgment in Flynn and Pfizer v CMA  CAT 11 on 7 June 2018. The Tribunal has set aside parts of the Competition and Markets Authority’s (‘CMA’) decision imposing combined fines on the pharmaceutical companies, Pfizer and Flynn, of approximately £90 million for charging (allegedly) unfairly high prices for the anti-epileptic drug (phenytoin sodium capsules) in breach of Article 102 TFEU / the Chapter II prohibition. In doing so, the Tribunal conducted a significant review of the relevant law relating to the test for identifying unfair pricing.
On 16 May 2018, the Supreme Court handed down judgement in an appeal concerning the way in which the Office of Fair Trading (the “OFT”) conducted settlement negotiations under its so-called “Early Resolution Process” (“ER Process”) with parties subject to its tobacco investigation. It held that a mistake made to the benefit of one party during settlement negotiations is not required to be replicated to the benefit of other parties. It reached this conclusion, overturning the Court of Appeal’s decision, on the basis of traditional principles of public law rationality and legitimate expectation. The Supreme Court rejected the argument that there are distinct legal criteria of “equal treatment” and (substantive) “fairness” amongst the traditional principles of judicial review.
The extent to which one NCA can depart from an MA that has been previouslygranted by another Member State raises rather dry and technical questions ofEuropean law. However, it has huge commercial significance for the entitiesinvolved, ie the actual or would be holder of the MA, on the one hand, andgeneric manufacturers on the other that would like to market and sell theirequivalent medicines based on the original relevant medicinal product.
The enforcement of the competing rights given to innovators and genericmanufacturers has become increasingly adversarial, either with genericsseeking multiple authorisations in different Member States or challenging theinitial MA that had been granted in favour of the MA holder or the innovator MA holder seeking to protect its rights conferred in terms data exclusivity.
Astellas was one example of such a case. Astellas challengeda generic MA that had been granted by the Finish NCA and the Supreme Administrative Courtreferred two questions for preliminary ruling to the CJEU. The first question waswhether a concerned Member State under the decentralised procedure wascompetent to determine the time at which the data exclusivity period startedto run. The second question was, assuming it was not, whether the nationalcourts could determine the period of data exclusivity and whether the principleof effective legal protection under Article 47 of the Charter required the nationalcourt to scrutinise the original MA granted in another Member State and/ordepart from it in order to give effect to the MA holder’s rights.
R (Teva B.V.) v Secretary of State for Health  EWHC 228 (Admin)
Biogen Idec Ltd was an interested party
On 13 February 2018, the High Court (Jay J) dismissed the application of Teva BV (“Teva”) for judicial review of the decision of the UK’s Medicines and Healthcare Products Regulatory Agency (“MHRA”) not to grant Teva a marketing authorisation (“MA”) for its generic version of Tecfidera, a drug used to treat multiple sclerosis.
Teva’s argument that the MHRA was not bound by a conclusion, appearing in a recital to the Commission Decision granting an MA to the reference product, as to the applicable period of data exclusivity for that reference product was found to be “ingenious” () but ultimately unsuccessful.
The judgment has important implications for pharmaceutical regulation, both now and post-Brexit. The High Court made key rulings about the role of national licensing authorities, including the requirement that they give effect to the package of rights emanating from the grant of a marketing authorisation by the Commission.
Just before Christmas, the High Court (Mrs Justice O’Farrell) delivered judgment in MLS (Overseas) Limited v The Secretary of State for Defence  EWHC 3389 (TCC). There had been some anticipation that, as the first post-Energy Solutions ¹ case in which allegations of manifest error formed a central part of the argument, the judgment might shed some light on what approach a court would take to the higher degree of scrutiny arguably indicated by Energy Solutions. In the end, however, not much could be gleaned from the court’s judgment in this respect. The more interesting findings concerned transparency and the implications of any vagueness in an ITT’s description of the evaluation process. The MoD’s ITT had failed to spell out the consequence of failing a certain pass/fail criterion, which the court found ultimately invalidated the rejection of MLS’ tender on that basis. In that respect, the judgment joins a line of cases highlighting to contracting authorities the pitfalls of a lack of clarity in an ITT. For bidders, however, the message is perhaps less clear. The court rejected an argument that because the ITT itself had not been challenged (and a challenge would now have been out of time) it was not open to MLS to challenge the award on the basis of an ambiguity in the ITT. This seems to at least leave room for the question whether it is always best to challenge an ITT promptly, or whether in some cases it may well be opportune to retain some vagueness as a source of a potential future challenge to the award decision.
The Court of Appeal’s decision in this case, handed down on 13 December 2017, deals with fundamental concepts of VAT, namely whether there was a supply of services, and if so, whether it was ‘for consideration’, and if so, whether the consideration could be expressed in monetary form. The case concerns deposit accounts provided by two members of the appellant’s VAT group referred to as “IDUK” and the ability of the group to recover input tax.