United Biscuits (Pension Trustees) Ltd and another v HMRC [2017] EWHC 2895 (Ch)

The High Court (Warren J) has dismissed a claim by United Biscuits (Pension Trustees) Ltd (“UB”) against HMRC for refunds of (allegedly) overpaid VAT.

UB is the trustee of a defined benefits pension fund.  It claimed restitution of sums paid by way of VAT on supplies of pension fund management services provided by undertakings that were not authorised insurance companies (“Non-Insurers”).  Supplies of such services by Non-Insurers have always been treated as standard rated under UK law.  The two main issues were (1) whether the supplies by Non-Insurers were to be treated as exempt supplies of “insurance”, because (allegedly similar) supplies of pension fund management services by authorised insurance companies (“Insurers”) had were treated as exempt; and (2) if Non-Insurers’ supplies should have been exempt, whether EU law required UB to be given a direct claim against HMRC to recover sums they had overpaid by way of VAT to the Non-Insurers (notwithstanding the Supreme Court’s recent decision in Investment Trust Companies (In Liquidation) v  RCC [2017] UKSC 29; [2017] 2 WLR 1200; [2017] STC 985, “ITC SC”).

Warren J decided both issues in favour of HMRC and dismissed UB’s claim.  On Issue (1), Warren J held that the services were not “insurance transactions” within the meaning of Article 13B(a) of the Sixth Directive (388/77/EEC) or Article 135(1)(a) of the Principal VAT Directive (2006/112/EC) and were thus properly standard rated.  Further, the principle of fiscal neutrality did not require them to be treated as if they were “insurance transactions” (and thus exempt) or to be given the same (incorrect) VAT treatment as supplies of pension fund management services by Insurers.  On Issue (2), Warren J held that EU law did not require UB to be given direct claim against HMRC (a process which would require the Court to create a common law cause of action in unjust enrichment and to disapply the statutory bar on such causes of action in section 80(7) of the Value Added Tax Act 1994, notwithstanding ITC SC): it was not “impossible or excessively difficult” for UB to vindicate any EU law rights it may have via the route dictated by UK statute, namely a claim against the Non-Insurer.

If he were wrong on Issues 1 and 2, Warren J considered that any direct claim against HMRC would be a claim in unjust enrichment; and that the bar in section 80(7) would have to be disapplied only to the extent necessary to allow UB a claim for the 4-year period prior to the issue of the claim form, having regard to the 4 year “cap” on claims by Non-Insurers against HMRC under section 80(4) VATA 1994.

Andrew Macnab appeared for HMRC.

To read the judgment please click here.

The transfer of personal data from EU Member States to third countries such as the United States is prohibited under the Data Protection Directive (95/46/EC) unless the level of protection afforded by the third country is adequate to provide essentially the same level of protection for personal data that EU citizens enjoy under EU law and the Charter of Fundamental Rights of the EU. Following the Edward Snowden revelations in 2013 concerning the extent to which the US security services engaged in extensive surveillance programmes of internet and telecommunication systems operated by companies such as Microsoft, Apple, Facebook and others, the European Commission adopted a “Safe Harbour” decision providing for procedures under which such data could be transferred to the US. On foot of a reference made in proceedings brought in Ireland by Max Schrems, the CJEU, in a decision of the 6th of October 2015, declared the Safe Harbour decision of the Commission to be invalid.

The Commission subsequently adopted certain decisions known as the Standard Contractual Clauses (SCC) decisions under which a data exporter in the EU (such as Facebook which transfers its EU customers’ data from Ireland to the US) could lawfully transfer data to countries such as the US if the data exporter and importer put in place an agreement which complied with the relevant SCC. Mr. Schrems reformulated his complaint to the Irish Data Protection Commissioner to the effect that the SCCs, even if complied with, did not in fact afford EU citizens the level of protection required under the Directive in order to comply with Articles 7 (respect for private and family life), 8 (protection of personal data) and 47 (right to an effective remedy and to a fair trial) under the Charter. Having considered his complaint, the Data Protection Commissioner, Helen Dixon, considered that his complaint was well-founded and she brought proceedings before the Irish High Court for the purpose of making a reference to the CJEU to adjudicate on the validity of the SCC Commission decisions. As Mr. Schrems’ complaint related to the transfer of his data by Facebook Ireland Limited to Facebook in the US, she joined Facebook Ireland Limited and Mr. Schrems as defendants. A large number of persons applied to be joined as amici curiae and the High Court joined four parties as amici curiae to the proceedings including the United States of America.

After a five week oral hearing which included evidence from five experts on US law concerning the nature and extent of the level of protection for personal data and remedies for infringements in the US, the High Court (Costello J.) formed the view that there appeared to be well-founded concerns that there is an absence of an effective remedy in US law compatible with the requirements of Article 47 of the Charter for an EU citizen whose data are transferred to the US where the data may be at risk of being accessed and processed by US State agencies for national security purposes in a manner incompatible with Articles 7 and 8 of the Charter. She formed the view that the safeguards purportedly constituted by the SCCs do not appear to address the well-founded objection that there is an absence of a remedy in the US compatible with Article 47 of the Charter, particularly having regard to the standing requirements under US constitutional law.

Costello J. accepted the arguments of the Data Protection Commissioner that she had jurisdiction to make a preliminary ruling on the validity of the SCC decisions; that the court was not obliged to reject the application by reason of the adoption by the Commission of another mechanism for data transfer known as the EU – US Privacy Shield decision; that the Data Protection Commissioner’s well-founded concerns as to the absence of an effective remedy in US law compatible with the requirements of EU law and the Charter were not eliminated by the introduction of the Privacy Shield decision; that an issue also arose as to whether the exceptional discretionary power conferred on the Data Protection Commissioner by Article 28 of the Directive to suspend or ban the transfer of data to a data importer in a third country on the basis of the legal regime in that third country is sufficient to secure the validity of the SCC decisions.

In her judgment she pointed out that “[t]he case raises issues of very major, indeed fundamental, concern to millions of people within the European Union and beyond. First, it is relevant to the data protection rights of millions of residents of the European Union. Secondly, it has implications for billions of euro worth of trade between the EU and the US and, potentially, the EU and other non-EU countries.  It also has potentially extremely significant implications for the safety and security of residents within the European Union.”

Following the delivery of the High Court’s decision on the 3rd of October 2017, the Court is shortly due to hear submissions on the form of questions to be referred to the CJEU.

Michael M. Collins SC acted for the Data Protection Commissioner.

Scotch Whisky Association v The Lord Advocate and The Advocate General for Scotland [2017] UKSC 76

The Supreme Court has decided that Scottish legislation which will introduce a minimum price per unit of alcohol does not breach EU free movement of goods law. Any retail seller of alcohol in Scotland will be required to ensure that an alcohol product must not be sold at a price below a statutorily determined minimum price per unit of alcohol. The current proposal is that it should be 50 pence per unit of alcohol.

The proceedings were brought by The Scotch Whisky Association and two Belgian organisations representing spirits and wine exporters. The Scottish and UK Governments were the respondents: the Lord Advocate representing the Scottish Ministers and the Advocate General for Scotland representing the United Kingdom government. The appeal turned on whether the restriction on inter-state trade created by the proposed legislation was justified on public health grounds.

The case discusses an important issue concerning the EU proportionality principle, namely whether a reviewing court should apply a separate “third stage” of balancing of interests (or “proportionality stricto sensu”) in addition to the first two limbs of “suitability” and “necessity”. The Supreme Court held that the Court of Justice had deliberately rejected the idea of a separate third stage, contrary to the view of Advocate General Bot.

The Supreme Court also considered the consequences of the Court of Justice’s ruling in Scotch Whisky on the “time of assessment” in a proportionality case. The Supreme Court considered that as the petitioners were allowed to rely on material not before the decision-maker, it would seem artificial, and even unfair not to allow the respondents to refine the “legitimate aims” previously advanced by reference to new material.

Ultimately, the issue in this case turned on the “necessity” limb of proportionality, and specifically the argument that taxation could achieve the same level of health protection but with less disruption to trade. The Supreme Court held that the court below had been entitled to find that taxation was unable to target the specific group of the drinking population the measure was aimed at as effectively as minimum pricing. It was reasonable to conclude on the basis of the evidence (including new evidence) available that there was no less restrictive measure which would achieve the state’s desired level of health protection equally effectively.

Ian Rogers QC advised various UK Government departments in the proceedings in the Supreme Court, Court of Justice of the European Union and Scottish courts. The Advocate General for Scotland (representing the UK Government) was one of the two respondents to the proceedings.The Supreme Court judgment can be found here.

COMPETITION AND MARKETS AUTHORITY v CONCORDIA INTERNATIONAL RX (UK) LIMITED

On 5 October 2017, the CMA was granted ex parte a warrant under section 28 Competition Act 1998 to search the premises of the pharmaceutical company, Concordia. The basis upon which the warrant was obtained was that there was a risk that documents relevant to an investigation would be destroyed or concealed (section 28(1)(b)(ii)).

The warrant was in relation to an investigation concerning inter alia the drug hydrocortisone. The CMA had been investigating Concordia in respect of an alleged anti-competitive agreement in respect of this drug since April 2016 and had previously served section 26 Notices on Concordia to obtain information. Concordia sought to have the warrant discharged on the basis that there could be no reasonable grounds for suspecting that any documents relating to the investigation would be destroyed or concealed.

The warrant was obtained in part by relying on information which the CMA said was protected by public interest immunity. The issue arose as to whether the CMA could rely on that material for the purposes of Concordia’s challenge to the warrant but not disclose it to Concordia. The CMA relied on authorities relating to criminal warrants which it said supported that approach.

Mr Justice Marcus Smith ruled that such a process would be unfair to Concordia and “would constitute the sort of “closed material” process that (according to the Supreme Court in Al Rawi) ought only to be sanctioned by Parliament.” He distinguished the approach taken to criminal warrants. Consequently, in so far as material was upheld as being subject to PII, it could not be relied on by the CMA at the inter partes hearing for the variation of the warrant. The Judge, agreeing with the CMA, also rejected a suggestion by Concordia that the CMA place the PII material into a confidential ring of external lawyers only.

The Judge made recommendations for the procedure to be adopted when the CMA applies ex parte for a warrant under section 28 and wishes to rely on PII material.

The Judge gave the CMA permission to appeal his decision to the Court of Appeal.

Mark Brealey QC acted for the Defendant, Rob Williams acted for the Claimant.

To read the judgment please click here.