The Court of Appeal today rejected Ryanair’s latest challenge to the UK merger authorities’ jurisdiction to review its minority stake in rival airline Aer Lingus.

Ryanair argued, initially before the CAT, that the CC could not investigate the minority stake while the European Commission was in the process of reviewing its public bid for the remaining shares.  The CAT rejected the challenge in August. Ryanair appealed to the Court of Appeal, arguing that the UK’s duty of sincere cooperation with the institutions of the European Union precluded the CC from carrying out a merger investigation in which some of the issues would overlap with those under consideration at EU level.

The Court of Appeal rejected Ryanair’s contention, holding that there was “no doubt that a stay of the Competition Commission’s investigation at the present time is neither necessary nor appropriate”.  The European Commission is investigating a different transaction, under a separate jurisdiction, and will in any event conclude its investigation before the CC does.  The Court also held that the earlier judgment in Ryanair v OFT could not be read across to the present case, because in that case the Court was considering the possibility of EU and UK authorities reviewing the very same share acquisition, which would be contrary to the European Commission’s exclusive jurisdiction over mergers falling within its remit.

Click to view the judgment in Ryanair v Competition Commission and Aer Lingus

Daniel Beard QC and Alison Berridge appeared for the Competition Commission.

On 12 December 2012, the Supreme Court handed down judgment in the case of X v Mid Sussex Citizens Advice Bureau.  The case concerned an Appellant who worked as a volunteer adviser at the Citizens’ Advice Bureau (“CAB”). She was not contractually bound to work and received no remuneration for doing so. Although volunteers often did go on to become employed by the CAB as paid advisers, this was not automatic. There was an open, external recruitment process for paid posts and volunteering arrangements were not for the purpose of determining to whom employment should be offered. The Appellant alleged that, after she informed the CAB that she was HIV positive, she was told that she could not return to work. She claimed disability discrimination. As a preliminary issue, the Employment Tribunal determined that the Appellant was not within the scope of the Disability Discrimination Act’s definition of “employment”, because it did not cover voluntary work. The Appellant’s appeals to the Employment Appeal Tribunal and the Court of Appeal, where argument focused more on the terms of the EC Framework Directive, were unsuccessful.

The Supreme Court also dismissed the appeal and held that the EU Discrimination Framework Directive (Directive 2000/78/EC) does not apply to unpaid volunteers in the position of the Appellant.  It held that it was not necessary to make a reference to the European Court in that regard. Given its conclusion on that substantive issue, the Supreme Court held that it was unnecessary to determine whether the Directive could have direct effect in domestic law between private parties.

Kassie Smith acted for the Secretary of State in the Supreme Court.

To view the judgment and the Supreme Court’s press release, please click here. 

The final report of the Laidlaw Inquiry into the failure of the InterCity West Coast Competition was published on 6 December 2012.  The purpose of the report is to look ahead to avoid similar problems being repeated in future

The Report highlights a series of significant organisational and individual failings in the conduct by the Department for Transport (DfT) of the InterCity West Coast rail franchise competition, which were in a number of cases interlinked.  From these failings the Report identifies a series of  ‘lessons learned’.

What are the implications of these ‘lessons learned’?   In particular, is their significance confined to the West Coast Competition or do practitioners need to be alive to their possible wider relevance and transferability to the conduct of complex procurements more generally?

At the heart of the problems were difficulties that arose in connection with the mechanism to be used to assess the financial risk of the bids.  Key was the methodology to be used in order to determine the size of any Subordinated Loan Facility (SLF) needed to confirm the financial capability compliance of bidders.

The key ‘lessons learned’ in the Report’s recommendations respond to the following categories of problems identified in dealing with the SLF issue:

(1) Inadequate planning and preparation;

(2) Deficiencies in organisational structure and resourcing;

(3) Lack of efficacy in governance framework.

As to (1):

The Report records an almost universally acknowledged truth that complex procurement processes are particularly vulnerable to challenge by the losing bidders.  External advice should therefore be obtained throughout the whole of the franchising process.

The Report says consideration should be given to the extent to which a contracting authority needs flexibility to exercise commercial judgment during the procurement phase and whether that flexibility is best achieved b y way of formally including a period of engagement with the market following publication of the ITT.

The Report also identifies as key points having a contingency plan and a timescale that respects the complexity of the process.

However, market engagement after the ITT can raise potentially tricky areas of procurement law (as the Report appears to acknowledge).  Further, the flexibility to depart from particular deadlines may also not be straightforward where this involves extending the tenure of the incumbent during the period of any extension.

As to (2):

Many of the lessons learned in terms of recommendations for project leadership and obtaining access to appropriately skilled individuals to manage the process are important points of general application.

Of particular note here are the concerns about the failure to escalate and address legal concerns, which in this case had been expressed about the very issue upon which the process foundered.  Also of concern is the possibility that cultural issues may have led to an inadequate response to potential difficulties when identified.

As to (3):

Many of the lessons learned refer to sensible proposals for the management of franchise competitions designed to ensure that ‘blinkers’ are avoided and that committees and decision making processes are conducted in a joined-up way with issues addressed in the context of their proper significance for the integrity of the overall process.

Two issues in particular stand out from a legal perspective.  First is trying to ensure that decision makers are not unnecessarily prevented through “excessive recusal”  from dealing with  important issues that are escalated during the process.  Second, is the suggestion that where a risk of bidder challenge is identified, these are escalated appropriately and considered at the ExCo level with appropriate independent legal and commercial input where necessary.

Whilst these points make good sense in the particular context of this case exactly how one approaches these issues (particularly the first) may vary quite a lot from case to case.  As to the risk of legal challenge, this, as the Report acknowledges, is a fact of life in complex procurements.  Whilst it appears that risks were not properly evaluated in the instant case the fact remains that an unduly defensive view (based on overly cautious advice) can also be extremely damaging to an effective procurement strategy.  A high profile disaster such as the present could easily lead to a disproportionate counter-reaction leading to the undue dotting of ‘i’s and crossing of ‘t’s that has been the subject of disapproving comments from the highest levels of government.

Difficult judgments will continue to have to be made under considerable pressure in the context of such complex procurements.  It is to be hoped that the ‘lessons learned’ from the Laidlaw Report will help to ensure that future franchise competitions are successful but also that they are only applied elsewhere when it is appropriate to do so.  As the Report notes “… whilst there is no absolute certainty that the flaws in this process are isolated and wholly specific to that process, it would equally be wrong to assume that they are commonplace in the DfT or across other Government departments.“

Melanie Hall QC of Monckton Chambers has had an article published in the latest edition of the Tax Journal.

The article is a focus on the AG Opinion in EC v Ireland and the impact that this will have on VAT groups.

To view the full article, please click here.

To view Melanie Hall QC’s online profile for the Tax Journal, please click here.

The hearing of a number of judicial review challenges to the Government’s decision to proceed with a high speed rail link from London to Birmingham, Leeds and Manchester started in the High Court today (Monday 3 December).  Mr Justice Ouseley will be hearing challenges brought, amongst others, by 15 local authorities located along the route of HS2.  The local authorities contend that the Government’s decision to proceed in Parliament by way of the hybrid bill procedure breaches EU environmental law (the EIA Directive), that the consultation leading to the decision was faulty, that the Government failed to comply with its public sector equalities duty and that, in a number of respects, the decision was irrational.

The challenges have been featured in the following press articles:

The Times

Financial Times

The Telegraph

Yahoo News

Kassie Smith is acting for the local authorities.

The Tax Chamber of the Upper Tribunal has released its decision on penalties for late VAT returns and payments and the principle of proportionality. HMRC, represented by Peter Mantle, won the appeal in Total Technology (Engineering) Limited. The decision is an important precedent because the integrity of the VAT surcharge provisions was in issue and grounds on which a penalty can be held disproportionate are considered.

The Upper Tribunal held that there is nothing in the VAT default surcharge which leads to the conclusion that its architecture is fatally flawed. It reversed the First-tier Tribunal’s decision that the penalty was disproportionate and had to be set aside; none of the reasons that the First-tier Tribunal had relied on lead to the conclusion that the VAT default surcharge regime infringes the principle of proportionality, or to the conclusion that the actual penalty imposed on Total did so.

After detailed analysis of ECJ and humans right case-law on proportionality, the Upper Tribunal concluded that it is open to tax tribunals to consider individual default surcharges without having first concluded that the default surcharge regime as a whole is disproportionate. The Upper Tribunal considered six features of the regime which might be said to result in unfairness. It concluded that there must be some upper limit on the penalty for a default which was proportionate, although it was not sensible for the Upper Tribunal, in this case, to suggest where that might be. The other features examined did not result in the regime failing to comply with the principle of proportionality at the level of the scheme as a whole. The absence of any power to mitigate the penalty was not such a flaw. On the facts of a particular case, a tribunal might be able to conclude that the penalty is disproportionate. But in assessing whether the penalty in any particular case is disproportionate, the tax tribunal must be astute not to substitute its own view of what is fair for the penalty which Parliament has imposed. The tribunal should show the greatest deference to the will of Parliament when considering the application of the VAT default surcharge scheme.

To view the decision, please click here.

Monckton Chambers warmly congratulates Anneli Howard who, following an open competition, has been appointed as Standing Counsel to the Civil Aviation Authority.

The Civil Aviation Bill, currently before Parliament and due to receive Royal Assent by the end of the year, will confer on the CAA new and more flexible economic regulatory functions in relation to airports including powers under the Competition Act 1998, the Enterprise Act 2002 as well as Articles 101 and 102 TFEU.  Anneli will advise the CAA on the exercise of its investigatory powers, regulation of airports and operators as well as its responsibilities under EU regulatory rules in the aviation sector.

Anneli is honoured to accept the appointment, which builds upon her extensive experience in UK and EU competition law and regulatory policy. Listed as one of the top 100 Women in Antitrust by Global Competition Review, Anneli is widely recognised as a leading junior in EU law and competition law. Described by Chambers UK as “a client’s dream counsel – a real class act“, Anneli is “a fine choice for when methodical and alert competition assistance is required“.

Sub One v HMRC, in which Melanie Hall QC and Ewan West of Monckton Chambers represented HMRC, is a featured case in this week’s edition of ‘The Lawyer.’

In Sub One v HMRC, The Hon Mr Justice Arnold rejected a challenge made by 1,200 hot food outlets to the UK legislation on VAT payable on hot takeaway food. The outlets argued that the legislation, introduced by Thatcher, was contrary to EU law because it inevitably meant that hot food outlets were taxed differently depending on what was in the mind of the supplier when the food was heated. The Judge disagreed. The legislation did not breach EU law. He concluded that it was perfectly possible to assess the purpose for which food has been heated above ambient air temperature in a way that did not create inequality between competing food outlets.

To read the full article, please click here.

Advocate General Jääskinen released his opinion today in Case C-85/11 EC v Ireland. He has concluded that the practice of permitting non-taxable persons to be members of a VAT Group does not infringe the Principal VAT Directive or any EU principle. The Irish case was heard at the same time as Case C-86/11 EC v UK  and other similar infraction proceedings brought by the Commission against the Czech Republic, Denmark, Finland, Sweden and the Netherlands. The European Court asked for only one opinion to be produced ahead of its judgment on the basis that the same point of principle arises in each case. This opinion therefore applies equally to the VAT Act and HMRC’s long-held practice of allowing non-taxable persons to belong to VAT groups. Judgment is expected in 2013. Given the robust and comprehensive opinion of the Advocate General, taxpayers can feel confident of a favourable outcome.

Melanie Hall QC represented the UK in the UK proceedings and intervened in support of Ireland. All UK arguments have been accepted by the Advocate General.

Click to view the judgment in EC v IRELAND

Click here to view our case note.

Sub One v HMRC, in which Melanie Hall QC and Ewan West of Monckton Chambers represented HMRC, is a featured case in this week’s edition of ‘The Lawyer.’

In Sub One v HMRC, The Hon Mr Justice Arnold rejected a challenge made by 1,200 hot food outlets to the UK legislation on VAT payable on hot takeaway food. The outlets argued that the legislation, introduced by Thatcher, was contrary to EU law because it inevitably meant that hot food outlets were taxed differently depending on what was in the mind of the supplier when the food was heated. The Judge disagreed. The legislation did not breach EU law. He concluded that it was perfectly possible to assess the purpose for which food has been heated above ambient air temperature in a way that did not create inequality between competing food outlets.

To read the full article, please click here.