Court Of Appeal Advocates A Practical Approach For Regulators Faced With Non-compliant Legal Systems

• Published date: 05 December 2022
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Energy and Natural Resources, Energy Law, Oil, Gas & Electricity, Constitutional & Administrative Law, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Mr Andrew Lidbetter, Nusrat Zar and Jasveer Randhawa

In R. (on the application of SSE Generation Ltd) v Gas and Electricity Markets Authority (GEMA) [2022] EWCA Civ 1472, the Court of Appeal allowed the appeal and cross appeal brought by the Gas and Electricity Markets Authority ("GEMA"), and SSE Generation Limited ("SSE"), respectively, in the context of amendments made to an energy code.

Key Points

• A regulator seeking to bring a non-compliant legal system into compliance with the law may have an element of discretion as to managing that transition, such that brief periods of non-compliance may be permitted by the courts.
• If there is a conflict between a private law contract, such as the Connection and Use of System Code ("the Code"), and the statutory duties of a relevant regulator, the latter will prevail. A public law decision maker cannot prevent itself from complying with its statutory duties by entering into, or approving, an inconsistent contract.
• Despite having power to rectify errors in legislation, the court will not repair such errors if there is a complex and uncertain regulatory environment where the legislative intent cannot be certain and will be wary of straying into judicial legislation.

Background

The appeals concerned GEMA's decision on a modification to the methodology for setting transmission charges payable to network operators by electricity generators using the network in Great Britain ("the GEMA Decision"). In the GEMA Decision, the modification of the Code: (i) required a methodology to be adopted for the setting of charges which was not compliant with the relevant law but which was intended to constitute an interim position pending a fresh decision which would be legally compliant; and (ii) adopted a definition of the expression "congestion management" which meant that the costs attributable to the management of "congestion" on the transmission system within Great Britain were not taken into account when calculating limits on the transmission charges which could be levied.

Following the GEMA Decision, one affected electricity generator, SSE, brought a statutory appeal to the Competition and Markets Authority ("CMA") which upheld the GEMA Decision. Consequently, SSE sought judicial review of the CMA's decision. The High Court held that it was unlawful for the CMA to approve the GEMA Decision endorsing the imposition of unlawful charges, even as an interim measure. However, it upheld the CMA and GEMA's decision that the only congestion management costs falling outside the...