The High Court has upheld the right of corporations to bring claims under the Human Rights Act.
Compensation of £140 million is claimed by the companies against the Department of Energy and Climate Change (DECC) under the review of its solar PV (photovoltaic) feed-in tariff (FITs) scheme.
The Court of Appeal and Supreme Court had previously decided in Judicial Review proceedings that DECC’s actions were unlawful. The DECC had failed to follow the FITs statutory review procedure for changing tariffs by issuing a consultation on short notice and retrospectively.
Friends of the Earth and two solar PV companies brought a successful judicial review (JR) challenge to the consultation. The Administrative Court decided that DECC’s proposal to cut FITs on 12 December 2011, 11 days before its consultation on that proposal closed (on 23 December 2011) was unlawful because it breached the statutory scheme for modifying FITs
In the meantime, many proposed smaller solar PV schemes under way were dropped or failed due to the uncertainty created by DECC’s October 2011 consultation announcement and the JR proceedings.
Civil claim for damages
In January 2013, 17 solar PV FITs installation, supplier and developer companies commenced civil proceedings against DECC claiming £140 million of losses resulting from DECC’s FITs 2011-12 solar PV tariff review. The claimants argued that they had been hit by cancelled orders and had to abandon solar PV projects due to DECC’s October 2011 consultation proposals announcement and its breach of the tariff modification procedure under the FITs statutory scheme.
Human Rights Claims
Article 1 of the first Protocol (A1P1) to the European Convention on Human Rights (ECHR) is a qualified right that provides that every natural or legal person is entitled to the peaceful enjoyment of their possessions. Therefore, the right extends to companies, because a company is treated at law as having a legal personality.
Because DECC had unlawfully interfered with the claimants’ possessions in breach of A1P1, the claimants are entitled to damages arising from concluded contracts
Contracts and losses protected by A1P1
- Signed and concluded contracts were assets, and therefore “possessions” under A1P1. They were tangible, assignable and had a present economic value.
- Unsigned contracts could not be possessions protected by A1P1. There is no authority for the proposition that an unsigned or incomplete contract is an asset. An unsigned or incomplete contract is no contract at all, intangible, non-assignable and absent present economic value.
- Loss of future income is not a possession protected by A1P1, unless it has already been earned, or is definitively payable.
- Goodwill may be an asset, and therefore a possession under A1P1, because it has been built up in the past and has a present-day value, as distinct from only being referable to events that may, or may not, happen in the future.
- Loss of marketable goodwill caused by interference that at the time of the interference can be capitalised is, in principle, protected by A1P1. On the other hand, interference causing only a potential loss of goodwill for the future is a claim for loss of future profit and so not recoverable.
Contracts that the claimants had entered into by 31 October 2011 and that were frustrated because of DECC’s October 2011 consultation proposal were an element of the marketable goodwill in the claimants’ businesses. Therefore, these contracts represented a possession protected by A1P1. The claimants could, in principle, recover for the loss of that element of the marketable goodwill in their businesses.
Even if the loss of unsigned or unconcluded contracts damaged the claimants’ goodwill, such losses are losses of future income and therefore not recoverable under A1P1.
As a matter of law and common sense, DECC’s publication of its October 2011 consultation proposal amounted to an interference with “possessions” under A1P1. DECC acted carefully, deliberately and unlawfully. It could not be characterised, as DECC argued, as “merely a proposal”.
This High Court decision on the preliminary issue is important:
DECC is potentially liable for claims of approximately £140 million due to its failure to comply with the FITs statutory scheme.
It provides a useful analysis of the extent to which commercial contracts and goodwill can be protected by bringing a claim under A1P1.
To establish an A1P1 claim for interference with possessions, it was necessary to show material economic consequences, due to state action.
The UK Government was liable for a Consultation Document, rather than a final decision.
The DECC indicated an intention to appeal.