Limits of Legitimate Expectation and Competition Law in Public Sector Decisions: Heathrow Hub Ltd v. Secretary of State for Transport

Introduction

The case of Heathrow Hub Ltd & Anor v. The Secretary of State for Transport ([2020] EWCA Civ 213) presents a pivotal examination of the interplay between the doctrines of legitimate expectation and competition law within the context of public policy decision-making. The appellants, Heathrow Hub Limited (collectively "HUB"), challenged the Secretary of State's decision to designate the Airports National Policy Statement (ANPS) favoring the New Northwest Runway (NWR) scheme over their own Extended Northern Runway (ENR) proposal at Heathrow Airport.

The core issues revolve around whether HUB was entitled to a legitimate expectation that promoter-specific risks, such as assurances from Heathrow Airport Limited (HAL) to implement the ENR scheme, would not influence the Secretary of State's preference decision. Additionally, the case delves into potential breaches of European Union competition law, specifically Articles 102 and 106(1) of the Treaty on the Functioning of the European Union (TFEU).

The Court of Appeal's judgment underscores the boundaries of legitimate expectation and reinforces the necessity for public authorities to rely on clear, unambiguous representations when making policy decisions that impact competitive markets.

Summary of the Judgment

The Court of Appeal upheld the decision of the Divisional Court, dismissing HUB's appeal against the designation of the ANPS favoring the NWR scheme. HUB had argued that the Secretary of State unlawfully preferred the NWR over the ENR by placing conditions, such as obtaining assurances from HAL, which they contended breached EU competition law and violated legitimate expectations.

The Divisional Court had previously found that there was no legitimate expectation established by the Secretary of State that promoter-specific risks would be disregarded. It further concluded that the Secretary's request for assurances from HAL did not materially influence the preference decision. Consequently, the competition law claims were deemed moot, as no actual or potential abuse of dominance by HAL was established.

The Court of Appeal affirmed these findings, emphasizing that without clear and consistent representations from the Secretary of State, no legitimate expectation could be inferred. Moreover, the competition law arguments lacked substantive merit given the absence of material impact from the Secretary of State's requests.

Analysis

Precedents Cited

The judgment references several key cases that have shaped the understanding of legitimate expectation and competition law:

R v Devon County Council, ex parte Baker (1995): Distinguished categories of legitimate expectation, including procedural and substantive expectations.
R (Gallaher Group Ltd and others) v Competition and Markets Authority (2019): Reinforced that legitimate expectations may arise from implied promises derived from consistent practices.
R (Khatun) v London Borough of Newham (2004): Highlighted that legitimate expectations must be clear and unambiguous.
Case C-475/99 Ambulanz Glockner Landkreis Südwestpfalz: Discussed special and exclusive rights under Article 106(1) TFEU.
R (on the application of Rusbridger) v Attorney General (2004): Explored exceptions to Parliamentary privilege concerning admissible evidence.
Office of Communications v Floe Telecom Limited (2009): Emphasized the importance of not engaging with academic or hypothetical competition law issues outside their context.

Legal Reasoning

The Court of Appeal meticulously dissected the assertions regarding legitimate expectation and competition law. Key elements include:

Legitimate Expectation:
- The Court affirmed that for a legitimate expectation to arise, there must be a clear, unambiguous representation or a consistent practice from a public authority.
- HUB failed to demonstrate that the Secretary of State had made any express or implied promise regarding the non-consideration of promoter-specific risks.
- The Statement of Principles explicitly excluded the creation of any legitimate expectation, further weakening HUB's claims.
Competition Law:
- The Court examined whether the Secretary's request for assurances from HAL constituted a State Measure capable of distorting competition under Articles 102 and 106(1) TFEU.
- It concluded that since the request did not materially influence the preference decision, no abuse of dominance was established.
- The relevant market was determined to be the provision of airport operation services in the South East of England, where HAL holds a dominant position. However, without evidence of actual distortion or potential abuse resulting from the State Measure, HUB's competition law claims were dismissed.

Impact

This judgment reinforces the necessity for clear and unequivocal representations from public authorities when establishing legitimate expectations. It delineates the boundary where such expectations do not arise merely from implied or non-specific representations. Furthermore, it clarifies that not all State Measures that interact with dominant undertakings will infringe competition law; only those that can be demonstrated to distort competition within the relevant market.

Consequently, public bodies must exercise caution in conditioning policy decisions on assurances or conditions from private entities, ensuring that such conditions do not inadvertently trigger competition law violations. For private promoters like HUB, the case underscores the importance of seeking explicit commitments rather than relying on implied understandings when engaging with public authorities.

Complex Concepts Simplified

Legitimate Expectation

Legitimate expectation is a legal doctrine wherein an individual or entity can expect a public authority to act in a certain manner based on the authority's representations or established practices. For such an expectation to be enforceable, the representation must be clear, unambiguous, and devoid of any relevant qualifications.

Competition Law under TFEU Articles 102 and 106(1)

Article 102 TFEU prohibits the abuse of a dominant position within the internal market or a substantial part of it, preventing undertakings from engaging in practices that distort competition. This includes unilateral actions that could harm consumers or hinder market competition.

Article 106(1) TFEU addresses public undertakings or those to which special or exclusive rights are granted by a Member State. It aims to prevent these entities from abusing any dominant position they hold, ensuring fair competition and protecting market integrity.

Conclusion

The Heathrow Hub Ltd v. Secretary of State for Transport case serves as a critical reference point for understanding the constraints of legitimate expectation in public sector decision-making and the application of competition law in policy contexts. The Court of Appeal's affirmation of the Divisional Court's findings underscores the importance of explicit representations from public authorities and the safeguards in place to prevent the abuse of dominant positions by private undertakings.

For practitioners and entities engaging with public bodies, the judgment highlights the necessity for clear communication and the establishment of unequivocal agreements to avoid future legal challenges based on presumed legitimate expectations. Simultaneously, it emphasizes that not all interactions between state measures and dominant entities will constitute a breach of competition law, maintaining a balanced approach to fostering both fair competition and effective public policy implementation.