The Department for Energy and Climate Change v Breyer Group Plc & Ors

Factual and Procedural Background

The litigation concerns claims arising from the Feed-in-Tariffs ("FIT") scheme introduced by the Department of Energy and Climate Change ("DECC") on 1 April 2010 under the Energy Act 2008. The FIT scheme incentivises low-carbon electricity generation, including solar photovoltaic ("solar PV"), through two tariff elements: the generation tariff (based on kilowatt hours produced) and the export tariff (based on kilowatt hours supplied to electricity suppliers). The case principally concerns the generation tariff.

The generation tariff for solar PV installations was originally fixed for 25 years from commissioning, subject only to inflation adjustments, and could only be amended for new installations following statutory consultation and parliamentary scrutiny. DECC initially intended to keep FIT rates unchanged for new installations until April 2012 to provide investor certainty, explicitly assuring no retrospective changes would be made.

By late 2010, rapid growth in solar PV installations and cost reductions led to returns exceeding the scheme's intended 5% rate for solar PV, risking disproportionate funding allocation. In response, DECC announced a review and published a consultation in October 2011 proposing a reduction in generation tariffs effective from 1 April 2012, but with a "reference date" advanced to 12 December 2011, effectively introducing retrospective effect for installations commissioned after that date.

The Proposal was challenged in judicial review, with the Court of Appeal holding it would be ultra vires if implemented due to its retrospective effect. DECC did not implement the Proposal but instead introduced a licence modification effective from 3 March 2012, reducing tariffs for installations eligible on or after that date. The modification was not challenged.

There are 19 claimants, including several companies engaged in solar PV generation and related businesses, collectively claiming approximately £195 million. They allege that the Proposal caused abandonment of installations and substantial losses, seeking damages for interference with their rights under Article 1 of Protocol 1 ("A1P1") of the European Convention on Human Rights concerning peaceful enjoyment of possessions.

The judge identified preliminary issues concerning whether the claimants had possessions protected by A1P1, whether the Proposal interfered with those possessions, whether any interference was justified, and whether damages were payable for loss of profits caused by the interference.

Legal Issues Presented

1. Whether the claimants had possessions within the meaning of Article 1 of Protocol 1 of the European Convention on Human Rights, including (a) enforceable legitimate expectations about FIT tariff changes, (b) marketable goodwill in their businesses, and/or (c) signed or would-be signed contracts entitling them to FIT payments or related consideration.
2. If so, whether the Proposal interfered with those possessions and the nature of any such interference.
3. Whether any such interference was justified under the Convention and domestic law.
4. Whether the claimants are entitled in principle to damages assessed by reference to loss of profits caused by the interference.

Arguments of the Parties

Claimants' Arguments

• The claimants assert they had possessions protected by A1P1 in the form of contracts and marketable goodwill.
• They contend the Proposal interfered with their possessions by causing economic harm and abandonment of projects.
• The interference was unjustified because the Proposal was unlawful and disproportionate, failing to strike a fair balance between public and private interests.
• They argue they are entitled to damages for loss of profits caused by the interference and that the defendant cannot rely on commercial decisions of third parties to break causation.
• They cross-appeal on the scope of marketable goodwill, contending the judge took too narrow a view.

Defendant's Arguments

• The Proposal had no legal effect and did not alter contractual obligations; it was merely a consultation.
• Any failure to complete contracts resulted from commercial decisions by the claimants and others, not the Proposal.
• Allowing a mere proposal to constitute an interference would lead to untenable consequences for government and public authorities.
• The Proposal was not unlawful as a consultation document; it is permissible to consult on proposals which might be unlawful if implemented.
• The judge applied too narrow a margin of discretion and erred in concluding the Proposal failed to strike a fair balance.
• The defendant should be allowed to argue causation at trial, including whether losses were independently caused by claimants' decisions.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Van Marle v The Netherlands (1986) 8 EHRR 483	Goodwill built by past work constitutes a possession under A1P1; interference with such goodwill is an interference with possessions.	Supported the principle that goodwill, as a present asset arising from past efforts, is protected under A1P1.
Tre Traktorer AB v Sweden (1991) 13 EHRR 309	Revocation of a licence leading to loss of goodwill and business value is an interference with possessions under A1P1.	Applied to show interference with goodwill protected under A1P1.
Ian Edgar (Liverpool) Ltd v UK (2000) Appln No 37683/97	Loss of future income is not a possession; only goodwill or an enforceable claim to income qualifies as possession under A1P1.	Confirmed the distinction between goodwill and mere expectation of future income.
Denimark Ltd v UK (2000) 30 EHRR CD 144	Reiterated Ian Edgar principle distinguishing goodwill from future income for A1P1 protection.	Reinforced the established Strasbourg jurisprudence on possessions.
R (Nicholds) v Security Industry Authority [2006] EWHC 1792 (Admin)	Goodwill may be a possession; future income is not. Economic goodwill is capitalised value of future cash flows.	Domestic case law endorsing Strasbourg principles; influenced the court's analysis of marketable goodwill.
R (Malik) v Waltham Forest NHS PCT [2007] EWCA Civ 265	Non-transferable personal licences are not possessions; goodwill must have marketable value.	Confirmed that only marketable goodwill, not personal rights or future income, are protected.
R (Countryside Alliance) v Attorney General [2007] UKHL 52	Distinction between goodwill and future income; only goodwill with marketable value protected by A1P1.	High authority confirming the distinction and endorsing the analysis in Nicholds.
Malik v UK (Application No 23780/08), 23 March 2012	Reduction in patient numbers may affect goodwill value but loss of non-marketable goodwill is not a possession.	Reinforced that only marketable goodwill constitutes a possession.
Sporrong and Lonnroth v Sweden (1982) 5 EHRR 35	Practical effect of permits and prohibitions can constitute interference with possessions even if legal rights remain intact.	Supported the conclusion that the Proposal, though legally ineffective, interfered with claimants' possessions in practice.
Agrotexim v Greece (1996) 21 EHRR 250	Prolonged preparatory acts and declarations can interfere with peaceful enjoyment of possessions despite absence of formal expropriation.	Analogous to the effect of the Proposal causing practical interference without legal effect.
Matos e Silva LDA v Portugal (1997) 24 EHRR 573	Measures reducing practical ability to use possessions constitute interference even if legal rights remain intact.	Further supported the analysis that practical interference suffices for A1P1 violation.
Centro Europa 7 Sri v Italy (2012) 32 BHRC 417	Lawfulness is a fundamental requirement for any interference with possessions under A1P1.	Supported the principle that unlawful interference cannot be justified.
AXA General Insurance Ltd v HM Advocate [2011] UKSC 46	Interference with possessions must be lawful, compatible with the rule of law.	Reinforced the requirement for lawfulness of interference.
R (Ullah) v Special Adjudicator [2004] UKHL 26	Domestic courts should follow clear and constant Strasbourg jurisprudence.	Guided the court to adhere to Strasbourg case law on possessions and interference.
Kingsley v UK (2002) 35 EHRR 10	Damages should reflect loss actually caused by violation of A1P1 rights.	Applied in assessing principles for damages entitlement.

Court's Reasoning and Analysis

The court began by analysing the nature of claimants' possessions under Article 1 of Protocol 1. It reaffirmed the established Strasbourg jurisprudence distinguishing between marketable goodwill (a present economic asset protected by A1P1) and mere expectations of future income (not protected). The court accepted the judge's classification of contracts and goodwill into categories reflecting their legal status and marketability, upholding the distinction between concluded contracts (possessions) and speculative or unsigned contracts (not possessions).

The court rejected the claimants' submission that the capitalised value of future expected contracts should be protected as possessions, emphasizing the autonomous nature of the Convention concept and the need to follow consistent Strasbourg case law. It held that goodwill must emanate from past work and have a present economic value, not merely reflect anticipated future profits.

On the legitimate expectation issue, the court agreed with the judge that such expectations could not provide an independent basis for possession where no underlying possession (contract or goodwill) existed. Legitimate expectation claims must be linked to existing property rights.

Regarding interference, the court held that the Proposal, though a mere consultation and having no legal effect, had a real and practical impact on claimants' businesses, deterring investment and causing economic harm. It drew close analogy with Strasbourg cases where preparatory or proposed measures interfered with possessions in practice. The court rejected the defendant's argument that a mere proposal cannot amount to interference, emphasizing that the nature and effect of the proposal determine interference.

On justification, the court disagreed with the judge's finding that the Proposal was unlawful, holding that consultation on a potentially unlawful proposal is not itself unlawful. The court reasoned that consultations serve to elicit objections and refine proposals, distinguishing consultation from implementation. However, the court upheld the judge's conclusion that the Proposal failed to strike a fair balance between public interest and claimants' rights, given the assurances of no retrospective effect, the scale of claimants' investments, and the disproportionate impact relative to savings achieved.

Finally, on damages, the court agreed that claimants are entitled in principle to damages for loss of profits caused by interference with their possessions, subject to factual causation. It rejected the defendant's argument that commercial decisions of claimants or others necessarily break causation, leaving this to be resolved at trial.

Holding and Implications

The court DISMISSED both the appeal by the defendant and the cross-appeal by the claimants.

The holding confirms that marketable goodwill and concluded contracts constitute possessions protected under Article 1 of Protocol 1, but speculative or unsigned contracts do not. The court held that a mere proposal or consultation document can amount to an interference with possessions if it has a real and practical adverse effect, even if it has no legal effect. However, consultation on a proposal that would be unlawful if implemented is not itself unlawful. The Proposal in this case was found to have interfered unjustifiably with claimants' possessions by failing to strike a fair balance between public and private interests.

The decision affirms the importance of investor certainty and the protection of economic interests embodied in contracts and goodwill under human rights law. It also clarifies the legal boundaries of interference arising from government proposals and consultations, emphasizing practical effects over mere legal formalities. The ruling leaves open factual determinations on causation and damages to be resolved at trial, but establishes the principle that claimants may recover damages for losses caused by unlawful interference with their possessions.