Renewable Heat Association & Anor, Re Application for Judicial Review

Factual and Procedural Background

These appeals arise from challenges to regulatory and legislative changes made to the Renewable Heat Incentive (RHI) Scheme in Northern Ireland, which incentivised the use of renewable heat sources in non-domestic settings. The first proceedings, initiated in 2017 by a group of boiler owners under the Renewable Heat Association and an individual appellant ("Plaintiff A"), challenged the legality of regulations that reduced payments under the original scheme. These claims included domestic law and Article 1 Protocol 1 (A1P1) of the European Convention on Human Rights (ECHR) concerning peaceful enjoyment of property.

A second set of proceedings was brought in 2019 by another individual boiler owner ("Plaintiff B"), also challenging payment structure changes and raising a human rights claim under A1P1. The High Court dismissed both challenges at first instance in judgments delivered in 2017 and 2021 respectively. The Court of Appeal now considers the appeals against these decisions.

The RHI Scheme was established pursuant to the Energy Act 2011 and subsequent regulations, with payments guaranteed for 20 years for accredited installations. The scheme aimed to meet renewable energy targets mandated by the EU Renewable Energy Directive 2009/28/EC. However, flawed assumptions in tariff calculations led to significant overcompensation and escalating costs, prompting legislative amendments in 2017 and 2019 that reduced tariffs and capped payments. The scheme was eventually closed to new entrants in 2016.

Independent reports and public inquiries, including one chaired by Sir Patrick Coghlin, revealed serious governmental failings in the scheme's design, oversight, and financial management. The appellants invested substantial capital relying on government assurances of guaranteed tariffs, but the tariff reductions caused financial losses and hardship. The appeals focus on the legality of the 2017 Regulations and the 2019 Act, claims of legitimate expectation, and alleged breaches of A1P1 rights.

Legal Issues Presented

1. Were the 2017 Regulations that altered tariff levels lawfully made within the powers conferred by the Energy Act 2011?
2. Should the appellants succeed on grounds of procedural or substantive legitimate expectation that tariffs would be guaranteed and grandfathered for 20 years?
3. Do the legislative changes, including the 2017 Regulations and the 2019 Act, breach the appellants' rights under Article 1 Protocol 1 of the ECHR, specifically the right to peaceful enjoyment of possessions?

Arguments of the Parties

Appellants' Arguments

• The 2017 Regulations unlawfully reduced tariffs promised to accredited participants, breaching their vested rights and legitimate expectations.
• The tariff reductions constituted an unlawful retrospective interference with rights, unsupported by the enabling legislation.
• The appellants relied on clear government assurances, including ministerial letters encouraging investment and lending, creating substantive legitimate expectations that tariffs would be maintained for 20 years.
• The changes breached their rights under A1P1 by depriving them of property without adequate justification or compensation.
• The methodology used by the Department to calculate tariffs and reductions was flawed, failing to properly consider actual costs, counterfactual fuels, and investment decisions.

Respondent's Arguments

• The 2017 Regulations were lawfully made under the broad and flexible powers of section 113 of the Energy Act 2011, aimed at establishing and managing the RHI scheme.
• The tariff changes were prospective and not retroactive; they did not require repayment of monies already received and were temporary measures pending review.
• The original scheme was fundamentally flawed, resulting in gross overcompensation well beyond the permitted 12% rate of return under EU State Aid rules.
• Financial necessity and public interest justified the tariff reductions to protect the Northern Ireland public purse and comply with EU obligations.
• Legitimate expectation claims fail because the interference was lawful, justified, and proportionate in the circumstances.
• The A1P1 rights were engaged but the interference struck a fair balance between individual rights and the public interest; no excessive or disproportionate burden was imposed.

Table of Precedents Cited

Court's Reasoning and Analysis

The court commenced by examining the scope of the enabling legislation, section 113 of the Energy Act 2011, which provides broad and flexible powers to the Department to establish and amend the RHI scheme, including payment calculations. The court acknowledged the presumption against retrospective legislation but distinguished between retroactive and prospective changes, noting that the 2017 Regulations operated prospectively from 2017 and did not claw back past payments.

Applying the fairness test articulated in Wilson v First Country Trust Ltd (No.2), the court found that although the appellants had a legitimate expectation of tariff guarantees for 20 years, the exceptional circumstances of the scheme’s significant overcompensation and threat to public finances justified the tariff reductions. The court emphasized the scheme’s flawed original assumptions, the substantial overpayment to participants, and the public interest in protecting the Northern Ireland budget and complying with EU State Aid rules.

In relation to the legitimate expectation claims, the court accepted that a clear promise was made but held that the interference was lawful, justified, and proportionate given the financial crisis. Procedural legitimate expectation claims failed due to prior consultations and regulatory impact assessments. The court also rejected the argument that the 2017 Regulations were ultra vires, finding them within the broad delegated powers.

Regarding the A1P1 Convention claims, the court held that the tariff payments constituted possessions. The interference with these rights was for a legitimate public interest aim and prescribed by law. The court applied the fair balance and proportionality tests, concluding that the tariff reductions did not impose an excessive or disproportionate burden on the appellants. It noted that the appellants had already received significant subsidies exceeding their initial capital investments, and no clawback was required.

The court declined to apply the Bosphorus presumption of Convention compliance, finding sufficient State discretion and no manifest deficiency in fundamental rights protection. It also acknowledged the complex and conflicting financial evidence but deferred to the trial judges’ assessments, given the judicial review context and absence of oral evidence.

Finally, the court recognized ongoing concerns regarding the scheme’s future and the need for a permanent solution, including possible compensation or revised tariffs, but held that the current legislative and regulatory measures were lawful and proportionate.

Holding and Implications

The court DISMISSED the appeals in their entirety.

The 2017 Regulations were lawfully made within the powers conferred by the Energy Act 2011. The appellants’ claims based on procedural and substantive legitimate expectation under domestic law were rejected on the basis of lawful justification and proportionality. The Convention claims under Article 1 Protocol 1 were also dismissed, with the court finding no breach of the right to peaceful enjoyment of possessions as the tariff reductions struck a fair balance between individual and public interests.

The direct effect is that the tariff reductions and legislative changes remain in force, and no relief is granted to the appellants. The court noted that the issue of A1P1 compliance may require reconsideration in the future depending on circumstances or delays in establishing a revised scheme. No new legal precedent was set beyond the application of established principles to the facts of this case. The decision underscores the judiciary’s deference to governmental discretion in managing complex public schemes within statutory and Convention frameworks, particularly when addressing financial crises and public interest concerns.