British Gas Trading Ltd & Ors, R (On the Application Of) v Secretary of State for Energy Security and Net Zero

Factual and Procedural Background

This appeal arises from a decision of the Divisional Court ("DC") following a rolled-up hearing of an application for permission to bring judicial review proceedings. The application concerned two decisions made by the Defendant, the Secretary of State for Energy Security and Net Zero (formerly the Secretary of State for Business, Energy and Industrial Strategy) ("SoS").

The Appellants are companies operating in the UK retail energy sector, including British Gas Trading Limited ("BGT") and E.ON group companies ("E.ON"). A third claimant, ScottishPower Retail Energy Limited and SP Smart Meter Assets Limited ("ScottishPower"), did not appeal.

The challenged decisions relate to the transfer of the business of Bulb Energy Limited ("Bulb"), an energy supply company in administration, to Octopus Energy Group Limited via Octopus Energy Retail 2022 Limited ("Octopus"). Bulb supplied approximately 1.5 million domestic customers and entered administration following a sharp increase in wholesale energy prices in 2021. An Energy Supply Company Administration Order ("ESCA Order") was made under the Energy Act 2011 to secure continued energy supply at the lowest reasonable cost.

The Joint Energy Administrators ("JEAs") conducted a sales process, assisted by Lazard & Co Ltd ("Lazard"), to effect a transfer of Bulb's business pursuant to the ESCA Order. Octopus was the only bidder, proposing a bid contingent on substantial financial support from the SoS. The JEAs recommended acceptance of Octopus's bid and the implementation of an Energy Transfer Scheme ("ETS").

The SoS approved the ETS and provided funding to Bulb through amendments to a funding agreement. The two challenged decisions are the "Funding Decision" (to provide funding) and the "Approval Decision" (to approve the business transfer).

The Companies Court appointed the effective time for the ETS to take effect on 20 December 2022, rejecting opposition from the claimants. The claimants then issued judicial review proceedings in the Administrative Court challenging the Decisions. The Divisional Court refused permission to apply for judicial review on grounds of undue delay but considered the substance of the claims, including public law and subsidy control grounds under the Trade and Cooperation Agreement ("TCA") between the UK and the EU.

The appellants appealed the DC's refusal of permission on three grounds: (1) error in refusing permission due to delay, (2) error in the standard of review applied regarding compliance with the TCA, and (3) error in the application and interpretation of specific TCA subsidy control provisions.

Legal Issues Presented

1. Whether the Divisional Court erred in refusing permission to bring judicial review on the grounds of undue delay, particularly in light of the TCA provisions on recovery and time limits.
2. Whether the correct standard of review to apply to the SoS's subsidy decisions under the TCA, as implemented domestically, includes the principle of proportionality or is limited to conventional domestic judicial review principles.
3. Whether the Divisional Court erred in its application and interpretation of the subsidy control principles under Articles 364, 366, 367, and related provisions of the TCA, including the adequacy and fairness of the sales process and the role of regulatory bodies.

Arguments of the Parties

Appellants' Arguments

• The refusal of permission on grounds of delay was erroneous because the appellants were entitled under Article 373 of the TCA to apply for judicial review within specified time limits and had acted promptly upon receipt of necessary information.
• The Divisional Court applied an incorrect standard of review by not treating proportionality as a substantive standard required under the TCA's subsidy control regime, instead applying a lighter "rationality" standard.
• The sales process was unfair and flawed as other bidders were not provided with the same information about government support as Octopus, undermining the requirement for an open, non-discriminatory, transparent, and competitive process.
• The Divisional Court failed to properly apply the restructuring subsidy provisions, particularly the requirement that owners or investors contribute significant funds and that subsidies must respond to a national or global economic emergency.
• The role of Ofgem and the Competition and Markets Authority ("CMA") was improperly treated as relevant to the subsidy control assessment, as their merger control functions do not address subsidy compliance.

Respondent's (SoS's) Arguments

• The Divisional Court correctly exercised discretion in refusing permission due to undue delay, considering the potential chaos and detriment to third parties if the transfer were reversed.
• The standard of review is limited to conventional domestic judicial review principles; the TCA does not require a distinct or more intense proportionality review standard.
• The sales process was reasonable and conducted in a commercially appropriate manner, with government support availability communicated sufficiently to bidders, and the SoS was entitled to rely on the JEAs' expertise.
• The subsidy was appropriately classified as a temporary response to a national/global economic emergency, satisfying the relevant TCA provisions.
• The SoS was entitled to consider the review by Ofgem and the CMA's decision not to intervene as relevant context in assessing competition impacts, without those bodies conducting subsidy control assessments.

Octopus's Arguments

• Supported the SoS's submissions on the standard of review, advocating for the application of conventional judicial review principles and a light-touch proportionality assessment.
• Agreed that the sales process was fair and competitive and that the SoS's decisions complied with subsidy control requirements.

Table of Precedents Cited

Court's Reasoning and Analysis

The court systematically addressed each ground of appeal, applying established legal principles and statutory interpretation.

On delay, the court accepted the DC's assessment that the urgency of the situation, and the potential chaos of reversing the ETS transfer, required measuring delay in days. The appellants had knowledge of essential grounds for judicial review by early November 2022 but delayed issuing proceedings. The court acknowledged that for claims seeking to quash the Decisions (and reverse the transfer), refusal of permission on delay grounds was justified. However, for claims seeking purely financial remedies (recovery or damages), the reasoning did not apply with the same force, and delay measured from receipt of key documents in late November was not undue.

Regarding the standard of review, the court distinguished between the substantive obligations imposed by the TCA and the procedural standard of judicial review under domestic law. While the SC Principles include proportionality as a component of the decision-maker's assessment, the TCA does not require courts to apply a proportionality standard of review beyond conventional domestic principles such as rationality, error of law, and procedural fairness. The court rejected the appellants' submission that the DC should have conducted a de novo proportionality assessment, emphasizing deference to the SoS's commercial judgment and the light-touch review appropriate in this context.

On the substance of the subsidy control grounds, the court upheld the DC's factual and evaluative findings that the sales process was open, non-discriminatory, transparent, and competitive. The court accepted that government support availability was sufficiently communicated to bidders, and that it was reasonable for the SoS to rely on the JEAs and Lazard's expertise. The court rejected claims that the process was unfair due to unequal information disclosure, finding the DC's findings on these matters were compelling and within its discretion.

Regarding the restructuring subsidy provisions, the court held that the subsidy was temporary and constituted a response to a national or global economic emergency (the Russian invasion of Ukraine and resulting energy market volatility). The court rejected a narrow interpretation requiring subsidies to be offered broadly to all affected entities, noting the particular nature of the special administration regime and the critical public interest in maintaining energy supply.

Finally, the court found no error in the DC's conclusion that the SoS was entitled to consider the review by Ofgem and the CMA's decision not to intervene as relevant to assessing competition impacts, even though those bodies did not assess subsidy control compliance.

Holding and Implications

The appeal is dismissed.

The court upheld the Divisional Court's refusal of permission to bring judicial review on grounds of undue delay in relation to relief seeking to quash or reverse the transfer effected by the ETS. However, it clarified that delay did not bar claims seeking purely financial remedies, such as recovery or damages, following receipt of necessary information.

The court confirmed that the standard of judicial review applicable to subsidy decisions under the TCA, as implemented in UK law, remains the conventional domestic standard encompassing rationality, error of law, and procedural fairness, rather than a distinct proportionality standard.

The court affirmed the reasonableness of the sales process and the SoS's decisions on subsidy control grounds, including the temporary nature of the subsidy as a response to a national/global economic emergency.

No new legal precedent was established beyond clarifying the application of existing principles to the specific context of subsidy control under the TCA and the transitional domestic implementation regime.