3.3 Renewable Energy Support Schemes
Fundamental rights considerations may arise in various guises in the renewables field. First, in making the shift from one support system to another (or to establishing a system in the first place), transitional regimes with phase-ins and phase-outs will be required. Ensuring appropriate treatment of pre-existing certificates and/or entitlements under the prior system will be crucial as a practical matter to secure support and credibility for the new policy and its legal framework, but could also raise difficult questions under fundamental rights law.(1)See, e.g., A Johnston, ‘Legal issues raised by the introduction of take-or-pay contracts for renewables deployment in the UK’, in B. Delvaux, M. Hunt and K. Talus (eds.), EU Energy Law and Policy Issues - The Energy Law Research Forum Collection (Euroconfidentiel/European Study Service, 2008), Section 4, ch. 4.
UK litigation concerning often abrupt government changes to renewables support schemes has raised the issue of fundamental rights protection for those relying upon government schemes as the basis for entering into various contracts, only to have those contracts undermined by later changes in the rules applying to such schemes.(2)A. Johnston, ‘Recent Renewables Litigation in the UK: Some Interesting Cases’ (2015) 13(3) OGEL. There have been public law challenges to policy changes made by governments as a result of austerity: judicial review has often focused upon fundamental rights to reject policy change, although it has also achieved the same result via (traditional) canons of statutory interpretation. In Friends of the Earth v. Department of Energy and Climate Change,(3)[2011] EWHC 3575 (Admin), upheld: [2012] EWCA Civ 28, [2012] Env LR 25.the courts at first instance and appellate level concluded that the changes to the Feed-in Tariff scheme for smaller-scale renewables operated retrospectively for a particular category of schemes which had qualified for the old tariff, by removing vested rights to receive that higher tariff for 25 years and instead replacing it with the new, lower tariff after only 4.5 months. No express authorisation for such retrospective operation could be found in the parent legislation which empowered the government to adopt the new rules in secondary legislation. This case can be contrasted with the decision in Solar Century Holdings v. Secretary of State for Energy & Climate Change,(4)[2014] EWHC 3677.concerning the decision to end the Renewable Obligation scheme (for new solar farms with capacity >5MW) two years earlier than it had originally intended. Here, the judge found that the scheme had to be understood as balancing a range of objectives, meaning that there could be no legitimate expectation that it might not be changed prior to its planned end date. Further, insofar as there was a measure of retrospective impact upon stranded investments made by the applicants - in having begun the process of seeking accreditation for their installations, which would now be wasted effort in view of the changes -, these were held not to amount to vested rights, so that the consultation conducted, the grace period offered for phasing in the new rules, and the reasons given by the government for making the changes were all satisfactory and did not render the impact upon such investments unfair in the circumstances.
In neither case was the issue of fundamental rights crucial to the analysis or the judgments of the courts: the assessment and outcome turned entirely on statutory interpretation, the aims of the schemes and the reasons for amending them, in the context of potentially vested rights and possible retrospectively applicable rules involved in the policy changes. Yet it should be noted that questions of the status of such 'vested rights' in the Friends of the Earth case could easily have triggered analysis under Article 1 of the First Protocol to the ECHR concerning the quiet enjoyment of possessions. This is evident from the analysis in the next group of cases.
These cases concerned actions for damages under the HRA/ECHR, brought by solar installation companies against UK government: Infinis v. GEMA(5)[2013] EWCA Civ 70.and Breyer Group(6)Breyer Group v. Department of Energy and Climate Change [2014] EWHC 2257 (QB) and Department of Energy and Climate Change v. Breyer Group [2015] EWCA Civ 408. See, most recently, Solaria Energy UK Ltd v. Department for Business, Energy And Industrial Strategy [2020] EWCA Civ 1625, where the result in Breyer was essentially followed on the substance (although the claim was ultimately dismissed on limitation grounds).. It has been striking that these claims have been successful. Their focus was upon whether damages were available for breach of Article 1 of the First Protocol to the ECHR under the UK's HRA 1998. In Infinis, this was due to GEMA's failure to accredit two renewables generating installations so that they earned ROCs for given periods; in Breyer, meanwhile, the claims concerned planned renewables installations that had been abandoned as a result of the proposed change in government policy on renewables support, and whether the interests held by the claimants were sufficient to found a claim in damages.
In Infinis, neither the first instance judgment nor that of the Court of Appeal engaged in extensive discussion of the HRA, the ECHR or the case law thereunder. Once the detail of the analysis of the various schemes and secondary legislation had been completed, just 13 paragraphs in Lindblom J.'s judgment(7)[42]-[47], [56], [65] and [103]-[107]. (including the arguments of the parties)(8)[56] and [65], for Infinis and the Authority, respectively. and 5 paragraphs in the Court of Appeal(9)[23]-[27]. were devoted to the claim for just satisfaction under fundamental rights law. Nevertheless, the willingness of the judiciary in these cases to accept this line of argument is significant, as is the absence of any attempt to identify or introduce a threshold(10)As opposed to considering the matter as part of the overall assessment of the need to award damages and their quantification: see [2011] EWHC 1873 (Admin), at [47]. criterion which would assess the (more or less) flagrant nature of any breach(11)Lindblom J. described the situation as follows: “[t]hough acting in good faith, [GEMA] misapplied the statutory scheme, and the claimants were unlawfully denied that to which they were statutorily entitled” (at [106]). From this, Coulson J. in Breyer (n. …, above) concluded that an unlawful act which amounted to an infringement upon rights under Article 1 of the First Protocol to the ECHR meant that such an interference could not be justified (at [135]-[137]): see further the discussion in section 3.2, below. of a fundamental right (as would commonly be found in many continental jurisdictions and, indeed, in the case law of the Court of Justice of the EU, concerning both Member State liability under the Francovich line of cases(12)Case C-6/90 Francovich and Bonifaci v. Italy [1991] ECR I-5357, ECLI:EU:C:1991:428, and Joined Cases C-46/93 and 48/93 Brasserie du Pêcheur v. Germany and R v. Secretary of State for Transport ex p Factortame (No. 3) [1996] ECR I-1029, ECLI:EU:C:1996:79. and liability of the EU's own institutions(13)Case Aktien-Zuckerfabrik Schöppenstedt v. Council of the European Communities [1971] ECR 975, ECLI:EU:C:1971:116.). Instead, the focus of Lindblom J. was on a demonstrable and direct causal link between the violation and the loss or damage,(14)[2011] EWHC 1873 (Admin), at [47], citing Kingsley v. United Kingdom [2002] 35 EHRR 177. and the need to achieve restitution in integrum, placing the applicant, so far as possible, in the same position as if his ECHR rights had not been breached.(15)Ibid., [45]-[46], and [2013] EWCA Civ 70, [26]-[27]: both citing Anufrijeva v. Southwark London B.C. [2004] QB 1124 (at [57]-[59], per Lord Woolf C.J.) and R (on the application of Greenfield) v. Secretary of State for the Home Department [2005] UKHL 14 (http://www.bailii.org/uk/cases/UKHL/2005/14.html) (at [10], per Lord Bingham of Cornhill). In particular, "[w]here the breach of a Convention right has clearly caused significant pecuniary loss, this will usually be assessed and awarded".(16)Anufrijeva (n. 57, above), at [59]. GEMA had conceded at first instance that Infinis's claim to be accredited was sufficiently established to amount to a possession for the purposes of the Article 1 claim, but it endeavoured to withdraw that concession on appeal, and argued that Infinis held no sufficient legitimate expectation that could be recognised as founding an Article 1 claim, in the absence of settled case law or a judicial declaration recognising the validity of such a claim (relying on the Kopecky v. Slovakia judgment(17)[2005] 41 EHRR 43 (ECtHR). of the Strasbourg Court). This was firmly rejected by the Court of Appeal. Sullivan L.J. clarified that the Kopecky case required that a legitimate expectation must "be of a nature more concrete than a mere hope and based on a legal provision or a legal act such as a judicial decision" (his emphasis). For Sullivan L.J., the right to accreditation under a statutory scheme was perfectly adequate to found Infinis's legitimate expectation, and it was not necessary that it should be based upon "both a legal provision giving the applicant an entitlement to some pecuniary benefit and a legal act such as a judicial decision confirming that entitlement"; one or the other would suffice.
The Infinis judgments stand as a robust affirmation of the principle that statutory entitlements under such renewables promotion schemes amount to a clearly defined legitimate expectation that pecuniary benefits will be received where the qualifying conditions are satisfied. The protection of such expectations - or vested rights, as they were described once accreditation had been granted, as in the Friends of the Earth case discussed above - is crucial to the predictability of the policy framework and investment climate relied upon in setting up such schemes, with a view to encouraging capital investment, and renewables development and deployment in any national electricity generating system.
The Breyer litigation, meanwhile, followed on from the conclusions in the Friends of the Earth case discussed above, and addressed the difficult question of what sorts of interests held by the claimants would qualify for protection under Article 1 of the First Protocol to the ECHR, such that interference with those interests would sound in damages. The claimants were companies who had been involved in renewables installation projects which had been abandoned because they would not have been completed in time to meet the cut-off date under the government's proposed new scheme. In summary, concluded contracts (and those so close to final formal conclusion that an agreement was already clearly reached) qualified, as did marketable goodwill that could be established at the time of the interference by the change in the scheme's rules. But other interests such as possible loss of future goodwill and unconcluded contracts did not amount to possessions protected under the ECHR.
The Court of Appeal agreed with almost all of the first instance judge's conclusions in Breyer, differing only on the point that the government's proposal itself was not an unlawful interference per se as a result of the Friends of the Earth judgment; rather, it had to be open for proposals to be made and consulted upon.(18)[2015] EWCA Civ 408, [81], [83]. At the same time, the fact that the proposal was made was acknowledged to be an interference, and one which failed at the proportionality stage to strike a fair balance between the interests of investors in renewables schemes and the public interest, as the first instance judge had also concluded.(19)Ibid., [99]: “[i]n view of (i) DECC's statements that April 2012 was the cut-off date, (ii) the statements that there would be no retrospective tariff changes, (iii) the scale of the investments made by the claimants (and others who were in the same position) in reliance on these statements, and (iv) the fact that the losses caused by the interference with their possessions were dwarfed by the savings achieved by DECC as a result of the interference”; upholding [2014] EWHC 2257 (QB), [145]-[147].
Finally, it is also notable that all discussion in these UK cases concerned the HRA and ECHR: no references at all were made to EU law and its possible fundamental rights implications. Practically speaking, the HRA approach was possible here because the relevant national rules have been secondary legislation (or lower), meaning that the HRA's mechanisms could offer protection on fundamental rights grounds: the story might have been different had primary legislation been involved. In those Member States where fundamental rights offer protection at the constitutional level, there may similarly be less pressure to resort to EU law fundamental rights arguments, yet adding this element alongside arguments based upon domestic constitutional law and the ECHR could prove important in future cases, especially where EU law's supremacy might offer stronger protection for claimants affected by drastic and financially damaging changes in government policy, whether in the renewables field or elsewhere.(20)Note the similar issue concerning government policy change in the energy sector which arose in Germany following the government’s decision to phase out nuclear power from the German electricity system. The legality of this decision and its detailed terms and conditions reached the Bundesverfassungsgericht, which ruled on the case in late 2016 (BVerfG, judgment of the First Senate of 6 December 2016 – 1 BvR 2821/11, https://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/EN/2016/12/rs20161206_1bvr282111en.html) and again in 2020 (BVerfG, Order of the First Senate of 29 September 2020 – 1 BvR 1550/19, https://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/EN/2020/09/rs20200929_1bvr155019en.html). In 2016, the Constitutional Court found that parts of the legislation (2011 original and 2018 amendments) were unconstitutional due to violations of the principle of proportionality concerning the power of use of and disposition over property, and in 2020 it held that the State’s new legislation had failed adequately to address this violation. See: L. Kramm, ‘The German Nuclear Phase-Out After Fukushima: A Peculiar Path or an Example for Others?’ (2012) 3(4) Renewable Energy Law and Policy Review 251 for the background; T. Leidinger, ‘The judgement of the Federal Constitutional Court on the nuclear phase-out in Germany. Every light has its shadow’ (2017) 62(1) Internationale Zeitschrift für Kernenergie 26, on the 2016 judgment; and R. Fleming, ‘German Atomic Energy Act Amendment Illegal - Case Comment BVerfG 1 BvR 1550/19’ (13 November 2020, http://energyandclimatelaw.blogspot.com/2020/11/german-atomic-energy-actamendment.html), on the 2020 Order.