The courts in England and Wales have been developing the concept of the Protective Costs Order (PCO) for a number of years and the principle has, broadly speaking, been imported by Scots common law in the form of the Protective Expenses Order (PEO). In either case the basic premise is simple they are orders made by the court to protect an unsuccessful claimant in a judicial review from exposing themselves to excessive financial liability.
Despite the subtle differences between the two jurisdictions, there has been general criticism of the UK position from a European level, on the grounds that the scheme of granting PCO does not comply with the Public Participation Directive (Directive 2003/35/EC) (PPD). The PPD implemented the Aarhus Convention into the EU and states that access to legal remedies in environmental cases should not be “prohibitively expensive”. In April 2011, the Commission announced that it was taking the UK to the European Court of Justice (ECJ) over the high cost of challenges to decisions on environmental issues. In the light of this announcement there has been UK wide recognition that something must be done in order to meet our European and international commitments in this sphere.
England and Wales - Consultation paper
On 19 October 2011, after coming under pressure at all levels (Aarhus Compliance Committee, the Commission, the ECJ and domestic pressure from reports by Jackson LJ and Sullivan LJ); the Ministry of Justice published a consultation entitled Cost Protection for Litigants in Environmental Judicial Review Claims. The consultation applies to England and Wales and the exercise closed on 18 January 2012. The consultation voices proposals which are intended to bring a degree of clarity to an area which still places a great deal of discretion in the hands of the court.
The main proposals discussed in the consultation are as follows:
- The rules are to apply to judicial review cases falling under the Aarhus Convention and they are applicable to all claimants regardless of whether they are a natural or legal person;
- A PCO will be obtained by lodging an application but need not be backed up by grounds and evidence except in special circumstances;
- A PCO will only be granted if permission to apply for judicial review is granted;
- The PCO will limit the liability of the claimant to pay the defendant’s costs to £5,000 and also limit the liability of the defendant to pay claimant’s costs to £30,000;
- The defendant may apply to have the cap removed if the claimant is not in need of costs protection – where information on the claimant’s resources is publicly available. Consultees are also asked whether there should be an option to raise the cap as well as remove it.
Scotland - Consultation paper
The idea of the PEO is less established in Scotland than in England. That said, the situation is similar between the jurisdictions in that the basic principle is recognised by the courts (McArthur v Lord Advocate(2006) SLT 170) but no procedure has been formalised in this respect. Indeed the Scots courts have, broadly speaking, endorsed the approach of the English courts albeit that the courts in Scotland have, because of the PEO’s relatively recent standing in Scotland, been less generous to the applicant on a case by case basis (The petitioner was awarded a cap of £5,000 in the English case of R (Medical Justice) v. Secretary of State for the Home Department (2010) EWHC 1425 and £40,000 in the Scottish case of Road Sense v Scottish Ministers (2011) CSOH 10). It is thus unsurprising that, on the back of numerous recent high profile cases in this area (Road Sense v Scottish Ministers (2011) CSOH 10), and the recent exertion of pressure from the European Commission, the Scottish Government launched a consultation on PEO of its own in January 2012: Legal Challenges to Decisions by Public Authorities Under the Public Participation Directive 2003/35/EC: A Consultation. This consultation is currently running and ends on 3 April 2012. The key points are as follows:
- A PEO will only be available in the case of decisions made by public authorities under the PPD. This has the effect of substantially limiting the PEO to those planning matters where an environmental impact assessment is or was required;
- The respondent may apply for the petitioner’s cap to be removed;
- The respondent will not be able to require the petitioner to disclose their means; and
- A PEO will limit the liability of a petitioner to pay the respondent’s expenses to a maximum of £5,000 should their petition fail. A PEO will also limit the liability of the respondent to pay the petitioner’s costs to a maximum of £30,000 should the petition be successful.
Consequences for the energy sector
Interestingly, the two jurisdictions have agreed on the maximum liability a claimant can be exposed to in respect of the respondent’s expenses and a grant in most circumstances will be automatic. The proposed liability limit of £5,000, and cross cap of £30,000 will no doubt achieve compliance with the PPD but is nonetheless likely to be a topic of debate. This figure is seen as an attempt to balance the need to provide an accessible means of challenging decisions with the need to deter vexatious litigation which will cause delay and expense to both public authorities and developers.
The question which must be asked, both north and south of the border, is whether or not this maximum liability in respect of the respondent’s costs is high enough to deter those determined to spuriously delay the progress of a development? It is a logical assumption, especially when compared with the existing PEO precedent in Scotland (The liability in the event of failure in McGinty v Scottish Ministers (2010) CSOH 5 was restricted to £30,000 and a cap of £40,000 was awarded in Road Sense v Scottish Ministers (2011) CSOH 10), that the new proposals will encourage more legal challenges to be brought which may result in major repercussions for the energy sector as a whole. The issue is particularly pertinent in Scotland where there is no process in place for filtering out judicial review claims with no prospect of success.
The majority of significant infrastructure projects and especially those falling under the Environmental Impact Assessment category, such as large wind farms, power stations and other Schedule 1 & 2 developments (The Town and Country Planning (Environmental Impact Assessment) (Scotland) Regulations 2011) are likely to be controversial and attract legal challenge. Giving claimants a more generous “insurance policy” in this respect may lead to further unreasonable delay of major planning and infrastructure developments through increased challenge.
Axa General Insurance Limited v Lord Advocate  UKSC 46
The above proposals cannot be looked at in isolation from the recent Supreme Court judgement of Axa General Insurance Limited v Lord Advocate  UKSC 46, this case was considered in a previous E-Bulletin.
Where before, there was uncertainty as to whether interest groups had the requisite “title and interest” to challenge administrative decisions, it would now appear that, in the light of this case, they can if they are acting in the public interest in doing so. Why is this important? Both of the consultations above suggest that there should be no requirement for the applicant to declare their means if it is not in the public domain already. It follows that it will be relatively easy and inexpensive for incorporated vehicles to be created for the purpose of challenge and fundraising in these cases. In turn, it may be argued that the £5,000 cap becomes a more obtainable target for those individuals or pressure groups intent on causing delay to contentious developments.
Despite small differences in the proposals, it is clear there is a push to make it both cheaper and easier to challenge the decisions of a public body. Both in the light of Axa and with reference to the suggestions in these consultation exercises, it can clearly be seen that in attempting to comply with our obligations under Aarhus and the PPD, the door is inevitably being left ajar to entice a greater level of participation in these matters. As such it is important for any developer of any major project to engage with the public and the local authorities and make their proposed actions known at an early stage. While the applicant will still have to pay their own legal expenses, which will doubtless be sizeable, the security of knowing that there is a cap of £5,000 in relation to the other side’s cost will likely act as a catalyst for challenge. From a Scottish perspective in particular, there is no time limit for bringing a judicial review challenge, no means of filtering out claims which have no prospect of success, and a relatively straightforward planning appeals procedure. If these reforms were to go ahead, it may be argued that a greater overhaul of the judicial review and planning process would be required to ensure the correct balance is struck between the requirement for public participation and the need for preventing undue delay in the development process. As they stand, the knock on effect of these proposals at a UK wide level is that in a time of financial insecurity, large projects typical of those pursued by the energy sector will be subject to further delay from well organised individuals and groups wishing to challenge.