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State aid damages claim dismissed by Court of Appeal


On 1 February 2022, the Court of Appeal dismissed an appeal against an order of 25 November 2020, made by HHJ Keyser QC, sitting as a judge of the High Court in the Competition List of the Business and Property Courts (Chancery Division), in which he granted Durham County Council ‘reverse’ summary judgment on its defence against a Francovich damages claim for breach of EU State aid rules brought by The Durham Company Limited trading as Max Recycle.

Max Recycle runs a commercial waste collection and recycling business in north east England. It claimed that it was being undercut by the Council’s statutory commercial waste collection services which are provided for a ‘reasonable charge’ under section 45 Environmental Protection Act 1990. Max Recycle claimed that the Council was using its public sources of revenue to cross-subsidise those commercial waste collection services and that this alleged cross-subsidy constituted unlawful State aid as it had not been notified to the European Commission as required by the last sentence of Article 108(3) of the Treaty on the Functioning of the European Union.

The majority of the Court of Appeal (Arnold and Coulson LJJ) upheld the Council’s defence that any alleged breach of the State aid rules was not, on any view, sufficiently serious under the EU Francovich principle and therefore did not give rise to a claim for damages. The Court agreed. If there were any breach, it was not an inexcusable breach for Francovich purposes and so did not give rise to a right to claim damages.

A separate claim for declaratory relief was also rejected because the EU State aid rules have ceased to apply to the Council, new subsidy control laws are based on the WTO and UK/EU Trade and Cooperation Agreement and so a declaration as to EU law would be devoid of purpose.

Edis LJ delivered a short dissenting judgment.

The judgment is here.

Aidan Robertson QC acted for the successful Council instructed by DWF Law LLP

An additional limitation point about the availability of Francovich damages is worth noting (although it did not arise in this case).  Francovich damages claims for matters arising prior to 2021 are now subject to a special limitation period expiring at the end of this year, in December 2022. This is because Francovich liability was abolished under the European Union (Withdrawal) Act 2018 with effect from 11pm on 31 December 2020 by Schedule 1, paragraph 4. However, claimants wishing to bring a Francovich claim for damage arising before that day have two years from that date to do so under Schedule 8, paragraph 39(7).