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Court of Appeal rejects appeal over summary judgment rejecting damages claim for breach of EU State aid rules in waste collection service

The Court of Appeal has rejected an appeal by a private waste business over a High Court judge's decision to award Durham Council summary judgment in relation to a damages claim for alleged breach of EU State aid rules in the running of its waste collection service.

In The Durham Company Ltd v Durham County Council [2022] EWCA Civ 66 the claimant, The Durham Company Limited, which trades as Max Recycle, failed to convince Lord Justice Arnold that a breach of European Union state aid rules had occurred.

Max Recycle appealed against an order made by HHJ Keyser dismissing its claim for breach of Article 108(3) of the Treaty on the Functioning of the European Union.

The council provided a household waste collection service and some commercial waste collections and charged for the latter.

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It had a fleet of 86 waste collection vehicles and 275 employees, who also provided the commercial waste collection services, and both types of waste were disposed of together.

Max Recycle complained that the council's charges for commercial waste were lower than its own and that it lost significant business as a result.

The company argued the council was able to charge lower prices for its commercial waste collection services because it used the same vehicles and infrastructure as for its household waste collection services and so cross-subsidised the price of commercial waste collection services out of its general revenues, which amounted to the provision of state aid contrary to EU law.

A further issue was that council’s commercial waste collection services are exempt from VAT whereas those offered by private firms are not. Max Recycle had challenged this unsuccessfully at an earlier proceedings.

In July 2018 Max Recycle complained to the European Commission that Durham had breached state aid rules, which the Directorate General for Competition eventually rejected.

Durham argued that breach of Article 108(3) was not actionable per se, but only if the conditions for state liability were met, including that the breach was sufficiently serious, and said Max Recycle had nor pleaded any facts which could be relied upon in support of such an allegation.

Max Recycle argued on appeal that HHJ Keyser erred in finding that it had no real prospect of showing that any breach of Article 108(3) could be sufficiently serious to merit damages.

It also said his reliance on Durham’s selectivity argument - whether a state measure favours 'certain undertakings or the production of certain goods’ - was procedurally unfair and that he erred in finding that declaratory relief as to the past position under Article 107(1) would serve no useful purpose.

Arnold LJ said the judge had not been inconsistent in allowing the council’s selectivity argument and that both the original judge and the commission’s assessments showed “the present case is a long way from the kind of egregious, wilful, deliberate or at least manifest breach of EU law that is required for an award of Francovich damages”.

He said Max Recycle’s application for declaratory relief would now serve no useful purpose as “the judge was clearly correct to say that a declaration would be academic given that the UK was no longer going to be bound by EU law on this subject”.

Counsel for Max Recycle argued that a declaration as to the position under EU law “could cast light on the position under the [Subsidy Control] Bill, assuming it becomes law. In my view this is a hopeless argument. It would plainly do no such thing”, Arnold LJ said.

Lord Justice Coulson agreed that the appeal should be dismissed but Lord Justice Edis would have allowed it.

Mark Smulian

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