13 July 2023

The Court of Appeal has handed down judgment on the appropriate management of costs for appeals against subsidy decisions under the Subsidy Control Act 2022 (the SCA): Durham County Council v The Durham Company Ltd [2023] EWCA Civ 729.

This claim is the first application for statutory judicial review under the SCA. A first hearing of issues took place on 3-4 July 2023, meaning the first substantive judgment under the SCA is anticipated this summer. However, in this initial judgment the Court of Appeal laid down principles for how the costs of these appeals should be controlled going forward.


The Durham Company Limited (trading as Max Recycle) is a waste-disposal company in County Durham. Durham County Council is the waste collection authority for the county. The Council competes with Max Recycle to provide commercial waste collection services to local businesses.

Max Recycle alleges that the Council’s charging practices for trade waste (common waste produced by businesses) are an unlawful cross-subsidy, whereby its non-commercial household waste operation (funded by council tax) subsidises its commercial trade waste operation. In brief, Max Recycle contends that the Council charges rates that would be unsustainable if its trade waste business operated independently.

The dispute is long running: it was the subject of judicial review proceedings in 2014, a complaint to the European Commission in 2018 and a claim for breach of EU state aid law that failed in the High Court and Court of Appeal in 2020 and 2022. This SCA iteration came before the President of the Competition Appeal Tribunal (CAT) in March and before the Court of Appeal in late June. Both courts sought to establish principles of cost management for the infant SCA appeals regime.

At first instance, the CAT imposed cost caps (i.e., limited the potential liability of each party for the other party’s costs) of £50,000 for Max Recycle and £60,000 for the Council. While neither party sought that order, Max Recycle was content with it but the Council was not. The Council appealed on the basis that the order was unlawful and, by unanimous verdict, the Court of Appeal agreed that the CAT’s cost caps were wrong in principle.

What did the Court decide?

At first instance, the CAT imposed aggressive cost controls. The cap figures were significantly below the President’s assessment of what litigation costs would be reasonable and proportionate for each party to incur. In this first case, the President consequently set out to indicate what the CAT’s general approach to costs management would be. His express ambition was to ensure that costs did not have a chilling effect on parties reasonably pursuing or defending SCA appeals:

The decision, in any given case, whether or not to award a subsidy is likely to be an important one, where it is critical that decision-makers do not feel inhibited by a threat of challenge – both when making a subsidy decision and when deciding whether to resist a review. Equally, challenges to subsidy decisions matter, and the risk of an enormous costs bill on failure should not be an undue deterrent to bringing section 70 reviews.”

The Court of Appeal commented that his ambition was “entirely laudable” but held that the CAT had no jurisdiction to impose the caps in the first place.

The Court of Appeal determined that the starting point should be that the successful party in any appeal should recover its reasonable and proportionate costs, which is the normal position in High Court litigation. It indicated that the CAT should, in most cases, be able adequately to protect against disproportionate costs and potential chilling effects by making appropriate case and cost managing orders and then assessing the successful party’s costs at the end of proceedings.

Who is this important to?

This is significant for those taking subsidy decisions or potentially interested in challenging them.

The SCA’s subsidy control regime gives interested parties a right to challenge public authorities’ subsidy decisions. However, litigation costs can be significant and will be a material factor for a party deciding whether to commence an appeal and for both parties in deciding how appropriately to conduct the appeal.

What are the key takeaways?

Sir Marcus Smith, the President of the CAT, intended to use this first opportunity to set down principles that would avoid the costs of litigation having a chilling effect within the SCA regime. He indicated that rigorous cost control should be expected in future appeals. While the Court of Appeal decided that his method of cost control was wrong, it supported the underlying ambition.

The Court of Appeal’s preference for cost budgeting and detailed assessment will likely mean that parties’ cost exposure will be somewhat higher going forward than it would have been had rigorous cost caps been approved and it is also likely that the overall cost of SCA appeals will be higher (e.g., because costs proceedings may need to be commenced after the conclusion of the liability trial). However, the CAT’s future practice is likely to remain focussed on keeping the issues in dispute narrow and documentary, witness and factual evidence contained, potentially with proceedings in expedited timeframes, to keep things fast, cheap and simple. 

Key contact

Ian Tucker

Ian Tucker Partner

  • Dispute Resolution
  • Procurement Disputes
  • Procurement and Subsidy Control

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