Jonathan Blunden, Oliver Slater and Christopher Watkins discuss the recent judgment in a case regarding the takeover of Bulb Energy by Octopus Energy and state funding provided to Bulb after it entered administration.
The Court of Appeal has handed down its judgment in R (British Gas Trading and E.ON) v Secretary of State for Energy Security and Net Zero.
This judgment follows the Divisional Court’s earlier refusal to grant British Gas and E.ON permission to judicially review decisions made by the Secretary of State for Business, Energy and Industrial Strategy (BEIS, now the Department for Energy Security and Net Zero, DESNZ).
The decisions in question concerned state funding provided to Bulb Energy Limited (Bulb) and approval of the transfer of Bulb’s business to Octopus Energy Group Limited (Octopus) after Bulb entered special administration in 2021.
The claimants challenged BEIS’s decisions, asserting that the funding provided to Bulb (a) contravened public law principles and (b) breached subsidy control provisions under the UK-EU Trade and Cooperation Agreement (TCA).
Although the judgment directly addresses the TCA, it is of broader relevance for the application of current subsidy control law under the Subsidy Control Act 2022 (SCA), which replaced the transitional arrangements previously in place.
The implications under the SCA are considered further below.
While the Divisional Court initially refused judicial review due to “undue delay,” it nevertheless reviewed the substance of the claims. The appellants appealed against this refusal specifically on subsidy control grounds, focusing on:
- The finding of undue delay and a lack of promptness;
- The standard of judicial review applied by the Divisional Court; and
- The application of TCA subsidy control principles and related exemptions for subsidies responding to economic emergencies.
The Court of Appeal concluded that, although the Divisional Court erred in refusing permission outright, the appeal ultimately failed on its substantive merits.
Undue delay
Both the TCA and SCA require subsidy control challenges to be brought within one month of subsidy publication, with an additional month granted if pre-action information requests are made.
The funding decision was published on 29 October 2022, with claim forms subsequently issued by the appellants on 28 and 29 November 2022, following pre-action correspondence.
Section 31(6) of the Senior Courts Act 1981 and CPR 54.5(1) require judicial review applications to be filed promptly and allow the refusal of permission due to undue delay.
The Divisional Court found the claimants guilty of undue delay and refused permission.
On appeal, the Court of Appeal agreed that seeking to quash the Bulb-Octopus transaction justified the Divisional Court’s decision due to potential severe disruption.
However, it reversed the decision regarding alternative financial remedies, ruling it reasonable that the appellants needed additional time to consider BEIS’s detailed subsidy control assessment before issuing their claims.
This suggests a two-tier test for undue delay:
- A stringent standard applies when claimants seek to quash subsidy decisions.
- A more lenient threshold applies to claims seeking financial remedies.
Under the SCA, this distinction specifically relates to remedies awarded by the Competition Appeal Tribunal rather than initial permission to challenge subsidy decisions (s31(6) SCA).
Standard of review
The Divisional Court had applied a “light-touch” proportionality review, refraining from substituting its judgment for that of BEIS.
The appellants argued the court should independently determine compliance with the subsidy control principles, particularly regarding proportionality.
However, the Court of Appeal rejected this argument, clarifying that subsidy decisions remain subject only to conventional domestic judicial review principles, notably rationality and legality – not proportionality.
Courts may address straightforward legal issues, such as whether a subsidy constitutes an unlimited guarantee, but will not replace the policy judgments of public authorities.
Furthermore, the appellants challenged BEIS’s conclusion that no subsidy was conferred on Octopus. The Court of Appeal reaffirmed that judicial intervention is limited to circumstances of irrationality or clear legal error, and differences of rational opinion alone would not warrant overturning BEIS’s determination.
Subsidy control principles and exemptions
The appellants alleged that the Bulb sale process was flawed as it lacked transparency and competitiveness.
However, the Court of Appeal endorsed the Divisional Court’s conclusion that BEIS had reasonably considered the process fair, transparent, non-discriminatory, and competitive, and that its outcome provided appropriate evidence of subsidy compliance.
Regarding exemptions for subsidies responding to economic emergencies, the TCA prohibits subsidies for rescuing or restructuring unless certain conditions are met.
Temporary subsidies responding to national or global economic emergencies are exempted from this prohibition.
The appellants argued the exemption was improperly applied, as Bulb’s financial difficulties predated the Ukraine invasion.
The Court of Appeal dismissed this argument, finding that the relevant economic emergency BEIS addressed was the imminent threat to Bulb’s customers, a situation intensified by the invasion of Ukraine.
An additional argument, concerning BEIS’s alleged improper reliance on reviews by Ofgem and non-intervention by the CMA, was abandoned by the appellants at the oral hearing and thus was not considered by the Court.
This judgment thus clarifies the limited scope of UK courts’ intervention in subsidy control cases, reaffirming reliance on conventional judicial review standards rather than intensive proportionality scrutiny.
Conclusion
The Court of Appeal’s decision provides valuable clarity on (a) the interpretation of “undue delay” in judicial review claims, (b) the appropriate standard of judicial review in subsidy cases, and (c) the practical application of subsidy control principles and exemptions.
The judgment brings enhanced certainty for public authorities and potential challengers regarding subsidy decisions.
Parties should note that proportionality will not be independently reviewed by the courts; rather, reviews will focus strictly on legality and rationality.
Sharpe Pritchard’s market-leading subsidy control team has a wealth of experience advising on the interpretation and application of subsidy control legislation and EU State aid rules.
The team advises on the full range of subsidies, from minimal financial assistance awards to subsidies of particular interest considered by the Subsidy Advice Unit.
Our experienced and active dispute resolution team is experienced in advising both public authorities and challengers in respect of judicial review claims.
This article is for general awareness only and does not constitute legal or professional advice. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it.
Jonathan Blunden is a Partner, Oliver Slater is a Associate and Christopher Watkins is a Trainee Solicitor at Sharpe Pritchard LLP.
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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it..
