R (on the application of Rotherham MBC) v Secretary of State for Business, Innovation and Skills [2014] EWCA Civ 1080

Key Points 

  • The Court of Appeal held that the Secretary of State for Business, Innovation and Skills was entitled to a wide margin of discretion when allocating EU structural funding.
  • The claimants applied for judicial review on the basis that the decisions made by the Secretary of State had breached the EU principles of equal treatment and proportionality.
  • The Court held that the proportionality challenge in this case did not add anything to the equal treatment challenge and that, in principle, the more complex and the more judgment-based the decision, the greater the margin of discretion should be afforded to the decision-makerIn a multi-topic e-bulletin, 10 items should be the maximum. If more material is available please consider sending out the bulletin more regularly.

Background

Claimants may rely on EU law where they consider that a decision of a public body is unlawful because it conflicts with EU law. Under EU law, an individual member state has a margin of discretion in relation to the implementation of EU legislation in order to achieve the objectives of that legislation. The width of this margin depends upon the circumstances of the case and nature of the decision. Decisions may also be challenged on a domestic basis where a claimant considers that a mandatory relevant consideration was not taken into account

Facts

In March 2013 the Secretary of State announced how the UK's allocation of EU structural funds were to be allocated as between England, Northern Ireland, Scotland and Wales for the 2014-2020 funding period, and in June 2013 the Secretary of State confirmed how these funds would be allocated as between the different English regions.

The claimants were four local authorities in the South Yorkshire area and five local authorities in the Merseyside area. The claimants alleged that the structural funds allocation decisions produced discriminatory and disproportionate funding cuts for their regions.

The EU budget determines the amount of structural funding for each member state. The calculations by the Commission refer both to individual member states and to regions within each state, which are separated into various categories by Council regulations. Merseyside and South Yorkshire fell into the "Transition" category.

The claimants submitted that the Secretary of State had breached the EU law principles of equal treatment and proportionality in relation to the two decisions on the allocation of the structural funds for 2014-2020.

There was also a domestic public law challenge that the Secretary of State failed to take account of a mandatory relevant consideration, namely the economic needs of "Transition" regions.

Decision of the High Court

The High Court held that the decisions of the Secretary of State had failed to comply with the public sector equality duty under s149 of the Equality Act 2010, but dismissed the other grounds of challenge under EU and domestic law referred to above.

It found that a proportionality challenge can only add significantly to a rationality challenge where there has been derogation from a specific legal standard, and in this case there is no legal standard imposed by EU law as to how to allocate funds within the 2013 regulation categories.

It was held that the Secretary of State had a wide margin of discretion because the decision involved "political policy and macro-economic judgement concerning the allocation of funding at the highest level" and therefore the court should only interfere "if a very high threshold of unreasonableness is met".

Court of Appeal Decision

The Court of Appeal dismissed the claimants' appeal, agreeing with the High Court's conclusion that the Secretary of State was entitled to a wide margin of discretion when allocating EU structural funding

Proportionality

The court agreed that a proportionality challenge can only add significantly to a rationality challenge where there has been derogation from a specific legal standard, and that in this case the proportionality challenge added nothing to the equal treatment challenge.

The court found that a wide margin of appreciation was appropriate in this case because the decisions in question were concerned with "matters of high level policy and economic, social and political judgment" involving complex assessments of a variety of factors.

The court noted that the objectives of allocating of the structured funds to achieve "smart, sustainable and inclusive growth" under the under the 2013 regulation were not limited to "narrow issues of economics" but included a variety of strategic considerations such as employment policies and environmental targets. The court noted that these objectives could be achieved in many different ways and therefore, following R (on the application of Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, the court should only interfere if it is satisfied that the decisions were "manifestly inappropriate or manifestly wrong".

In this case the court considered that the claimant's submissions did not demonstrate that the decisions of the Secretary of State were manifestly inappropriate or manifestly wrong.

Equal Treatment

The court stated that EU law required the decision-maker to apply the equal treatment principal in meeting the objectives of the legislation. It considered what margin of discretion should be afforded to the Secretary of State in deciding upon the comparability of regions for this purpose.

The court saw no reason why the width of the margin of discretion in relation to a decision on comparability should be approached differently from any other decision made within the scope of EU law, noting that "In principle, the complex and more judgment-based the decision, the greater the margin of discretion should be afforded to the decision-maker."

As the Secretary of State was required to have regard to a number of overlapping considerations in achieving "smart, sustainable and inclusive growth" and the 2013 regulation does not prescribe the weight to be given to each of them, then the exercise of comparing one region with another was "multifactorial" and involved a "substantial number of value judgments of an economic and social nature". Hence the Secretary of State was entitled to a wide margin of discretion.

The court found that in this case the complex nature of the exercise meant that it was unsurprising that the comparability issue exposed some inconsistencies at a detailed level but, given the width of the margin of discretion, the court could only interfere if a "high standard of unreasonableness" was met. In this case it had not been.

Domestic law challenge

The court found that the Secretary of State did have regard to the economic needs of all the Transition regions and had not failed to take into account a mandatory relevant consideration.

Comment

This case illustrates the extreme reluctance of the courts to limit the discretion afforded to public bodies under EU law with regard to decisions relating to public social and economic policy, especially where such high level decisions are required to take into account a variety of complex and interrelated factors.

In these situations the court will be unwilling to intervene, even where a decision shows some "rough edges" or inconsistencies in analysis, unless the decision was irrational, manifestly inappropriate or manifestly wrong. Simply seeking to use the concept of proportionality because of a link to EU law will not necessarily therefore lower the standard of review from the usual high level in domestic public law, unless there has been derogation from a specific legal standard.