Herbert Smith Freehills Kramer Podcasts
Herbert Smith Freehills Kramer Podcasts
Public Law Podcast EP25: July wrap up of key developments
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In this July wrap up edition of the public law podcast, Jasveer Randhawa is joined by HSF Kramer partners Nusrat Zar and James Wood. They start with an update on ECHR and proportionality, examining recent developments in A1P1 property rights, following the decisions in Dana Astra and BYL. The discussion then turns to practical takeaways for those advising on contentious regulatory matters, including the High Court’s refusal of permission to challenge a late application in Intelligent Land Investments Group, and the evidential threshold required when seeking to restrain the publication of public authority decisions in Euro Car Parks Ltd and South East Water. They also examine the courts’ evolving approach where regulators overstep, as illustrated by R (University of Sussex) v Office for Students, alongside recent High Court guidance on the correct test to be applied in energy price control appeals. To conclude, they flag the Divisional Court's decision on the lawfulness of facial recognition technology and the useful lessons it holds for the future use of AI by public authorities.
Speakers: Jasveer Randhawa (Knowledge Counsel), Nusrat Zar (Partner), and James Wood (Partner).
Summer Wrap Up And Key Themes
SPEAKER_01Hello and welcome back to the HSF Kramer Public Law Podcast Series. I'm Jasvir Randawa and I'm joined again by Nistrat Tsar and James Wood, who are both partners in our London public law and regulatory team. We thought we'd do a wrap-up before people disappear for the summer holidays, and we've had a broad range of really quite interesting decisions from the courts to choose from this time round. So we're going to discuss three main themes today. The Court of Appeals' latest word on Article 1 of the first protocol to the European Convention on Human Rights, A1P1, and proportionality, some important practice points in regulatory matters, and then what happens when regulators overstep and how courts push back. And just before we finish, I'll also just briefly mention a divisional court judgment on artificial intelligence and live facial recognition technology. So we've got a lot to get through, so let's kick off.
A1P1 Goodwill And Proportionality
SPEAKER_01We're going to start with A1P1 and proportionality. Two courts of appeal decisions handed down in fairly quick succession: Dharna Astra and the BYL challenge, both dealing with property rights under A1P1 and both grappling with the proportionality framework. Nasra, can you take us through the main conclusions?
SPEAKER_02Yes, and I think it's striking that despite the cases arising in really quite different factual situations, some common themes emerge from the judgments, including notably the Court of Appeals' acknowledgement that the authorities aren't clear in relation to many key concepts. The scope of goodwill as compared to future income as a potentially protected possession for A1, P1 purposes, is a notoriously vexed question that came up in both cases. So, starting with the Dana Astra case, and that was all about a Belarusian company, which argued that despite notwithstanding its lack of business and assets in the UK, it had a possession in the form of a marketable bundle of business interests, potential future goodwill in the UK. The court rejected that argument robustly and commented that the idea that potential future goodwill in a business that hadn't yet been started in the UK could establish ECHR jurisdiction was an invitation not just to run ahead of the Strasbourg jurisprudence, but flatly to contradict it. The court thought the reach of that argument would be extraordinary. On the appellant's logic, any company anywhere in the world hoping to do business in the UK would fall within the jurisdiction for A1P1 purposes.
SPEAKER_00Yeah, and so a closely related point also arose in BYL, and this is the case that concerned the challenge to the legislation applying VAT on private school fees. So in that case, the schools argued that legislation threatening their viability interfered with their A1P1 possessions in the form of goodwill. And so the Court of Appeal looked at the authorities and acknowledged that the dividing line between goodwill, which can be protected under A1P1, and future income which isn't protected under A1P1, is far from straightforward, which I think having dealt with this in practice, it certainly is. So the Court of Appeal ultimately applied what it described as the clearer test from the countryside alliance case, distinguishing between goodwill and future income not yet earned and to which no enforceable claim exists. Here, the court concluded that the school's ultimate concern was reduced expectations of being able to generate income in the future, which was not protected. Permission to appeal has now been granted to the Supreme Court in this case, though, so this will be one to watch. I think another interesting point across both Dana Astra and BYL is that although both cases turned on proportionality, the Court of Appeal went in different directions on whether to conduct a fresh proportionality assessment.
SPEAKER_02Yeah, I agree that's worth flagging. And what happened in Dana Astra was that the Court of Appeal decided not to conduct a fresh proportionality assessment, taking into account the options open to an appellate court following the Schwidler Supreme Court case, namely to conduct its own fresh assessment of proportionality, or just consider whether the lower court erred. The Court of Appeal relied on the fact that Schwidler had already examined proportionality in the sanctions context, in a situation where the effects of the measures were really considerably greater and more intrusive than in Dharna Abstra. So just being the first case to involve a claimant outside the UK with no assets in the country did not justify a fresh assessment.
SPEAKER_00On the other hand, in BYL, the appeals were said to fall squarely within the circumstances requiring a fresh proportionality analysis, and that was relying on the non-exhaustive list of factors set out by the Supreme Court in Schwidler. And these included that permission to appeal had been granted on substantive grounds, and the case involved the first consideration at appellate level of a new legislative regime with considerable potential significance for society. So interestingly, though, the government tried to argue that a more limited form of review would be appropriate in this case due to the seniority of the judges that had heard the claim in the divisional court. But that argument wasn't found to be persuasive by the court or indeed consistent with Schwidler.
SPEAKER_02Yes, and the methodology point made by the court in conducting that fresh review is really important for anyone looking at proportionality arguments. The Court of Appeal said the divisional court hadn't clearly identified the proportionality test applied. Instead, it had seemed to focus on whether the decision fell within the margin of discretion afforded to the legislature. The Court of Appeal was explicit that whilst authorities refer to metaphors such as margin, area, and varying intensities of review, these aren't legal tests to be applied by a court. Instead, they're helpful tools to assist courts in answering the questions posed by a legal test. So in this case, the applicable test was the four-stage proportionality test from Bank Mellat.
SPEAKER_01So pulling the threads together, the comments in both cases about marketable goodwill really do reiterate what I think practitioners in this area already know far too well, that the boundaries of this concept are really complicated and not easy to apply. But a reduced expectation of future profits or a reduced potential future income stream won't generally be protected under A1P1. And on proportionality, the focus in both cases on the structured approach courts should take to the assessment is really a helpful reminder that the strict application of the Bank Millat test is key without getting distracted by the language of varying intensities of review and margins of discretion, which can sometimes muddy the waters. Yes, the courts should afford appropriate latitude in specialist areas, but in the context of the legal test rather than as a replacement for the strict legal test.
SPEAKER_00Agreed, and thanks,
Missed Deadlines And Mind To Decisions
SPEAKER_00Jazz. So moving to our second theme, which picks up some practical lessons relevant in regulatory matters. And the first of these is about regulatory deadlines and what happens when you miss one, even if it's through an innocent clerical error. And the case that we've got in mind here, Intelligent Land Investments Group, PLC, and the Gas and Electricity Markets Authority, will resonate, I think, across regulated sectors, given the High Court showed how strictly deadlines set by regulators can be enforced. So the background to this case is that the claimant was refused permission for judicial review to challenge OffGem's rejection of its application to a regulatory scheme following a late submission of material. By the time of the hearing in the claim, it was common ground that there had been a clerical error. In fact, the required financial model had been finalised before the deadline, but just wasn't attached to the submission. And the key takeaway, I think, is that even where a regulated entity misses a deadline through an innocent clerical error, there is really no guarantee it will be allowed to submit the missing material later on.
SPEAKER_01Another point of broader application across regulatory contexts is this mind-to decision process. So here OffGem had issued a mind-to decision and invited representations, but it made it clear that it wouldn't accept further material that should have been included by the original deadline. The claimant went ahead and included the financial model and its representations at that stage anyway. The court was clear that the duty of procedural fairness requires a regulator to consider representations, but not necessarily to accept them. Where a regulator issues a mind-to-decision and invites representations, this shouldn't be taken as an opportunity to fix a late or incomplete submission.
SPEAKER_00And I think that's a key point to have in mind. So here the court accepted OffGem's evidence that strict enforcement of the deadline was justified by the need to treat all applicants consistently and fairly, really so as to protect those applicants who had complied with the requirements and avoid a delay to the overall process.
SPEAKER_01I think the numbers in this particular case are really interesting. So the judgment records that OffGem had received 171 applications, and it was minded not to accept 105 of those for insufficient or missing supporting information. So you can see a really strict approach. And regulators running these sorts of schemes will quite often be able to point to policy reasons to really strictly enforce their procedural requirements, such as fairness across applicants and the need to meet really tight delivery timelines.
SPEAKER_02That's really interesting. And taking a step back, I think the clear message for regulated businesses is that they must ensure submissions are complete and accurate before the deadline, rather than relying on a subsequent opportunity to correct them. So a mind or two consultation is a helpful procedural safeguard, but not a second attempt.
SPEAKER_00So I think that's exactly
Trying To Stop Regulator Publication
SPEAKER_00right. So sticking with the topic of the need to prepare full and accurate material, there are some recent cases to pick up in the context of commercial organizations seeking to restrain regulatory publication decisions. So, Nisra, what have the courts said recently on this?
SPEAKER_02Yeah, there's two decisions to talk about. First, Euro car parks and the CMA, and secondly, South East Water and Offwat. And both these judgments involved applications for interim injunctions to prevent regulators from publishing enforcement decisions. Both applications failed, and both judgments confirm that publication of decisions or reports by public authorities in accordance with their functions serves a significant public interest, since those functions will often be for the benefit of a particular class, such as consumers. And publication goes to public interests of both deterrence and transparency. So restraining publication may well engage the right under Article 10 of the ECHR to receive information.
SPEAKER_01And then that means that the well-established test for interim relief is modified by Section 12 of the Human Rights Act. The applicant has to satisfy the court that it is likely to establish that publication should not be allowed, which in most cases will mean showing that they'll probably succeed at trial. The courts impose a strict standard which has been described as a high hurdle or the most compelling reasons for the grant of interim relief to restrain publication of a report or decision by a public authority in this kind of context.
SPEAKER_00And so in both cases the evidence fell short?
SPEAKER_01Yes, significantly short. So one of the claimants relied largely on its CFO's predictions of investors and rating agency reactions. And the court accepted that some harm may be caused, but not that it would be grave or irreparable. And the evidence was also described as incoherent. The other claimant failed to exhibit corroborative evidence, despite there having been concerned raised about the weakness of the evidence at an earlier stage and them having the opportunity to provide information. References to threats and press intimidation over the years and in the past, without further detail and explanation, just weren't enough to persuade the court that publication would lead to the harm that they were alleging.
SPEAKER_02Yes, and I think these cases really reinforce that the threshold for restraining publication by public authorities is extremely high. When trying to meet that strict test, it's crucial that applicants evidence the harm that would be caused by publication in a clear, thorough, and convincing manner.
Courts Correct Regulators Who Overreach
SPEAKER_00Agreed. And so although in that context the cases talk about a high hurdle to restrain a regulator, our third theme shows that regulators do get things wrong, and when they do, the courts will step in. So, Jazz, we're starting in the energy context.
SPEAKER_01Yeah, so in Wales and West Utilities and Competition and Markets Authority, the court didn't agree with how the CMA had put the test to be applied to energy price control appeals and it clarified what it thought was the correct approach. The CMA's description of the relevant test essentially suggested that the Gas and Electricity Markets Authority, which was the relevant regulator here, that their decision would be likely to prevail unless an appellant put forward a clearly superior alternative. And the court rejected that. The words clearly superior require an alternative to be much better, and not simply better than the one adopted by Gima in order to persuade the CMA to intervene. In Mr. Justice Sheldon's view, all that was actually required for the CMA to judge that GEMA had got it wrong was that the alternative approach from an appellant be materially better. So basically weighing up the pros and cons that the alternative offers something more than GMA's approach.
SPEAKER_00So I think what that gets to is where GMA's approach is equally as good as the other approaches, it should be upheld even if the CMA would have preferred a different one. But the court was alert to the practical risk of a wrongly stated test, and that was using the words clearly superior. It really ran the risk of crystallising into a test that threshold that appellants would think they have to meet, and that would then actually be applied by the CMA. And that's here why the correction mattered, even though ultimately the judicial review was dismissed.
SPEAKER_01Yeah, exactly. Another point the court clarified in this case related to the financing duty. Now that's the obligation to have regard to licence holders' ability to finance their activities. And the court explained that this duty requires at least some consideration of the individual licence holder and not just licence holders as a collective or a group, although it doesn't exclude consideration of the group.
SPEAKER_02Yes, I think this is an important judgment that provides clarity for those in the energy sector affected by price controls and considering appeals. And I think it will also give a really helpful steer and be relevant to companies operating in other sectors where price control appeals are relevant, including, for example, water, transport and telecoms.
Office For Students Fine Quashed
SPEAKER_02Jazz, the second decision where a regulator has got things wrong is a really striking one.
SPEAKER_01Yes, it really is. It's the University of Sussex against the Office for Students, and here the High Court quashed a £585,000 fine imposed by the OFS, the Office for Students, on the university. Now there's been a lot of press about this case, and really most of it has focused on the free speech part, but actually the judgment runs across multiple grounds, and some of them have broader application beyond the education sector. One of the grounds, for example, was jurisdictional, so looking at whether a policy statement was a governing document, which here was basically the trigger for the purposes of the statutory and regulatory framework. The OFS argued that the term should be broadly construed so that its regulatory reach was effective and sufficiently wide to ensure compliance, but the High Court disagreed and concluded that the OFS had misdirected itself on this. It found that governing documents was to be narrowly construed, both on its ordinary meaning and in light of the legislative history. And that meant that the policy statement didn't actually fall within that meaning, so there was a lack of jurisdiction. This is a really fundamental point. The regulator must ensure that it has the power to do what it's doing. And where that depends on matters of statutory interpretation, the court won't hesitate to reach its own view and say if the regulator has got it wrong.
SPEAKER_02There was also an issue in this case about how the Office of Students applied the statutory threshold for academic freedom. So the OFS Urden law by expanding the test of protection for staff against a jeopardy of losing their job or privileges to encompass disciplinary exposure, stress, anxiety, reputational effects, and other concerns, none of which fell within the statutory language. So a related point, really, which is that statutory thresholds must be applied precisely. Regulators can't expand the reach of a legal test to capture broader perceived harms.
SPEAKER_00And I think another ground with potentially broader application was a failure to treat current compliance and remediation as mandatory material considerations when deciding whether action was needed and when imposing a substantial fine. So the OFS was subject to statutory duties to undertake regulatory activities in a proportionate manner, targeting action only where it's needed, and many other regulators are subject to similar duties. So in this case, a need for finality in the process didn't justify ignoring the university's remediation efforts in circumstances where 10 months passed between changes having been made to a policy statement and the final decision. So the OFS's attempt to rely on incentivising other providers as a response was described by the court as extremely odd. The desire to send a signal to the sector was not a lawful basis for proceeding to a decision if the breach had already been remedied. Remediation efforts will often be relevant for a regulator to address before deciding on a sanction.
SPEAKER_01I think for me, possibly the most notable point from this case is the finding of predetermination and a failure to approach the decision with an open mind. The court pointed to a number of factors that indicated that the OFS had a closed mind, so its deterrence strategy, its settlement stance, and its overarching strategy just from the beginning of looking for a test case that would send a strong signal. It refused to enter into settlement negotiations unless the university accepted the alleged breaches in their entirety. Now that isn't always fatal, but in this context, it did strongly indicate the OFS's determination to find significant breaches really to further its own objectives. Another indicator was its failure to investigate other universities that had adopted identical policies. It only wrote to them after the final decision was published.
SPEAKER_02So while regulators may lawfully set an enforcement strategy, they can't approach decisions with a predetermined outcome. Regulated entities should be alert to warning signs. For example, a regulator characterizing its own investigation as a test case or deterrence vehicle, settlement terms that are conditional on admitting all alleged breaches, and a failure to investigate comparable entities or pursue sector-wide guidance as an alternative.
SPEAKER_01Yeah, thanks, Nestra. So that's all on our main themes for today.
AI And Live Facial Recognition
SPEAKER_01Before we sign off, I just wanted to flag a judgment that puts artificial intelligence firmly in the dock. The divisional court handed down a really significant decision in Thompson and Carlo and the Metropolitan Police Commissioner, which examines and affirms the lawfulness of the Met Police's use of live facial recognition technology. And I think this judgment provides really useful guidance on the framework and safeguards that might be required for the future use of AI by public authorities. If you'd like to know more about this judgment and its significance for AI and public law, Andrew Lidbetter, who's a consultant in our team, Andrew and I are recording a dedicated slot on our cross-examining AI podcast series where we're looking at this case in a bit more depth. And that episode will be available soon, so do look out for it. And if you can't wait, then we do already have a blog post on that case.
Practical Takeaways And Closing
SPEAKER_01But that now brings us to the end of our July 2026 wrap-up. I think it's been a particularly eventful few months, so from the Court of Appeal trying to draw clearer lines around what A1P1 actually protects and how proportionality should be reasoned, to some sharp practical reminders about the importance of meeting deadlines and building a compelling evidential case before going to court. But alongside that, we have seen the courts hold regulators firmly to account, both where enforcement is overreached and where legal tests have been misstated. As always, you can find more on these cases on our HSF Kramer Public Law blog. And all that remains is for me to say thank you to Nasritten James for joining me today, and thank you for listening. We look forward to bringing you more updates in future episodes of the Public Law podcast.