Partner Tom Snelling examines the judgment in Hughes v Board of the Pension Protection Fund  EWHC 1598, handed down today, and more broadly how judicial review in England and Wales grapples with the regulation of controversial products, in Artnet.
Tom’s article was published in Artnet, 24 July 2020, and can be found here.
On 12 June 2020, an application was made to the UK Supreme Court for permission to appeal the judgment of the Court of Appeal in R (on the application of Friends of Antique Cultural Treasures Ltd) v The Secretary of State for the Department of Environment, Food & Rural Affairs  EWCA Civ 649, which is more commonly known as the ivory trading ban case. I understand that the permission application has as one of its focuses, the lack of compensation for the legislative interference with rights.
Earlier today, judgment was handed down in R (on the application of Hughes) v Board of the Pension Protection Fund  EWHC 1598 (Admin). Although covering a very different subject matter, this case was one where, exceptionally, the justification for legislative interference was so weak as to be without reasonable foundation. In the words of Lewis J, “[t]his is one of those probably very rare cases where it is right to reach the conclusion that the imposition of the [measure] is unjustifiable“.
These two developments in the space of two weeks provide a good opportunity to look again at how judicial review in England and Wales grapples with the regulation of controversial products and when, if at all, compensation will be paid for product bans and deprivation of property rights.
The May 2020 judgment of the Court of Appeal upheld the High Court’s dismissal of a challenge to the UK’s 2018 ban on ivory trading. A company founded to represent the interests of antique ivory dealers and collectors argued (unsuccessfully) that the UK’s “world-leading” Ivory Act 2018 was contrary to EU law because the ban was a disproportionate interference with the free movement of goods and antique dealers’ rights.
The Court of Appeal judgment is interesting to me as it deals with the issue of how the courts engage with legislation that infringes fundamental rights to pursue lauded policy goals but with serious questions posed as to the effectiveness of the measures.
Here, there was no doubt as to the importance of attempts to enhance the protection of African and Asian elephants in the face of harrowing and ongoing threats to their survival. The question which caused more debate was the effectiveness to that goal of banning, with limited exceptions, the sale of antique worked ivory, including netsuke (small carved ornaments, often attached to the sash of a kimono, and crafted in Imperial Japan between the 17th and the early 20th century). Bluntly put, the appellant’s position was that the suggestion that trade in such antique ivory makes a direct/indirect contribution to the poaching of elephants today had not been proven and was unsound.
Despite dismissing their application for judicial review, at first instance Jay J was clearly sympathetic to the applicant’s case and at times unimpressed by the evidence relied upon by the Secretary of State (“…somewhat of a mélange of evidential shards varying in their weight; anecdote; and inference and/or opinion, the latter often very strongly held and emotionally expressed, and therefore not necessarily entirely dispassionate“). The Judge had made clear he was not impressed with important aspects of the Impact Assessment: “The poor quality of aspects of the IA means that the margin of appreciation dwindles to the nugatory in connection with my assessment of the evidential terrain it purports to cover“. The Secretary of State submitted that the Ivory Act would be proportionate even if there was no evidence that it would do any good. In its view, the ban on ivory trading “was a moral and political judgment which could be supported by intuitive common sense alone“.
There are echoes here of a case in which I was involved: R (BAT Ltd) v Secretary of State for Health  EWHC 1169 (Admin) in respect of UK legislation banning tobacco product manufacturers from using their valuable intellectual property (including iconic non-word trade marks like the Camel ‘beast’ or Marlboro ‘chevron’) from the packaging of their products or on the products themselves without compensation to rights’ holders. Indeed, the judgment of Green J (as he then was) in BAT is referred to in a number of places by the Court of Appeal in the ivory trading case – perhaps not surprising as one of its three-member panel was Green LJ (as he now is).
At the heart of the BAT case was again the question of the effectiveness of the legislative intervention (the trade mark ban) on a lauded public policy goal (reducing smoking to the maximum degree). Also considered was the principle that it is only in exceptional cases that a deprivation of property absent compensation will be held to be proportionate. Having posed the question ‘how exceptional is exceptional?’ (albeit obiter as he considered the legislative measures to amount to a control on use of the relevant trade marks), Green J made crystal clear that he viewed the facts of the BAT case as exceptional “such that even if this were a case of absolute expropriation no compensation would be payable“.
The Court of Appeal’s judgment in the ivory trading case is worth reading in full, but one area I want to emphasise (which brings my elephants, camels and cheese together), and I understand now forms part of the permission to appeal application, is the final complaint before the Court of Appeal: that the Judge failed to take due account of the fact that the trading bans undermined fundamental rights, primarily the right to respect for property (under Article 1 of the First Protocol (“A1P1“) of the European Convention on Human Rights (the “ECHR“), as incorporated into UK law by the Human Rights Act 1998 and Article 17 of the European Charter) and specifically that, absent a compensation scheme, the ivory trading ban could never be proportionate.
The start point is paragraphs 168 to 169 of the first instance judgment:
“If this were a case of complete deprivation of a property right compensation would probably have to be paid in order to render the interference proportionate. [The Applicant’s Counsel] submits that the interdiction of the alienation of ivory strikes at the heart of fundamental freedoms and of proprietary rights generally, and that the “very essence of the right” is violated… If an interference strikes at the very essence of a fundamental right, it cannot be justified at all and the inquiry would end there; but that is not in truth the Claimant’s case…
The interference with the Claimant’s rights … entails the following aspects: the Act prevents dealing rather than use; the delay in implementation has enabled owners of antique ivory to sell items if they can, almost certainly at a significant undervalue; and sales outside the UK, as opposed to the dealing within the UK of items to be sold abroad, are probably still permitted (see Air India v Wiggins  1 WLR 815). These last three factors serve to temper, at least to some extent, the degree of interference. The present case is, I am afraid, far removed from the desecrations of the 1530s.”
The last point being Jay J’s response to the (bold) submission that the impact of the Act was of such significance so as to be “the largest loss since the Reformation“.
Against this backdrop, the Court of Appeal explains that A1P1 and Article 17 of the Charter (which are to be read consistently) apply where there is either an expropriation of property (which refers to a compulsory vesting of a person’s ownership in property in the state or a person or entity chosen by the state) or to a “control of use” (whereby ownership remains with the proprietor but rights of ownership are curtailed – the conclusion in the BAT case).
In the case of expropriation, “the case for compensation is strong and case law indicates that it will be exceptional for it not to be payable“. In the case of control of use, however, the obligation to compensate is much weaker. This point was explained by reference to R v Secretary of State for Health ex p. Eastside Cheese Co  3 CMLR 123:
“… In a deprivation case the availability of compensation is a relevant consideration. In Case A/301-A Holy Monasteries v. Greece, the European Court said:
‘In this connection, the taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference and a total lack of compensation can be considered justifiable under Article 1 only in exceptional circumstances.’
Such a rule is readily understandable where the State is itself assuming ownership of property belonging to another, or where property is being transferred from one citizen to another. It appears to us to have very much less force where, in a case such as the present, the object of the measure is to restrain the use of property in the public interest…”
The Cheese case was not referred to by Green J in his first instance BAT judgment but was on appeal. Interestingly, that case has recently been subject of discussion when considering whether business tenants prevented from trading by the UK’s Covid lockdown requirements have a remedy under the Human Rights Act 1998, noting that the “Courts are, understandably, reluctant to find that public health measures are disproportionate even though they cause substantial economic harm to specific businesses” (https://www.falcon-chambers.com/publications/articles/tenants-locked-out-from-their-human-rights-do-business-tenants-prevented-fr). Also in the Covid context, in “Coronavirus (COVID-19), A1P1 and compensation under the European Convention on Human Rights” (https://twentyessex.com/wp-content/uploads/2020/04/A1P1-and-COVID-19-GN-AP-April-2020.pdf), Gordon Nardell QC and Angharad Parry assess the circumstances in which those affected by measures taken to address the pandemic may have a claim for violation of A1P1.
The factual backdrop to today’s decision in Hughes is the lawfulness of the arrangements made to protect the pension benefits of a group of airline pilots whose employers had become insolvent – a tricky point that was made trickier for the Pension Protection Fund (the “PPF“) by the decision of the Court of Justice of the European Union (the “CJEU“) in C-17/17 Hampshire v Board of the Pension Protection Fund  ICR 327.
In an important judgment, Lewis J has found the imposition of the cap on compensation payable by the PPF constitutes discrimination on grounds of age contrary to EU law. In Hughes, Lewis J’s analysis of the legality of the measure is based on the well-established principles that:
- The court must consider whether the decision-maker is pursuing a legitimate aim and whether the measure in question is appropriate and necessary for achieving that aim.
- In assessing that issue, the gravity of the effects on those subject to the differential treatment (here, on the basis of age) is to be weighed against the importance of the legitimate aims pursued.
- Consequently, the more serious the effects of the differential treatment on those affected, the more cogent must be the justification for the measures.
Applying those principles, Lewis J was “… driven to the conclusion that the compensation cap, as originally enacted and as modified in 2017 was not, in the circumstances of this case, an appropriate means of achieving the aims” – the key aim being to protect accrued pension entitlements. Therefore, the imposition of the compensation cap was unlawful discrimination on grounds of age when it was first introduced. Lewis J considered the statutory provisions imposing the compensation cap to be incompatible with the right to non-discrimination under Article 14 of the ECHR when read with A1P1. This was why, as explained above, the Judge viewed Hughes as “…one of those probably very rare cases where it is right to reach the conclusion that the imposition of the [measure] is unjustifiable“.
Returning to ivory trading, the absence of compensation did not make that ban unlawful as it constituted a “control of use” and not a deprivation of property. Ivory can no longer be traded, but it can be held and passed on as a gift or bequest (contrast, for example, the ban on handgun ownership introduced after the Dunblane massacre which was accompanied by a legislative compensation scheme).
This left the appellant having to argue that the very essence of the right to hold ivory had been taken from owners. The Court of Appeal disagreed. It found, for three reasons, that there was no obligation upon Parliament to introduce a compensation scheme as:
- “The world was on notice of the risk of a control of use well before the Act was passed” and the Act has still yet to have been brought into force.
- A potential chilling effect on others considering bans (“states with the largest ivory trades are often not the wealthiest; if a curb on trade had to be accompanied by compensation, it is easy to understand how this would curb the willingness of those states to impose trading restrictions in the first place“).
- Finally, no evidence was placed before the Judge (or this Court) identifying who would be entitled to compensation, and in what amounts.
The principles examined on appeal in the ivory trading case are of importance beyond constraints on controversial products. Recent history has repeatedly shown the willingness of UK politicians to float, or in some cases sanction, the seizure of private sector property. In the last 12 months alone, we’ve seen this in the context of:
- ‘(re)nationalising’ transport and broadband infrastructure during last year’s general election campaign;
- February’s HS2 ‘go ahead’ decision;
- “ownership” of fishing rights in Cornish waters post-Brexit; and
- during the Covid crisis, the nationalisation of PPE manufacture and, most recently, future vaccine technology.
The regularity of such (exceptional) circumstances coming to the fore increases the likelihood of the Courts continuing to revisit (and, in my view, expand) the category of cases in which compensation need not be paid to those deprived of (the use of) their property. This will be either because a measure, however ‘expropriatory’ in form, is treated as a control of use of property rather than a deprivation; or because the circumstances fall within the limited, but potentially growing, range of cases in which even an outright deprivation need not be compensated.
It’s often hard to avoid a Brexit angle. Here, irrespective of where Brexit ultimately leaves the relationship between the Courts in the UK and the CJEU (on which I have previously commented that the suggestion that the Luxembourg court “could be air-brushed entirely out of the UK’s legal landscape was always deeply flawed, if not illusory“: https://www.ft.com/content/48c3f6ba-8817-11e7-bf50-e1c239b45787), UK Courts will remain bound to take into account decisions of the European Court of Human Rights.
Even if that was not the case, English common law property rights could be the answer. And they’re continuing to enjoy something of a renaissance (perhaps not unconnected to some politicians having in the past raised doubts about the UK remaining part of the ECHR). We have been reminded that English common law “is not a defunct or moribund jurisprudence when it comes to the protection of human rights and that it can evolve and be capable of marching hand in hand with other internationally recognised fundamental rights” (see paragraph 856 of the BAT first instance judgment). In BAT, Green J went on to quote from the UK Supreme Court in Kennedy v Information Commissioner  2 WLR 808, which referred to the “baleful and unnecessary tendency to overlook the common law“. In Kennedy, Lord Mance also (famously) told us that it “…was not the purpose of the Human Rights Act that the common law should become an ossuary“. These words have been reiterated often since to remind us that: “the common law is capable of being developed to meet the changing needs of society… Sometimes those developments will bring it closer to the ECHR and sometimes they will not” (per Lady Hale in one of her last UK Supreme Court judgments: R (on the application of Jollah) v Secretary of State for the Home Department  UKSC 4).
All of the above makes it interesting to see if the ivory trading case will be granted permission to appeal to the UK Supreme Court – something which will only happen if the application is deemed to raise an arguable point of law of general public importance.
With thanks to Gordon Nardell QC
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28 November 2023
28 November 2023