Mabanaft Ltd, R (on the application of) v Secretary of State for Trade & Industry

Where European Union legislation gives a member state a choice of implementation methods, judicial review applies proportionality-based scrutiny, but the court must respect a broad margin where the decision involves complex economic and technical assessment. The court asks whether the chosen measure falls within the range of legally available options and whether relevant considerations have been given manifestly excessive or inadequate weight.

The requirement for fair and non-discriminatory arrangements does not require precise equalisation of the economic burden between market operators. A member state may use a reasonable comparative measure, such as Minimum Operating Requirements, even though it does not calculate each operator’s actual costs. The use of that methodology, and adjustments for fuel oil, naptha and exports, was lawful.

The claimant, a major oil importer, sought judicial review of the Secretary of State’s decision to introduce a new compulsory oil-stockholding system under Directive 2006/67/EC. The system required refiners to hold 67.5 days’ supply and importers to hold 58 days’ supply, producing a differential of 9.5 days.

The claimant accepted the new reporting point and the imposition of obligations on importers, but argued that the differential was unlawfully calculated. It challenged the use of Minimum Operating Requirements and adjustments relating to fuel oil, naptha and exports. The central questions were whether the arrangements were fair, non-discriminatory and transparent, and whether the Secretary of State’s methodology fell outside the legally permissible range.

1. Standard of review. In a case concerning European obligations, review went beyond domestic Wednesbury principles and included proportionality-based scrutiny. The court had to test whether the measure was supported by relevant, reasonable and proportionate factual considerations, while recognising that the width of the margin depended on the nature and context of the decision.
2. Margin of appreciation. The Directive left member states a choice of methods for implementing the stocking obligation. Because the assessment involved complex market structure, economic evidence and modelling, the Secretary of State had a broad margin. The court was not entitled to substitute its preferred methodology where the chosen measure fell within the range of legally available options.
3. Articles 3(1) and 3(2). Fair and non-discriminatory arrangements did not require precise equalisation of the actual or relative costs borne by refiners and importers. The transparency requirement did not require disclosure or calculation of each operator’s confidential costs.
4. Minimum Operating Requirements. The Secretary of State was entitled to use MOR as a comparative measure of the operational differences between refiners and importers, notwithstanding that it had been developed for a different purpose and did not measure actual commercial costs. The decision not to rely on data from Germany and the Netherlands was also within the permissible range, given the material differences between the markets and the acknowledged limitations in the comparative data.
5. Adjustments. Excluding or adjusting fuel oil and naptha was not manifestly erroneous. Using total inland and export deliveries in the export calculation was a reasonable method of approximating the result that would have been obtained by identifying stocks attributable solely to inland consumption.
6. The application for judicial review was refused. The decision satisfied the European-law requirement of being fully reasoned and within the range of options legally open to the decision-maker.