Case details
Summary
An unincorporated treaty is justiciable where the Government has embedded it in domestic decision-making and used it materially to alter domestic rights or obligations, provided that its rules are suitable for judicial determination. The intensity of review depends upon the nature of those rules.
Internal tax concessions affecting exported goods may engage the non-discrimination obligation in Article I:1 of the GATT. A discriminatory concession must be corrected immediately, although the state may level down rather than extend it. An extra-statutory concession cannot override Parliament’s decision that an activity is taxable.
In reviewing broad fiscal policy, the court allows the decision-maker a substantial margin of judgment over the evidence and modelling required. Relevant economic effects may rationally be assessed qualitatively where reliable quantification is impracticable.
Factual background
The Government abolished the VAT Retail Export Scheme and Extra-Statutory Concession 9.1 following the end of the Brexit transition period. The schemes had enabled specified high-street and airside sales to be zero-rated. Heathrow Airport Ltd and businesses operating VAT-refund and airport-retail services challenged the abolition.
The claimants alleged that the Government had misunderstood the Commissioners’ collection and management powers, the General Agreement on Tariffs and Trade 1994, and the later UK–EU Trade and Cooperation Agreement. They also alleged failures to investigate and assess the wider economic consequences of abolition and challenged the refusal of Swift J to grant permission on those evidential grounds.
The court sat both as the Court of Appeal, hearing the appeal from Swift J, and as a Divisional Court determining the judicial review. The central questions concerned the legality of the extra-statutory concession, the domestic justiciability and application of the GATT, and the adequacy of the Government’s evidence-gathering and reasoning.
Held
Disposition. The appeal from the refusal of permission, the judicial review claim and the application to amend all failed. Green LJ gave the judgment, with which Whipple J agreed.
Extra-Statutory Concession 9.1 zero-rated transactions which were taxable under Value Added Tax Act 1994 and the VAT Directive. The statutory exemption required export by, or on behalf of, the supplier. Export by a customer acting independently did not satisfy that requirement. Under the principle in Wilkinson, the Commissioners’ collection and management powers could not untax transactions which Parliament had made taxable. Retention or extension required legislation.
The GATT issue was justiciable. Although the GATT had not been formally incorporated, the Government had firmly adopted it, used it to confine its policy options, reflected that approach in subordinate legislation and thereby affected domestic fiscal advantages and obligations. The GATT rules were also sufficiently precise and supported by extensive decisional practice. The intensity of review was context-sensitive. Here the questions were clear legal questions, and the Government’s interpretation was correct, not merely tenable.
The VAT schemes fell within Article I:1 GATT as charges, rules connected with exportation and internal-tax matters referred to in Article III:2. Retaining schemes which favoured goods according to export destination would have discriminated between like products. Article I:1 required immediate and unconditional removal of that discrimination, but permitted either extension of the advantage or abolition.
Article XXIV GATT disapplied other GATT obligations only so far as necessary to permit formation of a free-trade area or customs union. The Trade and Cooperation Agreement did not regulate VAT rates or exemptions. Its conclusion therefore neither displaced Article I:1 nor required reconsideration of abolition. Section 29 of the European Union (Future Relationship) Act 2020 automatically modifies domestic law only where implementation of the agreement requires it.
Public international law was a question of law for the court. The parties’ expert reports on the GATT were therefore inadmissible as expert evidence, although they could illuminate context and arguments.
The fiscal decision attracted a broad margin of judgment. Wider economic effects were relevant, but officials rationally concluded that reliable quantitative modelling was impracticable because of uncertain behavioural assumptions and the pandemic. The Chancellor received narrative accounts, stakeholder evidence and the Cebr report. The alleged computational errors were differences of approach and, even on the claimants’ figures, immaterial to the multifactorial decision.
There was no undue delay. The proceedings were brought within time, involved exceptional complexity and caused no ultimate procedural prejudice to the Government.
The court’s approach to earlier authorities
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Appellate history
- Court of Appeal and Divisional Court: In this combined judgment, the Court of Appeal dismissed the appeal from Swift J’s refusal of permission on the evidential grounds. The Divisional Court dismissed the judicial review and refused permission to amend.
- High Court, Swift J: Swift J granted permission on the Wilkinson and GATT grounds but refused permission on the procedural and evidential grounds. No neutral citation for that decision is stated.
Lower court decision
Key cases cited
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