Enterprise Managed Service Ltd & Anor, R (On the Application Of) v Secretary of State for the Ministry of Housing, Communities and Local Government

Retrospective legislation which affects pending litigation engages the rule-of-law protection in ECHR Article 6. It may be justified only by compelling public-interest grounds, assessed with particular care. Correcting a policy error, preventing substantial windfalls for commercial entities and protecting pension funds from risks ultimately borne by local taxpayers may satisfy that demanding test, even where the legislation defeats a serious claim before judgment. The fact that legislation applies generally, rather than targeting one claimant, does not prevent it being designed to determine a class of pending claims. For A1P1, the interference is subject to the less demanding proportionality test and may be upheld where it has a reasonable foundation. Under regulation 64 of the Local Government Pension Scheme Regulations, exit-credit decisions require a rational and fair multi-factorial assessment. No single factor, including pass-through arrangements, is conclusive.

The claimants, private contractors participating in the Local Government Pension Scheme, challenged the retrospective operation of the Local Government Pension Scheme (Amendment) Regulations 2020. Those regulations replaced an apparent statutory entitlement to an exit credit with a discretion to determine its amount, potentially reducing it to zero.

Enterprise Managed Service had issued a Chancery claim for an unpaid exit credit of approximately £6.5 million. The 2020 Regulations applied retrospectively to extinguish the accrued entitlement while leaving the amount to be reconsidered under the new discretion. The claimants alleged breaches of ECHR Article 6 and Article 1 of Protocol 1, and sought declarations concerning the proper interpretation of regulation 64(2ZAB) and the relevance of pass-through pension arrangements.

1. Article 6. The statutory right created by regulation 64(2ZA) and (8), before amendment, was sufficiently arguable and identifiable to engage Article 6. The principle in Zielinski v France (1999) 31 EHRR 19 is not confined to undisputed claims. A serious claim based on a statutory cause of action is protected even where substantial defences remain unresolved.
2. The 2020 Regulations were designed, at least in part, to determine a class of pending claims including the Chancery claim. It was immaterial that the Secretary of State was not a party to that claim and that the legislation was of general application. The relevant question was the intended effect on pending litigation.
3. The interference was justified by compelling public-interest grounds. The exit-credit regime had produced potentially substantial windfalls which had not formed part of the parties’ original commercial bargain; payment of unpaid credits would diminish pension funds and create risks ultimately borne by local taxpayers; the beneficiaries were commercial companies; retrospective legislation was under consideration when the claim was commenced; the proceedings were at an early stage; the underlying claim was not certain to succeed; and the new regime preserved a discretionary claim rather than removing all possibility of payment. Grounds 1 therefore failed.
4. The state-aid argument did not prevent the claimants acquiring rights. For the purposes of the selective-advantage analysis, the relevant reference system comprised entities admitted to the LGPS, and the possibility of an exit credit depended on the random state of the fund rather than favouring particular undertakings.
5. A1P1. Assuming that the claims were possessions, the retrospective interference was lawful, pursued legitimate aims and was proportionate. The decision to prevent what were regarded as unjustified windfalls was not manifestly without reasonable foundation. Ground 2 failed.
6. Regulation 64 discretion. Regulation 64(2ZAB) and (2ZC) requires a rational and fair multi-factorial assessment. The decision-maker must consider the stipulated factors and any other relevant factors. Pass-through arrangements, pricing, pension-risk allocation and the statutory possibility of exit credits may be relevant, but no single factor is conclusive and the weight of each depends on the facts. Ground 3 succeeded to that extent. Ground 4 was academic.
7. Grounds 1, 2 and 4 were dismissed. Further submissions were invited on the precise form of any declaration embodying the ground 3 guidance.

First-instance judicial review in the Administrative Court. No earlier judicial decision in the same litigation was stated as determining the claim.