British Gas Trading Limited, R (on the application of) v Secretary of State for Energy Security and Net Zero

Judicial review claims concerning a government-supported sale of an energy supplier were refused for undue delay. The court nevertheless considered the merits and held that the decisions were amenable to review, but that the commercial and insolvency context required a relatively light-touch intensity of review.

Fairness did not require the Secretary of State personally to conduct or equalise the administrators’ commercial sales process. The process was relevant principally as evidence of market value and the minimum necessary subsidy. The court upheld the use of proportionality under the Trade and Cooperation Agreement, while recognising a wide margin of judgment. The wholesale funding arrangement was a hedge or swap, not an unlimited guarantee. The subsidy was capable of serving lawful objectives, including avoiding social hardship caused by a hard-close insolvency.

Bulb Energy Limited entered the energy company special administration regime after serious financial difficulty. Its joint energy administrators conducted a sale process, assisted by Lazard, which culminated in a transaction transferring Bulb’s business to Octopus Energy Group Limited with substantial government financial support.

British Gas, ScottishPower and E.ON challenged the Secretary of State’s funding and energy transfer decisions. They alleged procedural unfairness, failure to comply with the Trade and Cooperation Agreement, irrationality, inadequate consideration of statutory matters, failure to consult and unlawful subsidy control. The court heard the claims on a rolled-up basis and considered whether permission should be refused for delay and, if not, whether the grounds were arguable and meritorious.

1. Delay. The claims were not brought promptly. The claimants knew the essential substance of their complaints by the hearing before the Companies Court on 11 November 2022, yet issued their claims only on 28 and 29 November. Pre-action correspondence and the absence of full disclosure did not justify the delay. Permission was therefore refused under section 31(6)(a) of the Senior Courts Act 1981.
2. Amenability and intensity of review. The decisions were exercises of statutory powers and were amenable to judicial review. The commercial context, the expertise of the joint energy administrators and Lazard, and the statutory insolvency structure justified a relatively light-touch review. The question was whether the Secretary of State was reasonably entitled to rely on the administrators’ advice, not whether the court preferred a different commercial outcome.
3. Fairness and consultation. The Secretary of State did not conduct the M&A process and had not unlawfully self-directed himself that it was legally fair. The administrators conducted that process. There was no general common-law duty to consult the claimants. Schedule 21 to the Energy Act 2004 specified consultation with GEMA before approval of an energy transfer scheme.
4. Subsidy control. Proportionality formed part of the domestic standard for reviewing compliance with Article 366 of the Trade and Cooperation Agreement, but its application depended on context and allowed substantial weight to the executive’s commercial and predictive judgments. The M&A process was capable of evidencing market value and the minimum necessary subsidy, although an open competitive process was not the only possible method.
5. The Secretary of State was entitled to conclude that the transaction pursued lawful objectives, including avoiding social hardship from a hard-close insolvency, and that the regulatory-change protection formed part of an integrated package directed to that objective. The WAMA exchanged cashflows by reference to wholesale prices and the price cap. It was a hedge or swap, not a guarantee prohibited by Article 367(2) of the TCA.
6. The court would have granted permission on the subsidy-control grounds but rejected them on their merits. The public-law grounds were not reasonably arguable. The Approval Decision was not vitiated by the Funding Decision.

First-instance decision of the Divisional Court of the High Court. No prior appellate decision was stated in the judgment.