HSF client Drax loses £1.3bn Government subsidy case

Herbert Smith Freehills (HSF) client Drax has been defeated in the Court of Appeal over £1.3bn in Government renewable energy subsidies.

Partner Nusrat Zar represented the power giant in its row over the Government’s decision to withdraw subsidies for the energy giant’s conversion from coal-power units into biomass-fuelled generators last year.

The firm secured a win for Drax in the last round of the subsidy battle at the High Court in July, when Mrs Justice Andrews ruled that the power giant had satisfied the criterion for subsidies. But last week the Court of Appeal overturned the judgment, re-established the Government’s decision and set aside a costs order made against the Secretary of State.

The Department for Energy and Climate Change instructed Brick Court Chambers’ Martin Chamberlain QC and Oliver Jones. Drax turned to HSF partner Zar for both stages of the fight, who instructed Monckton Chambers’ Tim Ward QC and Daisy Mackersie and 39 Essex Street’s Duncan Sinclair

The case hinged on whether Drax was entitled to an investment contract worth £1.3bn to support the generation of renewable energy from its North Yorkshire plant in Selby. In December 2013 the company was told it would qualify for a new subsidy scheme for its generators but the following April ministers announced only two of the units would be eligible for the new scheme.

Instead of qualifying for a new minimum price per unit under the Government’s newest renewable energy scheme, the power plant’s second unit was only going to qualify for the old system, said to be less lucrative.

At first instance, Andrews J had held that the Secretary of State’s decision was flawed, and was one that no reasonable decision-maker could have made. She therefore quashed the decision and granted a declaration that the key criterion for gaining the subsidies was satisfied.

But in the judgment handed down last week Lord Justice Richards said: “I am not persuaded by the judge’s reasoning or by Drax’s submissions that, in deciding that Drax had failed to demonstrate to its satisfaction that the Key Criterion was met, DECC reached a decision that no reasonable decision-maker could reach.”

Richards LJ concluded that a court should exercise great caution in going behind the experienced and technical assessment of the department. He concluded that the Secretary of State had good reasons for having the concerns that he did, and the high standard for irrationality was therefore not met in this case.

Drax us currently on the hunt for head of legal after setting up the new role last month. The power company is looking for a lawyer or barrister to join its Selby team under the company secretary and general counsel Philip Hudon. The new role will head up Drax’s nine-strong legal team based in in Yorkshire. 

The legal line-up

For the claimant/respondent, The Queen (on the application of Drax Power Ltd)

Monckton Chambers’ Tim Ward QC and Daisy Mackersie and 39 Essex Street’s Duncan Sinclair instructed by Herbert Smith Freehills partner Nusrat Zar 

For the defendant/appellant, the Secretary of State for Energy and Climate Change

Brick Court’s Martin Chamberlain QC and Oliver Jones instructed by the Treasury Solicitor