The CJEU on “prohibitively expensive” and the new protective costs order regime

11 April 2013 by David Hart KC

R (Edwards & Pallikaropoulos) v. Environment Agency et al, 11 April 2013, read CJEU judgment, and read Opinion of A-G Kokott,

and the Civil Procedure Rules 45.41 to 45.44, in force from 1 April 2013, with Practice Direction 45

Twin developments, both of which are important for those involved in environmental cases. They emerge from the UK’s treaty obligations flowing from the Aarhus Convention under which it is obliged to ensure that environmental cases are not “prohibitively expensive” per Article 9(4) of the Convention.

The first development is a decision by the CJEU on the meaning of those words.

The second is a new set of rules providing for protective costs orders in environmental judicial review claims.

The CJEU judgment

First to the decision of the CJEU. It arose in this way. A judicial review challenging the grant of an environmental permit to a cement works got to the House of Lords and the second claimant, Ms Pallikaropoulos, lost. The Aarhus Convention was in point because its obligations had been directly incorporated into the two EU Directives at issue in the case. She was ordered to pay the costs; her opponents then claimed over £88,000.

The question of how much she should pay came before two costs officers of the Supreme Court. They sought to give effect to Aarhus. This was appealed to the Supreme Court who asked the CJEU to say what “prohibitively expensive” meant. They posed in effect the following particular questions:

(i) prohibitive to whom? Was the test subjective or objective, i.e. by reference to the individual litigant who may be as rich as Croesus or on benefits, or by reference to an “ordinary” member of the public?

(ii) or was it up to each member state as to how they achieved the result laid down by the Directive?

(iii) was it relevant that the claimant was not in fact deterred by the prospect of costs?

(iv) was it permissible to have different approaches at first instance, in the Court of Appeal and in the Supreme Court?

The Court started by emphasising that the effect of the rule was that people should not be prevented from pursuing a claim by reason of the financial burden which might arise as a result: [35]. This applied whether one was retrospectively deciding (as in this case) what the claimant ought to pay, or prospectively deciding the maximum which the claimant ought to pay if he or she lost.

Then to the particular questions. As to (i), the court should not exclusively look at the estimated financial resources of an “average” claimant, as this may have little connection with the situation of the person concerned: [41]. Nor must one look solely at the claimant’s financial situation, one must carry out an objective analysis of the amount of the costs: [46]. So a bit of both.

But that is not the end of the exercise: [46]: the court

may also take into account the situation of the parties concerned, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages, and the existence of a national legal aid scheme or a costs protection regime.

This is fairly close to the AG’s opinion. It can in theory be adjudicated retrospectively, when one knows the ultimate merits of a case and can judge its importance or otherwise in the round. But prospectively it makes the whole exercise of determining the “right” costs figure an extremely wide-ranging one, and, if not kept under control, an expensive one.

Now to  questions (iii) and (iv) which were dealt with briskly, and contrary to the UK’s contentions. No, the fact that a given claimant was not deterred from litigating was not in itself sufficient to determine that the proceedings were not prohibitively expensive. And, no, the approach at the various stages of the case and appeals ought not to differ.

And as for Ms Pallikaropoulos whose costs order (of July 2008) the CJEU was debating? Ah, she does not still know where she stands, because under the sharing of responsibilities between national and EU courts it will be for the UK Supreme Court to decide the extent to which she ought to bear any of these costs.

The new rules

Mercifully, the new rules have not adopted the complex “everything in the mix” approach of the CJEU. Someone who after 1 April 2013 brings a judicial review “all or part of which is subject to the provisions” of the Aarhus Convention may not be ordered to pay costs exceeding the amount set out in Practice Direction 45 – which stipulates £5,000 for individuals and £10,000 for others. This applies automatically to proceedings where the claimant ticks the Aarhus box on the form. Part of the deal is that costs recovery against a losing defendant is usually capped at £35,000. There are some fairly stern rules designed to deter expensive arguments about whether a case is an Aarhus case. If the claimant loses, normally no order for costs. If the defendant loses, normally the claimant will get his or her costs on an indemnity basis, even if the total is taken beyond the £35,000.

In some ways, these rules are more generous to claimants than they might have been. They apply to all judicial review claims falling within Aarhus, namely all environmental judicial reviews. They are not limited to cases where the Convention has been specifically incorporated into EU law, which would have limited it to the EIA and IPPC/IE Directives. So the wider criticisms coming from the Aarhus Compliance Committee about the UK costs position seem ultimately to have stuck.

But there have been a number of criticisms of these rules. The first is that they do not apply to private law environmental claims  (such as nuisance as between neighbours) which equally fall within the Aarhus Convention. The second is that the £5,000 cap is set too high – someone on benefits who has a viable case will quail at the thought of being ordered to pay that amount; but at least the wording still leaves it open to them to argue that they should not be ordered to pay anything because of their means – and, in reliance on the CJEU, because of the merits and wider importance of their case. The third is that it does not extend on the face of it to a very common form of challenge in the planning context, namely under section 288 TCPA – see my post of earlier today by way of example. The fourth is that it will lead to cases being brought in the name of one person (£5,000) rather than as would otherwise have been in the case in the name of a modest community group (£10,000). Finally some have said that the reciprocal cap does not sufficiently reward claimant lawyers who win a time-consuming case – they can only recover from the defendant in practice whereas lawyers for a defendant authority, government department or operator will always get paid the commercial rate by their clients, whatever the nature of the cap.

The tension between the twin tracks will be evident. An environmental public law individual  can automatically get his or her £5,000 cap. But should they go for something better than that – or do they risk ending up with a costs order against them even before the proceedings have got going?

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