Norfolk County Council could follow Bradford and Calderdale councils and North Yorkshire County and York City councils in challenging the Government’s decision to withdraw PFI funding for major waste infrastructure projects. Fiona Ross, associate with law firm Pinsent Masons, examines the issues.
Government withdrawal of waste PFI credits has previously undergone judicial review (JR), following the 2010 spending review. Local authorities in Cheshire challenged the withdrawal of their PFI funding but were unsuccessful. The court found they had no substantive legitimate expectation to receive funding, or a procedural legitimate expectation to be consulted or given notice of any funding withdrawal.
There may be differences in the present cases, and full examination of the facts surrounding the grant and subsequent withdrawal of PFI credits can be expected. It is understood that grounds specified include failure to follow Defra’s own criteria, failure to take account of obligations under the Waste Framework Directive and failure to consult. In the case of Norfolk County Council (if it decides to bring a JR) the fact that financial close had already been achieved could potentially be significant.
JR is a procedural review and the court will not consider the merits of the decision or substitute its own decision for that of the public body. If it believes decision making procedure was improper it will quash the decision and direct the institution to make it again, on terms ordered by the court. There is therefore no guarantee, even if the local authorities were successful, that PFI funding would be reinstated, as Defra could arrive at the same decision once any procedural defect has been remedied.
It is also rare for compensation such as damages to be payable under JR. This can generally only take place where a private law right to damages exists, such as breach of contract. In the present cases local authorities therefore might not get compensation for contractual penalties they are liable to pay, even if funding is reinstated.
The process could take up to a year and is often very costly. However, local authorities will be looking at ever rising landfill tax costs and questioning how they can afford these if they are not awarded funding for infrastructure to divert material from landfill.