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The Green Bank Sale: public law challenges to the auction of state assets

On 7 April 2017, in R (SDC LLP) v Secretary of State for Business, Energy and Industrial Strategy [2017] EWHC 771 (Admin), the High Court dismissed a judicial review challenge brought by a disappointed bidder to the decision by the Secretary of State for Business, Energy and Industrial Strategy to appoint a rival consortium as preferred bidder for the purchaser of the UK Green Investment Bank Plc.

The case (see also Legal update, Permission refused for judicial review challenge to appointment of preferred bidder for sale of Green Investment Bank) tackles the thorny question as to whether or not the sale of state assets is amenable to judicial review. The court held that whilst the decision in question on the face of it was amenable to judicial review, the nature of the alleged breaches here did not involve any breaches of public law. However, for those looking for any definitive statement of principle regarding whether or not public auctions of state assets are subject to public law, they will be disappointed. The court noted that whilst complaints about tendering exercise themselves are “unlikely” to involve allegations of breach of any applicable principle of public law, it stopped short of stating that they could never do so in principle.

The judgment is only a decision refusing permission. Therefore strictly speaking it is of no precedent value. However, full argument was heard on all the issues, and so the case may still be a useful reference point for those advising on the sale of state assets who may be concerned by the public law risks of such a process being challenged.

The approach to amenability of a sale of government assets

The Green Investment Bank Plc was a public limited company that was incorporated in May 2012, with the Secretary of State the sole shareholder. The Bank’s activities were carried out within the framework under section 1 to 6 of the Enterprise and Regulatory Reform Act 2013 (2013 Act). The Bank had been designated for the purposes of sections 1 to 3 of the Act as the Secretary of State was satisfied that the Bank, acting consistently with the objectives of its articles of association, would only act in pursuance of certain purposes, referred to in the 2013 Act as “green purposes”. Those included the reduction of greenhouse gas emissions, the advance of efficiency in the use of natural resources, the protection or enhancement of the natural environment and biodiversity, and the promotion of environmental sustainability.

In June 2015, the Secretary of State announced that the government intended to sell its shareholding in the Bank. The intention was to ensure that the Bank became a private sector body. A key issue therefore was to ensure that any legal structure, by means of the size of the public body’s share and the rights that it would have in relation to the Bank after sale, did not result in the Bank continuing to be classified as a public sector body. Two offers were received. The claimant bid on the basis that its consortium members would acquire 75% of the equity in the partnership that would, ultimately, own the Bank and the Secretary of State would have the option of taking a 25% share in the equity of the partnership. The interested party in the judicial review challenge formed a consortium and made a definitive offer for 100% of the Bank, which was received shortly after the deadline for submitting offers had passed.

The primary complaint by the claimant was that it submitted a compliant offer whereas the preferred bidder (the interested party) did not, and so should have been “disqualified”.

The judge approached the question in two stages: first, whether the decision had a sufficient public element to it, and secondly whether the breaches alleged involved breaches of public obligations applicable to the decision-making process.

Regarding the first issue, the judge held that the decision in question did have a sufficient “public element to it”. It involved the sale of a publicly-owned asset, was being sold as a matter of government policy, and the sale was to be reported to Parliament. Those factors were viewed as sufficient to generate the public element necessary to render the decision amenable to judicial review (at paragraph 39).

Regarding the second issue, the judge held that the particular allegations did not involve questions of public law but the judgment is not quite so clear as to why that was the case. The judge placed significant weight on the fact that there was no relevant statutory framework governing the exercise of the power of sale (at paragraph 43). He also noted that the terms of the auction (as set out in the final phase letter) retained a very wide discretion for the Secretary of State to refuse to accept any or all offers, and to change the process by which the sale was conducted. On this basis, the court held that there was no basis for the claimant to assert that there was a legitimate expectation that the Secretary of State was in some way not adhering to the process that he had fixed, which ensured the maximum discretion on the Secretary of State  (at paragraph 44).

The various criticisms of the assessment of the bids made by the claimant were all dismissed essentially on the facts. The court held that they did not amount to any error of public law and that there was nothing unfair about the process (see the summary at paragraph 67).


In this case, it was the lack of merit in the arguments pursued by the claimant regarding the alleged unfairness of the bid assessment by the Secretary of State that ultimately meant that there was no breach of any public law obligation, rather than the mere fact that all that was being challenged was a commercial judgment of the public body in question.

In different circumstances, where public bodies have conducted public auctions (for example an auction for the grant of a unique licence such as was considered in R v National Lottery Commission ex parte Camelot Group Plc [2001] EMLR 43, referred to in the judgment), the court has found that such issues can give rise to public law breaches. So where significant unfairness can be identified in the way a central government or local authority has conducted itself when selling its own assets, I do not think it can be ruled out that a court could find that this amounted to a public law breach.

The bar to establish such unfairness, particularly where the terms of the bid confer a very wide discretion on the Secretary of State as they did in this case, will clearly be set very high by the court.  Those advising central or local government clients on the sales of public assets can therefore take some comfort from this judgment that the court will be disinclined to allow such challenges and that the risk of successful challenge as a general rule will be low. But the judgment stops short from altogether absolving any public body conducting such a process from acting fairly and reasonably.

For further information on amenability to judicial review, see Practice note, Judicial review: an introduction.

Landmark Chambers James Neill

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