ADMINISTRATIVE COURT DEFERS TO THE EXPERT VIEW OF REGULATOR

In R (on the application of Cox) v Oil and Gas Authority [2022] EWHC 75 (Admin) the High Court has dismissed a judicial review challenge to a decision of the Oil and Gas Authority ("OGA"), in doing so emphasising that it will afford considerable deference to a regulator’s expert view and that there may not be a "single right answer" to questions of statutory construction.

Key points

Background

Section 9A of the Petroleum Act 1998 (as amended) sets out a "principle objective" for the OGA of "maximising the economic recovery of UK petroleum" ("MER"). The Act also requires the publication of a strategy which must be reviewed periodically, with which the OGA must act in accordance. In addition, the Energy Act 2016 requires the OGA to "have regard" to a number of matters when exercising its functions, including how facilities for storing carbon dioxide may assist the Secretary of State to meet the Net Zero Target (set out in section 1 of the Climate Change Act 2008).

The OGA's current strategy came into force in February 2021 (the "Strategy"). The Strategy included a "central obligation" which provided that, in meeting the principal objective of MER, relevant persons must take appropriate steps to assist the Secretary of State in meeting the Net Zero Target. The Strategy also gave a definition of "economically recoverable" which included "resources which could be recovered at an expected (pre-tax) market value greater than the expected (pre-tax) resource cost of their extraction".

The three individual Claimants in this case, who were environmental campaigners, brought a claim for judicial review against the OGA and the Secretary of State for Business, Energy and Industrial Strategy in relation to the decision to adopt the Strategy.

Grounds of challenge

The Claimants were granted permission to pursue two grounds of challenge.

Ground One

The Claimants submitted that the Strategy's definition of "economically recoverable" frustrated the statutory purpose of section 9A and in particular that the OGA had erred by adopting an objective of maximising the economic recovery of UK petroleum on a pre-tax basis. The essence of the Claimants' case was that, by ignoring the effect of government-backed financial support, the Strategy had stretched the definition of "economically recoverable" too wide, such that activities that were not truly "economic" for the UK as a whole were nonetheless still sought to be maximised through the Strategy. This was because in some years there had been negative tax flows (such that taxpayers were recipients, not payers).

The Claimants also argued that the meaning of the statutory provision was a question for the Court, that there could not be more than one permissible interpretation of it, and the OGA had erred in law by adopting the construction that it had.

Ground Two

The Claimants claimed that the definition of "economically recoverable" which the OGA had adopted was irrational as it would have the effect of increasing the amount of petroleum which would be sought and recovered, such that the Strategy would be inconsistent with the Net Zero Target (to which the Energy Act 2016 required the OGA to have regard).

Decision of the Administrative Court

Mrs Justice Cockerill dismissed both grounds of challenge.

As to Ground One, Cockerill J summarised the primary question for the Court as being whether it is for the Court to determine the correct construction of MER or whether that is for the OGA to determine, subject only to a "Wednesbury" unreasonableness test (ie a decision so unreasonable that no reasonable public body could come to that decision).

Ultimately, Cockerill J held that, while she did not necessarily accept the Defendants' submission that it was always improper in a judicial review for a Court to substitute itself for the regulator on complex issues of economic assessment, the Court will afford considerable deference to the regulator’s expert view. In this particular case, Parliament had not intended the Court, rather than the expert regulator, to determine the best method of economic assessment.

Even if it had been for the Court to determine the correct construction, Cockerill J considered that the OGA had reached the right result. In arriving at this conclusion, Cockerill J considered that the Claimants' case was "considerably hampered" by their failure to put forward a positive case as to construction, which made it harder to test the "wrong" approach. Cockerill J was also influenced by conducting a "sense check" of the Claimants' concerns, which she found led to a "strained and nonsensical approach".

As to Ground Two, Cockerill J explained that the starting point for the Claimants was that they needed to meet the high threshold of irrationality. They also needed to show that, while the pre-tax method is not legally an incorrect construction to have arrived at (on the basis that Ground One had been dismissed), it was nevertheless irrational to reach that conclusion. On the facts of this case, the threshold for irrationality had not been reached. The Claimants could also not show a breach of the "have regard" duty under the Energy Act 2016, which the Court emphasised was a "process duty". Balancing the various matters to which the regulator must have regard was a matter for the OGA, not the Court.

Comment

This decision illustrates that the Court's approach to statutory construction will vary according to the context. While in some cases there might be a "right" approach, in others (and particularly where an expert regulator is concerned) the Courts might show significant deference. It is therefore important that those construing statutory provisions (whether public bodies considering their own powers or those considering bringing challenges) consider the context carefully to assess the Court's likely approach.

The judgment in this case also demonstrates that it is often important (and of significant persuasive value) for parties to put forward positively what they consider the "right" approach to the construction of a particular point. A Court may also be influenced by consideration of whether the practical effects of a particular construction are sensible.

Finally, the decision shows the difficulty in succeeding on an irrationality challenge where another more "hard edged" challenge based on legality has failed. For this reason, before including an irrationality ground, parties ought to consider carefully whether that is really likely to add anything to a legality challenge.