“As far as Bulb is concerned, it is entirely obvious that in order to trade it needs funding, and the only available funding is that on the terms proposed by the Secretary of State. As the evidence makes clear, there are no other funding options available. The Funding Agreement is the only show in town. It therefore seems to me obvious that entry into the Funding Agreement is a proper exercise or would be a proper exercise of power by the Proposed Administrators.”
“any view on payment of a ‘dowry’ to secure a sale?”
“is there a competition policy objective to keep in mind ... (independent supplier / new entrant benefit, maintaining technology platform competition)?”
“Bidders question likely to arise as ‘What is BEIS proposal on mitigating market risk exposure [given unhedged position] to optimize value’”
“We need to maximise the recovery from the sale value to minimise the overall exposure to the consumer. Therefore, our overall view is that the M&A process should be a primarily market driven one, focussing on cost. This principle extends to HMG not taking a position as to the desirability of bid profiles or investor types. Given this construct, Teneo and Lazards will be responsible for undertaking the assessment of the M&A bids, as detailed in Annex C” [with certain exceptions]. Those exceptions included “financial structures”, “e.g. reliance on a portion of HMG funding remaining in the company”, and “subsidy control”, “if any value coming from Government funding is left in the company when it is sold, it may be considered a subsidy and therefore fall into the Subsidy control regime.”
“There is optionality for interested parties on the scope / perimeter of the Potential Transaction, and we invite interested parties to indicate in their Indicative Offer both (i) how they would bid on the indicative transaction structures … and (ii) whether an alternative transaction structure …would be preferred”
“We have therefore held a firm line with Teneo /Lazard that (i) Lazard should not proactively advertise any potential financial structures to bidders (ii) we will not confirm the acceptability of any financial structure or communicate a preferred option(s) until we have seen and digested Phase-1 bids”
“How are you going to decide who to engage with – are there any legal / presentational risks (i.e. of a perception that this wasn’t a fair and open process)? Specifically, how do we ensure that were there a JR of the process this would not be found to be unfair? Could you explicitly, for our records, set out the purpose of this engagement?”
“We have agreed with Teneo that they engage with key strategic participants that signed up to NDA but didn’t subsequently make submissions into Phase-1. One of the purposes of this engagement is to understand if there would be a future point (e.g. after specific regulatory decisions) that parties would be interested in the Bulb proposition. This information could be important should we need to pause and re-start the M&A process at a future point, to identifying when that future point should be. Teneo have offered a meeting .. to [Daisy], Octopus, Shell and ScottishPower. As it stands this offer has been accepted by [Daisy] and Octopus … If one or both of these parties were to indicate that they are not interested in the proposition now, but could be at a future point, we will consider whether it could be helpful and appropriate for Teneo to continue to engage with these parties … such that it would be easier to bring them back in a scenario in which we needed to pause and then subsequently restart the process. Does the board have any steer on whether such engagement would be beneficial/appropriate?”
“They seem keen to talk to Treasury on art of the possible re risk … I said they should talk to us, not go direct. They asked if there could be protection from some of the open Ofgem risks.”
“immediate cash injection to companies with rumoured credit problems would be problematic” (a clear reference to Mr O’Shea’s text to Lazard of10 June 2022 ). We are satisfied that this was a fair characterisation of the position. (ii) “A competitive sale process has been run over the past four months against a highly challenging market backdrop”, which had delivered only one transactable bid (the Octopus’ bid). (iii) Octopus’ bid “envisages certain transitional support” regarding the lack of hedge, working capital and the trading collateral implications of rising government debt. (iv) Octopus’ bid “seems better value” than the two identified counterfactuals – keeping the business in SAR, or breaking up the book for split sales, which would be “higher risk and likely more expensive”
“If however you believe you have landed on a structure that is superior for consumers to what we have outlined we would like to understand what that might be”
“The draftSubsidy Control Act 2022 guidance … and EU State aid law indicate that public authorities will be able to show that there is no subsidy/aid to the buyer where an open and competitive process has been followed. As Orchid’s bid has been proposed following such an open, non-discriminatory, and competitive sales process, there is no subsidy to Octopus as the buyer.”
“Repayment of HMG funding is a realistic outcome given that the wholesale risk has been addressed with the transaction structure and assuming that [Octopus] can run the business efficiently in line with the Ofgem price cap structure.”
“The difference (15 Sept estimate£1.2bn ) which HMG would otherwise bear in the counterfactual options, will be a permanent price adjustment not recoverable from the SPV – but may be recovered under the shortfall mechanism from consumer bills.”
“What in substance is being asked for by BGT, SPR and E.ON is interim relief in the context of their application challenging the lawfulness of the Secretary of State’s decision. It is common ground that interim relief can be applied for, and is commonly granted, in the Administrative Court; and that such relief could include suspending the effect of the Secretary of State’s decision pending the resolution of the challenge to it.”
“The usual structure is that the special regime draws on some of the principles underpinning the administration regime which is available for companies generally, but includes additional purposes which will normally take priority over, or even replace altogether, the objectives for which an ordinary administrator is required to perform his functions.”
“12-008 The general attitude of the court when: (i) considering the strategies proposed by the prospective administrator in support of administration applications under Sch. B1.para. 12; or (ii) considering or reviewing decisions, acts and transactions of the administrator undertaken within the scope of his extensive statutory powers, is one of deference to the commercial judgment of insolvency practitioners as experts and regulated professionals. This reflects a broad judicial understanding of the nature of the administrator’s task and the challenges that he faces on appointment; an appreciation, in particular, that the administrator will invariably be operating at pace in difficult and urgent circumstances which dictate the need for quick decision-making, often based on less than perfect information, if value is to be preserved and the purpose of administration achieved. It also reflects an institutional judgment that licensed professionals are better placed than the court to formulate and implement commercial strategy according to the circumstances in which they find themselves. 12-009 Accordingly, the exercise of the administrator’s wide powers, inter alia, to manage the company’s business and to realise its assets are regarded as matters for the commercial judgment of the administrator, rather than as being appropriate matters for directions by the court. In the words of David Richards J, the court ‘would not normally give directions to an administrator as to the means by which he should market assets, any more than as to which particular deal to make.’ Consistent with this approach, the court will not usually be prepared to review the commercial strategy that the administrator wishes to pursue in advance. Thus, the court will not generally interfere where the administrator wishes to dispose of the company’s assets speedily, in order to preserve goodwill that may otherwise rapidly diminish, before creditors have received his proposals or have had the opportunity to consider and approve them in their decision-making procedure. … 12-014 … The critical point to be borne in mind is that the court will generally allow the administrator a wide measure of independence and latitude in the performance of his functions, having regard both to the statutory framework which vests the management of the company’s affairs in him and to the commercial exigencies that he faces.”
“Where the High Court considers that there has been undue delay in making an application for judicial review, the court may refuse to grant– (a) leave for the making of the application; or (b) any relief sought on the application, if it considers that the granting of the relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration.”
“The claim form must be filed– (a) promptly; and (b) in any event not later than 3 months after the grounds to make the claim first arose.”
“At the time bids were invited there was no Government support being offered to potential bidders. This background informed the approach which potential bidders, such as ScottishPower, took when deciding whether or not to submit a bid for Bulb.”
“(a) the public interest; and (b) the effect the scheme is likely to have (if any) upon the interests of third parties.”
“It does not seem likely that a decision by a state enterprise to enter into or determine a commercial contract to supply goods or services will ever be the subject of judicial review in the absence of fraud, corruption or bad faith.”
“63. The power of the Minister of Energy to undertake negotiations with CT Power as part of the conduct of the business of the Government is a wide one, conferring on the Minister a very wide discretion as to how best to proceed. The implication is that the Minister is permitted to participate in the commercial market in the usual way, i.e. through the exercise of the full bargaining power available to the Government in order to secure the best commercial deal possible and thereby promote the public interest. With that end in view, a court should be astute to ensure that application of public law standards in relation to the Minister does not cut down or undermine that bargaining power. Nor should public law standards be applied in such a way as to give a potential contracting counterparty a negotiating advantage which has not been bargained for. 64. In negotiating a commercial contract on behalf of the Government, the Minister, as a public authority, is not entirely free from constraints arising under public law. He is obliged to comply with basic public law standards which ensure that he properly seeks to promote the public interest. Accordingly, his decision-making as to how to conduct negotiations before a contract is entered into might be brought into question if, by way of purely hypothetical example, he acted out of personal spite or because he had been bribed. As a result, the potential counterparty is not exposed to what, if they were negotiating with another party, might be the pure capriciousness of that private party in deciding whether to enter into the contract and on what terms.”
“What does fairness require in the present case? My Lords, I think it unnecessary to refer by name or to quote from, any of the often-cited authorities in which the courts have explained what is essentially an intuitive judgment. They are far too well known. From them, I derive that (1) where an Act of Parliament confers an administrative power there is a presumption that it will be exercised in a manner which is fair in all the circumstances. (2) The standards of fairness are not immutable. They may change with the passage of time, both in the general and in their application to decisions of a particular type. (3) The principles of fairness are not to be applied by rote identically in every situation. What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. (4) An essential feature of the context is the statute which creates the discretion, as regards both its language and the shape of the legal and administrative system within which the decision is taken. (5) Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken, with a view to procuring its modification; or both. (6) Since the person affected usually cannot make worthwhile representations without knowing what factors may weigh against his interests fairness will very often require that he is informed of the gist of the case which he has to answer.”
“Existing domestic law has effect on and after the relevant date with such modifications as are required for the purposes of implementing in that law [the TCA] … so far as the agreement concerned is not otherwise so implemented and so far as such implementation is necessary for the purposes of complying with the international obligations of the United Kingdom under the agreement.”
“[Section 29] … amounts to a blanket, generic, mechanism to achieve full implementation, without the need for any further parliamentary or other executive intervention. The section transposes the TCA onto domestic law, expressly and mechanistically changing it in the process. Following section 29, domestic law on an issue means what the TCA says.”
“1. The provisions of this Agreement and any supplementing agreement shall be interpreted in good faith in accordance with their ordinary meaning in their context and in light of the object and purpose of the agreement in accordance with customary rules of interpretation of public international law, including those codified in the Vienna Convention on the Law of Treaties, done at Vienna on23 May 1969 . 2. For greater certainty, neither this Agreement nor any supplementing agreement establishes an obligation to interpret their provisions in accordance with the domestic law of either Party.”
“Article 31: 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. 3. There shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c) any relevant rules of international law applicable in the relations between the parties. 4. A special meaning shall be given to a term if it is established that the parties so intended.”
“Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable.”
“With the objective of ensuring fair competition, each Party shall ensure its regulatory framework for the production, generation, transmission, distribution or supply of electricity or natural gas is non-discriminatory with regard to rules, fees and treatment.”
“1. For the purposes of this Chapter, the following definitions apply: (b) ‘subsidy’ means financial assistance which: i) arises from the resources of the Parties, including: (A) a direct or contingent transfer of funds such as direct grants, loans or loan guarantees; (B) the forgoing of revenue that is otherwise due; or (C) the provision of goods or services, or the purchase of goods or services; (ii) confers an economic advantage on one or more economic actors; (iii) is specific insofar as it benefits, as a matter of law or fact, certain economic actors over others in relation to the production of certain goods or services; and (iv) has, or could have, an effect on trade or investment between the Parties.”
“Subsidies that are granted on a temporary basis to respond to a national or global economic emergency shall be targeted, proportionate and effective in order to remedy that emergency. Articles 367 and 374 do not apply to such subsidies.”
“Prohibited subsidies and subsidies subject to conditions (1) The categories of the subsidies referred to in Article 366(2) and the conditions to be applied to them are as follows … Subsidies in the form of unlimited guarantees (2) Subsidies in the form of a guarantee of debts or liabilities of an economic actor without any limitation as to the amount of those debts and liabilities or the duration of that guarantee shall be prohibited. Rescue and restructuring (3) Subsidies for restructuring an ailing or insolvent economic actor without the economic actor having prepared a credible restructuring plan shall be prohibited. The restructuring plan shall be based on realistic assumptions with a view to ensuring the return to long-term viability of the ailing or insolvent economic actor within a reasonable time period. During the preparation of the restructuring plan, the economic actor may receive temporary liquidity support in the form of loans or loan guarantees. Except for small and medium-sized enterprises, an economic actor or its owners, creditors or new investors shall contribute significant funds or assets to the cost of restructuring. For the purposes of this paragraph, an ailing or insolvent economic actor is one that would almost certainly go out of business in the short to medium term without the subsidy. (4) Other than in exceptional circumstances, subsidies for the rescue and restructuring of insolvent or ailing economic actors should only be allowed if they contribute to an objective of public interest by avoiding social hardship or preventing a severe market failure, in particular with regard to job losses or disruption of an important service that is difficult to replicate. Except in the case of unforeseeable circumstances not caused by the beneficiary, they should not be granted more than once in any five year period.”
“Transparency 1. With respect to any subsidy granted or maintained within its territory, each Party shall within six months from the granting of the subsidy make publicly available, on an official website or a public database, the following information: (a) the legal basis and policy objective or purpose of the subsidy; (b) the name of the recipient of the subsidy when available; (c) the date of the grant of the subsidy, the duration of the subsidy and any other time limits attached to the subsidy; and (d) the amount of the subsidy or the amount budgeted for the subsidy. 3. In addition to the obligation set out in paragraph 1, the Parties shall make subsidy information available in accordance with paragraph 4 or 5. … 5. For the United Kingdom, compliance with paragraph 3 means that the United Kingdom shall ensure that: (a) if an interested party communicates to the granting authority that it may apply for a review by a court or tribunal of: (i) the grant of a subsidy by a granting authority; or (ii) any relevant decision by the granting authority or the independent body or authority; (b) then, within 28 days of the request being made in writing, the granting authority, independent body or authority shall provide that interested party with the information that allows the interested party to assess the application of the principles set out in Article 366, subject to any proportionate restrictions which pursue a legitimate objective, such as commercial sensitivity, confidentiality or legal privilege. The information referred to in point (b) of the first subparagraph shall be provided to the interested party for the purposes of enabling it to make an informed decision as to whether to make a claim or to understand and properly identify the issues in dispute in the proposed claim.” (a) the legal basis and policy objective or purpose of the subsidy; (b) the name of the recipient of the subsidy when available; (c) the date of the grant of the subsidy, the duration of the subsidy and any other time limits attached to the subsidy; and (d) the amount of the subsidy or the amount budgeted for the subsidy. (a) if an interested party communicates to the granting authority that it may apply for a review by a court or tribunal of: (i) the grant of a subsidy by a granting authority; or (ii) any relevant decision by the granting authority or the independent body or authority; (b) then, within 28 days of the request being made in writing, the granting authority, independent body or authority shall provide that interested party with the information that allows the interested party to assess the application of the principles set out in Article 366, subject to any proportionate restrictions which pursue a legitimate objective, such as commercial sensitivity, confidentiality or legal privilege. The information referred to in point (b) of the first subparagraph shall be provided to the interested party for the purposes of enabling it to make an informed decision as to whether to make a claim or to understand and properly identify the issues in dispute in the proposed claim.”
“Independent authority or body and cooperation Each Party shall establish or maintain an operationally independent authority or body with an appropriate role in its subsidy control regime. That independent authority or body shall have the necessary guarantees of independence in exercising its operational functions and shall act impartially.”
“Courts and tribunals 1. Each Party shall ensure, in accordance with its general and constitutional laws and procedures, that its courts or tribunals are competent to: (a) review subsidy decisions taken by a granting authority or, where relevant, the independent authority or body for compliance with that Party's law implementing Article 366; (b) review any other relevant decisions of the independent authority or body and any relevant failure to act; (c) impose remedies that are effective in relation to point (a) or (b), including the suspension, prohibition or requirement of action by the granting authority, the award of damages, and the recovery of a subsidy from its beneficiary, if and to the extent that those remedies are available under the respective laws on the date of entry into force of this Agreement; (d) hear claims from interested parties in respect of subsidies that are subject to this Chapter where an interested party has standing to bring a claim in respect of a subsidy under that Party's law. … 3. Without prejudice to the obligations to maintain or, where necessary, to create the competencies, remedies and rights of intervention referred to in paragraphs 1 and 2 of this Article, and Article 373, nothing in this Article requires either Party to create rights of action, remedies, procedures, or widen the scope or grounds of review of decisions of their respective public authorities, beyond those existing under its law on the date of entry into force of this Agreement.”
“Financial assistance will not confer an economic advantage if it could reasonably be considered to have been given on the same terms as it could have been obtained on the market. This is known as the Commercial Market Operator (CMO) principle.”
“A court or tribunal must have regard to Article 4 of the Trade and Cooperation Agreement (public international law) when interpreting that agreement or any supplementing agreement.”
“1. Each Party shall ensure, in accordance with its general and constitutional laws and procedures, that its courts or tribunals are competent to: (a) review subsidy decisions taken by a granting authority or, where relevant, the independent authority or body for compliance with that Party’s law implementing Article 366; … (c) impose remedies that are effective in relation to point (a) …, including the suspension, prohibition or requirement of action by the granting authority, the award of damages, and the recovery of a subsidy from its beneficiary, if and to the extent that those remedies are available under the respective laws on the date of entry into force of this Agreement; (d) hear claims from interested parties in respect of subsidies that are subject to this Chapter where an interested party has standing to bring a claim in respect of a subsidy under that Party’s law. … 3. Without prejudice to the obligations to maintain or, where necessary, to create the competencies, remedies and rights of intervention referred to in paragraphs 1 and 2 of this Article, and Article 373, nothing in this Article requires either Party to create rights of action, remedies, procedures, or widen the scope or grounds of review of decisions of their respective public authorities, beyond those existing under its law on the date of entry into force of this Agreement. …”
“Subsidies are proportionate and limited to what is necessary to achieve the objective”
“Accordingly, even where, as here, the relevant decision maker has carried out the balancing exercise, and has not made any errors of primary fact or principle and has not reached an irrational conclusion, so that the only issue is the proportionality of the decision, the court cannot simply frank the decision, but it must give the decision appropriate weight, and that weight may be decisive. The weight to be given to the decision must depend on the type of decision involved, and the reasons for it. There is a spectrum of types of decision, ranging from those based on factors on which judges have the evidence, the experience, the knowledge, and the institutional legitimacy to be able to form their own view with confidence, to those based on factors in respect of which judges cannot claim any such competence, and where only exceptional circumstances would justify judicial interference, in the absence of errors of fact, misunderstandings, failure to take into account relevant material, taking into account irrelevant material or irrationality.”
“1. With the objective of ensuring fair competition, each Party shall ensure that its regulatory framework for the production, generation, transmission, distribution or supply of electricity or natural gas is non-discriminatory with regard to rules, fees and treatment.”