High Court dismisses challenge to autonomous tariff quota for raw cane sugar

24/02/22

Mr Justice Foxton today dismissed a claim for judicial review brought by British Sugar plc against the Secretary of State for International Trade challenging the legality of an autonomous tariff quota for raw cane sugar (“the ATQ”). Under the ATQ, 260,000 tonnes of raw cane sugar may be imported into the UK tariff-free each year for refining. The ATQ is available to all importers on a first-come, first-served basis.

By its first ground, British Sugar alleged the ATQ was an unlawful State aid to Tate & Lyle Sugars in breach of Article 10(1) of the Northern Ireland Protocol. Tate & Lyle is the only substantial refiner of raw cane sugar in the UK and imported over 99% of the raw cane sugar which benefited from the ATQ in 2021. By its second ground, British Sugar alleged that the ATQ was an unlawful subsidy to Tate & Lyle granted in breach of Article 366 of the Trade and Cooperation Agreement between the UK and the EU (“the TCA”).

On the first ground, Mr Justice Foxton rejected British Sugar’s submission that the ATQ was by its nature selective. The Judge concluded that, while the Government’s expectation when introducing the ATQ was that the overwhelming majority of the ATQ would be used by T&L, this was not because of any term of the ATQ which was designed or in fact had this effect, but because T&L was the only raw cane sugar refiner operating in the UK. As such, the Judge held that it was necessary to apply the three stage World Duty Free test for determining whether a tax measure is de facto selective. Applying the three stage test, he held that the ATQ formed part of the normal taxation regime for imports of raw cane sugar and did not discriminate between undertakings in comparable factual and legal situations. Accordingly, it did not confer a selective advantage on Tate & Lyle. Had the issue arisen, however, he would have rejected the Secretary of State’s case that the ATQ was justified by the general principles of the UK’s system of import duty.

Mr Justice Foxton also considered two issues specific to the Northern Ireland Protocol, which do not arise under EU State aid law more generally. He accepted British Sugar’s argument that tariff measures adopted by the UK, such as the ATQ, could in principle fall within the scope of Article 10(1) of the Northern Ireland Protocol. However, he held that the jurisdictional requirement for an effect on trade between Northern Ireland and the EU was not satisfied. That was because the EU’s Unilateral Declaration of 17 December 2020 had modified the effect on trade test as it exists under EU law. The ATQ did not, in the words of the Unilateral Declaration, have a “genuine and direct link” to Northern Ireland.

On the second ground, Mr Justice Foxton held that the ATQ did not involve a “foregoing of revenue that was otherwise due” and in any event was not “specific” within the meaning of the TCA for similar reasons to his conclusion that it was not a State aid. He also rejected an argument advanced by Tate & Lyle (but not by the Secretary of State) that the ATQ did not affect trade and investment between the UK and the EU.

The judgment will be of wide interest to practitioners because it is the first case in which the State aid provisions of the Northern Ireland Protocol (including the jurisdictional requirement for an effect on trade between the Northern Ireland and the EU) and the subsidy control provisions of the TCA have been considered in detail by the domestic courts. It is also the first case in which the selectivity test under EU State aid law has been applied to tariff measures. The judgment also considers the relationship between the subsidy control provisions of the TCA, the EU law of State aid and the WTO Agreement on Subsidies and Countervailing Measures.

The judgment is here