1 Friday, 22 March 2019 2 (10.00 am) 3 Submissions by MR PALMER (continued) 4 LORD JUSTICE HICKINBOTTOM: Yes, Mr Palmer. 5 MR PALMER: My Lord, I was proposing to pick up from where 6 I left off last night, just after the passage dealing 7 with the parliamentary privilege point, and pick up the 8 chronology with the proposed ANPS being issued 9 in February 2017. My Lords have the consultation 10 document that accompanied that in bundle 17. Behind 11 tab 1, there were two consultations, and the first was 12 in February 2017, and the tab is so marked. 13 Just simply to highlight, at pages 24 to 25 the 14 reasons for preferring the northwest runway specifically 15 over the extended northern runway are given in what is 16 now familiar form. 17 At page 28 of the bundle, a specific consultation 18 question, making clear this remained a live issue in the 19 consultation. This could be through the northwest 20 runway scheme, the government's preferred scheme, or 21 Gatwick second or the ENR scheme, or indeed any other 22 scheme. That was part of the consultation. With the 23 government's reasons for its view set out in that way, 24 as I have shown my Lords, and obviously nothing touching 25 on the lack of a guarantee. 1 1 So, no final decision has been reached at this 2 point. 3 As I said before, the guarantee point, in any event, 4 logically falls away as soon as you decide that the 5 planning merits otherwise favour the northwest runway 6 scheme. 7 I say it has also legally fallen away now because it 8 is not relied upon as a reason for the public for 9 consultation or to Parliament to support the proposed 10 policy. 11 There was a further consultation in October, but 12 there is no change relevant to this point. 13 Then there is the Transport Committee. The evidence 14 to the Transport Committee is at tab 10 of this bundle. 15 Relied on by the claimants is the passage at page 215. 16 The question from Steve Double MP, moving on to the 17 economic case: 18 "The Airports Commission has always shown that there 19 is very little separating the three schemes on an 20 economic basis [whether it is little or not is a matter 21 of judgement]. That is still the case with the updated 22 appraisal work by the department. Is it accurate for 23 the NPS to say that the northwest runway scheme will 24 offer the greatest net benefit to the UK?" 25 He says: 2 1 "We believe that is correct." 2 In my submission, that is the main point here. Then 3 he goes on to say this was a difficult decision, he goes 4 on to the compliment the other schemes. At the end of 5 the day, he says: 6 "I think the biggest issue for us was that the 7 promoters of that scheme could not secure from Heathrow 8 a written guarantee that if we picked it, they would do 9 it. That seemed to be a fairly fundamental problem for 10 us. There were a number of other issues related to it; 11 that was not the only one, but there was no guarantee 12 that would be something that the owners of Heathrow 13 would be willing to pursue. No guarantee could be 14 secured on this front." 15 He says there were other matters, too. Those other 16 matters would be the reasons that had been consulted 17 upon, which demonstrated collectively why it was that 18 the greatest net benefit to the UK was provided by the 19 northwest runway scheme. 20 So, the same points arise as I made yesterday 21 afternoon in relation to the House of Commons debate 22 about context for this. Obviously, the words are what 23 they are, but when you look actually at how the 24 decision-making process has proceeded to this date, and 25 indeed continued to proceed, it is not right to say that 3 1 issue of the guarantee somehow supplanted the judgment 2 that it was the northwest runway scheme that offered the 3 greatest net benefit to the UK, or that was not the 4 reason set out in the NPS and the consultation, the 5 reasons why that judgment was made. 6 Indeed, when you go over to 218 and the foot of the 7 page, you get the whole matter put the other way around: 8 "I explained why we have taken the view on the 9 extended northern runway scheme. It did not deliver as 10 much capacity." 11 LORD JUSTICE HICKINBOTTOM: Where is that? 12 MR PALMER: It is the bottom of page 218. The one paragraph 13 up beginning "I explained ..." 14 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 15 MR PALMER: "... why we had taken the view on the extended 16 northern runway. It did not deliver as much capacity." 17 Pausing there -- and I will come back to this -- the 18 amount of capacity is obviously one of the key drivers 19 of the determination on net economic benefits and 20 strategic benefits. I will come back to that in 21 a moment. 22 "... it also had the simple complication that we did 23 not have certainty that we could do it because Heathrow 24 would not sign up to it". 25 So, there that point is presented as a supplementary 4 1 point, and it is described as a simple complication. 2 So, if one really parses these comments, reads them 3 as if they were considered statements of the executive, 4 they are not strictly in alignment. My point is -- the 5 larger point is that the suggestion or the inference 6 which is to be drawn from it -- the claimants seek to 7 draw from it, but in their words the "real reason why" 8 the northwest runway scheme was preferred to their 9 scheme was simply the lack of a guarantee isn't 10 supported against the backdrop of the material as 11 a whole. 12 Just for your note, the transport conclusions, the 13 Transport Committee's conclusions on all this are -- 14 I need not get it out -- bundle 8, tab 7, page 358. 15 They were produced on 23 March 2018. The short point is 16 they accept -- for what it is worth they accept the 17 government's case that the NWR has the greatest net 18 benefits and accept the preference for Heathrow, and 19 they accept the Secretary of State's reasons for 20 preferring the NWR over the ENR for the reasons he gave; 21 they list the reasons he gave, and they do not include 22 the guarantee. 23 I give you the reference and you can see that. 24 If I can take out bundle 18 now, near the end of the 25 chronology. Bundle 18, tab 1. This is not in the 5 1 speaking note. It is an additional reference to give 2 you. So, it is 18/1/1. A letter dated 17 May 2018 from 3 Hub's solicitors, DAC, to the Secretary of State, 4 enclosing a suggested revised airports NPS, and you can 5 see from the bottom paragraph on that page what they 6 have done. They say: 7 "Maximised the options for providing capacity at 8 Heathrow Airport to maintain its hub status. 9 Accordingly HHL has revised the airports NPS so that it 10 includes the ENR scheme along with the NWR scheme 11 promoted by HAL. We enclose a revised draft of the 12 airports NPS on this basis. It is submitted on the 13 basis that it is an example of how the airports NPS 14 could be amended to include the ENR scheme and consulted 15 upon prior to its submission to Parliament in 16 a relatively short time frame. We want to work 17 collaboratively." 18 Pausing there, that is, of course, a perfectly 19 acceptable proposal in principle. As you will recall 20 from section 5 of the Planning Act 2008, an NPS can 21 specify one or more locations for a specified 22 description of developments. There is nothing 23 objectionable about leaving open in the NPS a choice of 24 two and then, at a later stage, a DCO application could 25 be made on the basis of either. So, that would have 6 1 been a legally available route for the Secretary of 2 State to take, and that no doubt was why it was 3 proposed. You can see if you just turn on through that 4 tab -- I don't intend to take you to any detail -- they 5 have done a tracked changes version of the existing NPS 6 at that stage, to build in that possibility. That's the 7 exercise they've undertaken. 8 At the same time, at tab 4, they lobbied the 9 Prime Minister, essentially in support of their proposed 10 amendments, enclosing them to her as well. Maintaining 11 the same basic complaints about the Airports 12 Commissions' original proposals. You see that on 13 page 411, in the fourth paragraph, notably just saying 14 it is just a mistake about the lower capacity. There 15 are other points, too. It is not the only one. 16 Then, at tab 5, you get the ministerial submission 17 dated 4 June -- this is on page 113 -- providing that to 18 the Secretary of State. You see in the first paragraph 19 the summary, it has been accompanied by a press release 20 by Heathrow Hub. There was a PR campaign accompanying 21 this. 22 Then, the recommendation: 23 "That you note: that officials have considered the 24 material sent and have concluded the arguments raised do 25 not warrant any further amendment to the proposed 7 1 airports NPS." 2 Then, "Consideration" is over the page. It is 3 explaining what DAC's proposal is. 4 Then, from paragraph 6: 5 "You will recall from the time of the airports 6 subcommittee's [that is a Cabinet subcommittee's] 7 preference decision in October, that the ENR scheme has 8 two key advantages, lower capital costs and fewer houses 9 demolished ... However, the subcommittee also considered 10 the ENR scheme's disadvantages, including the ENR 11 providing less potential for runway respite ..." 12 The now familiar three points. 8: 13 "Many of the amendments that have been proposed in 14 the marked up version relate to the recommendations of 15 the Transport Committee around the relevant scheme being 16 tested by the CAA to ensure it is both affordable and 17 financeable. However, a number of other amendments do 18 not, including ..." 19 Can I just pick out (c): 20 "... stating at least the same capacity can be 21 delivered by the ENR as the NWR, and therefore they have 22 equal economic benefits." 23 Then reference to the York Aviation report: 24 "Their report has now been sent to you." 25 It is under a different cover, but in conclusion: 8 1 "... the report sets out the Hub has not 2 demonstrated that the ENR scheme could ... capacity of 3 700,000 at an acceptable level of service and whilst 4 maintaining periods of respite for the local population. 5 This therefore casts doubt on Hub's claim the economic 6 benefits could be equal." 7 Indeed, if you look at (e): 8 "It is accompanied by an apparent dilution of the 9 expected night flight ban." 10 No doubt to improve the capacity and that was 11 contrary to the expected night flight plan, which was 12 a key measure within the noise passage: 13 "As you know, we have carefully considered the 14 Transport Committee's recommendations and have 15 subsequently made changes which have been reflected in 16 the proposed airports NPS where appropriate. However, 17 we do not consider that any of the changes proposed by 18 HAL are necessary or desirable." 19 There's the conclusion. I could have shown you this 20 en route, but by this time Hub had also made a complaint 21 to the CMA about the guarantee point. So, what is said 22 here is: 23 "You will also wish to note that separately Hub has 24 formally complained to the CMA." 25 What is said about that is in the final sentence or 9 1 two: 2 "We are working with the CMA and the CAA [the 3 responsible regulator] on the handling of this 4 complaint. We are also handling a number of information 5 requests from Hub." 6 You will note there the difference between the 7 assessment of the proposed alternative of keeping the 8 ENR scheme in the frame, as an option within the ANPS, 9 which is rejected on its merits, separately reporting 10 what is happening to the guarantee issue, which has gone 11 down an entirely separate route in terms of a complaint 12 to the CMA and to the CAA. 13 What is strikingly absent from that submission is 14 any suggestion: well, of course, you have already 15 decided because they haven't a guarantee it is 16 a nonstarter. 17 Or even: you might want to put that in the balance 18 here. 19 It is rejected on its merits because it is not 20 as good a scheme as the NWR in that recommendation, and 21 that is accepted. 22 LORD JUSTICE HICKINBOTTOM: Just one moment, the letter at 23 tab 1 that you took us to, which is the letter with the 24 draft NPS, the revised draft NPS. That doesn't raise, 25 does it, any complaint about the guarantee -- any 10 1 reference about the guarantee? 2 MR PALMER: No, it is an alternative ANPS, and they are not 3 suggesting -- no. 4 LORD JUSTICE HICKINBOTTOM: This is on the basis that, on 5 balance, ENR should still be in the mix, to put it 6 colloquially. 7 MR PALMER: Yes. 8 LORD JUSTICE HICKINBOTTOM: That is also the gist of the 9 letter to the Prime Minister. 10 MR PALMER: Yes. 11 LORD JUSTICE HICKINBOTTOM: It is a response to that, that 12 the submission to the minister, consideration, 13 paragraphs 4 to 9, are concerned. 14 MR PALMER: Yes. It is presented on its merits and 15 considered on its merits, straight forwardly. Just so 16 you have the reference to refer to, it's tab 3 in the 17 same bundle. It is a week after they had sent the 18 proposed NPS. They provided the Secretary of State with 19 a copy of the complaint lodged with the CMA. 20 LORD JUSTICE HICKINBOTTOM: Yes. 21 MR PALMER: What they say there is: 22 "In this respect, Hub are of the opinion that the 23 airport's NPS should not be laid before Parliament 24 without the ENR scheme being included in the airports 25 NPS and a written guarantee from HAL to Hub that if the 11 1 ENR scheme is progressed, HAL will work on standard 2 commercial terms with Hub to implement that scheme for 3 the expansion of Heathrow Airport." 4 They are at this point inviting the Secretary of 5 State to go out and get a guarantee from HAL in Hub's 6 favour, and for that then to be presented to Parliament 7 to fill that identified gap in their scheme. 8 So, far from saying at this point the guarantee is 9 irrelevant, they are consistently -- with Mr Kingston's 10 case at least -- saying that is a material consideration 11 and, "We think you should do the work to provide it". 12 But, anyway, that isn't treated -- despite that 13 invitation -- as a point in the subsequent ministerial 14 submission for rejecting the scheme. They don't say, 15 "Oh well, we could do that, but we don't want to" or "We 16 don't think we can", and therefore that is a point 17 against them. It is just treated on its merits on the 18 basis, in particular, that I have shown you amongst 19 other things, but my central point is that capacity is 20 much lower. 21 In the following tab, in the Prime Minister's 22 letter, page 112, I am asked to draw your attention to 23 the second paragraph: 24 "Mr Garyling deserves great credit for pressing on 25 with Heathrow expansion, but he is on record that the 12 1 biggest reason he could not choose our scheme is that 2 Heathrow Airport would not provide a written guarantee 3 to implement it, and we believe this was partly 4 motivated by a perverse incentive in the regulatory 5 regime, which encouraging Heathrow to adopt the most 6 expensive plan in order to reward its shareholders. We 7 have therefore complained to the CMA, claiming that 8 Heathrow Airport has abused its dominant market 9 position. Consumers will pay more." 10 So, they are making that complaint in the letter to 11 the Prime Minister, but by whatever route that point is 12 made, it is not treated in this consideration of the 13 relative merits of the scheme and still including it as 14 an alternative, as a material consideration. It is just 15 dealt with on the planning matters. 16 So, to answer my Lord, Mr Justice Holgate's question 17 he put to me yesterday, it is of course right that even 18 at the last moment, after parliamentary approval of the 19 Secretary of State's NPS, there was still a discretion 20 not to designate it. He could even then have considered 21 going back to Parliament with a different scheme along 22 these lines, and indeed he was being lobbied right up to 23 that last moment. I showed you that last ministerial 24 submission where there were still representations being 25 made about Hub's capacity. But all that was considered 13 1 on those terms, and then the decision was made to 2 designate for the reasons I say that it is the better 3 scheme. 4 MR JUSTICE HOLGATE: I did wonder when I saw reference to 5 the complaint to the CMA, whether it might be suggested 6 that provided an alternative remedy, assuming that the 7 ground 1 otherwise had legs, but that point is not 8 pursued, is it? 9 MR PALMER: I have not taken that point. I don't think we 10 have the response from the CAA, but it depends what the 11 nature of the response was. 12 MR JUSTICE HOLGATE: It depends on what the nature of the 13 remedy is and how it relates to it, but we don't have to 14 worry about that. We have plenty of other things to 15 think about. 16 MR PALMER: So, no. Let's just leave it there, shall we? 17 MR JUSTICE HOLGATE: I didn't want to interrupt you, but you 18 didn't take us to the Transport Select Committee, it was 19 bundle 8, tab 7, page 358. That is the starting point. 20 Are there any particular paragraphs? 21 MR PALMER: Yes. 22 MR JUSTICE HOLGATE: Because it -- well, it seemed to be the 23 start of a chapter, so if there is something which is 24 really relevant -- 25 MR PALMER: It is, but the key conclusions are up-front, so 14 1 the ... 2 MR JUSTICE HOLGATE: Volume 8. 3 MR PALMER: Volume 8, tab 7. It starts at 434. 4 MR JUSTICE HOLGATE: Then you took us to 358, but that is 5 just chapter 2 here: 6 "A case for more capacity." 7 MR PALMER: But this chapter includes the preferred scheme 8 as well, which you will see. In particular, you can see 9 the first two paragraphs are dealing with meeting future 10 demand, and that is the case for more capacity, but then 11 the government's case for northwest runway specifically. 12 Then consideration of that, and there are some 13 advantages laid out, paragraphs 13 and 14. But then, at 14 15: 15 "The government said that the NWR scheme delivers 16 the greatest strategic and economic benefits. The NPS 17 states that the NWR scheme ..." 18 Then there is a list of benefits, including at the 19 third one: 20 "Delivers the greatest net economics benefits to the 21 UK." 22 16: 23 "The strategic benefits are achievable if it is 24 delivered on time and generates the capacity specified 25 in the NPS. We conclude the government was right to 15 1 pursue development at Heathrow and accept the arguments 2 it has made in favour of its preferred scheme." 3 Obviously, the arguments immediately set out before. 4 Then there is more detail in the following pages. 5 There is more detailed consideration, first, of the 6 strategic case, then of the economic case, and then at 7 page 365, there is the final, in bold type, 8 recommendation. In summary: we agree with the 9 government that the NWR scheme offers the greatest 10 strategic benefits. It takes the view that the economic 11 benefits are broadly comparable across the three 12 schemes, and DfT's forecast shows that the NWR scheme's 13 advantage is more marginal over the longer term. Its 14 three schemes add more weight to environmental health 15 impacts and makes a recommendation. 16 But that is its -- that went into the pot -- 17 MR JUSTICE HOLGATE: It doesn't deal with the guarantee 18 point? 19 MR PALMER: No. 20 MR JUSTICE HOLGATE: In other words, it is not conclusive as 21 to what considerations were taken account. 22 MR PALMER: No, despite that answer -- 23 MR JUSTICE HOLGATE: Sorry, by the relevant decision-makers. 24 MR PALMER: Yes. No, quite. This is not -- I wonder if we 25 shouldn't be looking at this. 16 1 MR JUSTICE HOLGATE: I was going to say Article IX. 2 MR PALMER: I am just going there because obviously the 3 Article IX issue is open for my Lords. 4 The key point is: despite that answer given to the 5 transport secretary, you can see that they understood 6 the reasons the government had given for the preference 7 for the NWR scheme are those in particular set out at 8 paragraph 15, and those are reasons that they accepted, 9 for what that is worth. Those recommendations and 10 conclusions were obviously taken into account going 11 forward through the rest of the process and what further 12 evidence they obtained, including, of course, the 13 further evidence relating to runway capacity of the ENR, 14 which is also a point that the Transport Committee has 15 highlighted. 16 So, then, last of all on the chronology, we get 17 considerable time later in September 2018, at tab 16 of 18 this bundle 18, the note which is recorded in Ms Low's 19 second witness statement. This is the actual notes. 20 I will go through it first-hand if I may. 21 So, this is now after the event, in September 2018, 22 just over two months after the designation decision and, 23 indeed, after these proceedings were commenced. In 24 light of the points which have been raised by Hub, the 25 officials took the opportunity to ask the Secretary of 17 1 State for his take on their significance. You can see 2 that first question: 3 "The extent to which the HAL guarantee was a factor 4 in the Secretary of State's decision to designate the 5 ANPS either linked into the issue about safety or 6 as wider point." 7 So, that's a question about the designation, rather 8 than the government subcommittee's decision, of course: 9 "I think you need to look at it the other way 10 around. All the way through we always looked carefully 11 at the issues, and we accepted the Airports Commission's 12 recommendations." 13 That is obviously a key point: 14 "The decision to designate the airports NPS was 15 based on this." 16 That acceptance: 17 "When I took over we asked questions again: has the 18 Airports Commission got it right? Has anything changed? 19 The drawbacks of the Gatwick and Hub schemes were amply 20 set out in the AC's recommendations." 21 Of course, and those drawbacks were accepted: 22 "The question was: was there anything new? Was 23 there anything to change that view? The issue about 24 a guarantee was: is there something that requires us to 25 move away from the AC points on safety and novelty of 18 1 the Hub scheme? A big factor in preventing me moving 2 away from the AC view was that even if the AC had got it 3 wrong, there was no guarantee it would be built." 4 Just pausing there, there was nothing suggestion 5 anything foregoing that he suggested that the AC had got 6 it wrong. He was asking himself the question: does this 7 lack of a guarantee have any impact? Or if there had 8 been a guarantee, would that have an impact on moving 9 away from the AC? 10 James Adutt, who is a legal adviser, who is the 11 legal adviser present, said: 12 "So, the main points were the AC points?" 13 Just pausing there, it is said on the other side, 14 that is a blatantly leading question. That is 15 a clarificatory question arising from what has already 16 been said, which is that the starting point is the AC 17 recommendation, and we accepted that. That is why he 18 said you have to look at it other way round. Don't 19 start with the guarantee. Start with the AC. 20 "Yes, nothing had changed. It was different with 21 Gatwick, there the updated forecasts for Gatwick 22 strengthens its case, which meant the government now had 23 a harder decision to make. That's why I said Gatwick 24 was a very different decision. But with the Hub scheme, 25 nothing emerged post the AC to change the view that the 19 1 NWR scheme was preferred over the ENR, based on a number 2 of factors: respite, resilience and deliverability. And 3 furthermore, the lack of a guarantee made it even harder 4 for them." 5 Additional, but in my submission inessential. The 6 way that point was made is: if there had been 7 a guarantee, then that could have led, of course, to, 8 one would suspect, further questions, as to, well, why? 9 Because, you know, what's changed? What is the 10 difference? Or is there something we are missing? 11 Because, whatever it is, it need not have been the end 12 of the inquiry if a guarantee had been produced. 13 Mr Adutt then asked: 14 "So, would it be right to describe the guarantee as 15 a reinforcing reason?" 16 Again, clarificatory, not leading. It is based on 17 something that has already been said: 18 "Yes. For the government to not accept the 19 recommendations of the expert and independent AC, 20 I would need good reasons to think again. For the 21 Gatwick scheme there were good reasons, for Hub scheme 22 there were not. The guarantee point was a further 23 reason not to think again -- I didn't even know they 24 could build it. It was the biggest reason for not 25 overturning the conclusions of the AC." 20 1 When read in that context, you can see -- as this is 2 obviously a note of a verbatim conversation, but 3 obviously you can see the logic that -- 4 MR JUSTICE HOLGATE: Hang on a second, there was an 5 application for disclosure to see any drafts leading up 6 to this final document. 7 MR PALMER: There was. And that was -- 8 MR JUSTICE HOLGATE: I think I was told in the January 9 hearing that this was the perfected note. 10 MR PALMER: That's right. 11 MR JUSTICE HOLGATE: Was it agreed with the Secretary of 12 State? 13 MR PALMER: I don't think it was. It was agreed by all 14 those who were present with the Secretary of State. 15 MR JUSTICE HOLGATE: I beg your pardon? 16 MR PALMER: It was agreed by those who were present in the 17 meeting with the Secretary of State as being an accurate 18 note. 19 MR JUSTICE HOLGATE: Because this is the for the purposes of 20 explaining his reasoning, so one might expect it to be 21 agreed with the Secretary of State. 22 MR PALMER: I can check, but I don't think it was submitted 23 back. It wasn't that sort of document. It was 24 a meeting which was minuted in the normal way, and those 25 who were there were satisfied that it was an accurate 21 1 minute of what he has said. 2 But the biggest reason -- when you think about it 3 logically -- because obviously my learned friend's focus 4 on it are the biggest reason for not overturning the 5 conclusions of the AC -- the lack of a guarantee doesn't 6 logically provide a reason for overturning everything 7 that the AC has said is an absence. 8 Had there been a guarantee, that in itself wouldn't 9 affect the planning merits of what the AC had said, but 10 it might have led you to further inquiry as to what is 11 behind that, or it doesn't make a difference. Obviously 12 it resolves some of the uncertainty questions. Is there 13 anything else you could at that point ask yourself which 14 means we should be departing? 15 But the key point here -- which is consistent with 16 what you have seen in the ministerial submissions at the 17 time -- is, firstly, we accepted the AC recommendations. 18 Not so in relation to Gatwick, but in relation to Hub. 19 Then, there was no good reason to think again. 20 Now, I of course accept -- and you have heard the 21 prominence with which the claimants have put their 22 complaint about capacity and the reason for capacity, 23 and their case is still these two schemes offered equal 24 capacity. 25 If that were right, if the conclusion, if their 22 1 ground 4 point that the Secretary of State's acceptance 2 that there was a differential capacity, if that was 3 flawed by a manifest error and was Wednesbury 4 unreasonable and irrational, then that would necessitate 5 at least reconsideration of the net economic and 6 strategic benefits. 7 We don't know what the answer would be. It is not 8 a simple mathematical, it doesn't all reduce only to 9 capacity. That is obviously one of the biggest inputs 10 into the identification of the quantum of the economics 11 benefits or otherwise. I have some references to show 12 you on that in a moment. 13 So, if they had been right about that, as they were 14 pressing even to the last moment, were equal capacity, 15 then you would be looking at again -- there would be 16 reason to think again. 17 But, in absence of any irrationality in the 18 identified reason which has been given, on the basis of 19 the acceptance of the Airports Commission's 20 recommendations, and in each of those respects, there is 21 no reason -- and beyond their complaints about 22 irrationality, the claimants don't identify any reason 23 to move away from the Airports Commission's 24 recommendations. 25 If I may, just in this respect, just take you 23 1 briefly back to the Airports Commission in bundle 7 -- 2 MR JUSTICE HOLGATE: Are we going to put this document away? 3 Because I just had one small question on it. There is 4 some underlining. Forget about the titles and 5 subtitles, but as you go halfway down the page, someone 6 has underlined "even if"; do you happen to know if that 7 is in the original document? Likewise the underlining 8 two paragraphs further down. 9 MR PALMER: When your Lordship says the "original document", 10 this is the -- 11 MR JUSTICE HOLGATE: The original document has underlining? 12 MR PALMER: Yes, that has not been added for litigation 13 purposes, yes. 14 MR JUSTICE HOLGATE: Well, because -- 15 MR PALMER: I mean, the document is produced for the 16 purposes -- I mean, it has not been underlined for the 17 benefit of the court, is what I mean. 18 MR JUSTICE HOLGATE: Sometimes that happens. 19 MR PALMER: That is the original document made on 20 5 September. 21 MR JUSTICE HOLGATE: It was an innocent question. 22 MR PALMER: Yes. 23 LORD JUSTICE HICKINBOTTOM: This absolutely not a statute, 24 and whoever agreed it -- anyway, it is not a statute. 25 But, for example, the last two sentences of the 24 1 whole thing seem to me simply to be logically 2 inconsistent. That's not fatal to anybody's case. It 3 is just a comment on what they mean as a matter of 4 English. 5 MR PALMER: Yes. There is an illogicality there, in the 6 sense that what goes before it is -- I would need a good 7 reason to depart from the AC. There in the Hub case -- 8 the case of the Hub scheme, there was not -- that should 9 be the end of the matter, you don't need anything beyond 10 that, and then -- but there was nothing reason not to 11 think again, as well. 12 LORD JUSTICE HICKINBOTTOM: That -- 13 MR PALMER: Now, you may think that is a good or bad point, 14 but it doesn't affect the core point. 15 LORD JUSTICE HICKINBOTTOM: No, but that which is what the 16 penultimate sentence says is not what the last sentence 17 says. It just doesn't say. They say different things. 18 MR PALMER: Yes, I mean -- 19 LORD JUSTICE HICKINBOTTOM: You like one of the sentences 20 and Mr Kingston likes the other. 21 MR PALMER: You have to look at the substance of it, across 22 the entire course of events. 23 LORD JUSTICE HICKINBOTTOM: Speaking entirely for myself, we 24 could look at those two sentences until kingdom come and 25 they would still be inconsistent. 25 1 MR PALMER: That was trying to explain what role. It was 2 a factor that was there. Should we be looking again or 3 should we be accepting what the Airports Commission has 4 recommended? 5 It was a potential point in Hub's favour. If they 6 could produce a guarantee, the Secretary of State -- 7 whether logically or not -- was saying: we can look 8 again. 9 But, in the absence of it, you are left where you 10 started with the Airports Commission's recommendations 11 and no reason to move away. 12 LORD JUSTICE HICKINBOTTOM: Yes, I think you slipped into 13 Mr Kingston's area there because that's what he says, 14 but -- because contrary to what you have just said, if 15 there had been a guarantee -- if your primary submission 16 is correct, it wouldn't have made any difference at all. 17 MR PALMER: No, but that's right. It doesn't, but what the 18 Secretary of State was saying was in the lead up to the 19 consideration about where the planning merits lie, one 20 of the identified problems with the ENR scheme was the 21 uncertainty that I showed you, because it had been 22 reduced as far as they could to the best endeavours 23 point, and that had been the product of all of that. 24 Here was one potential way which could have brought that 25 scheme up to the same level or nearer the same level as 26 1 the Heathrow and Gatwick schemes in that narrow 2 specified respect. 3 LORD JUSTICE HICKINBOTTOM: Yes, because -- 4 MR PALMER: It would have repaired one deficiency. 5 LORD JUSTICE HICKINBOTTOM: I think you have accepted that, 6 although it is not in the NPS, one material factor was 7 deliverability. 8 MR PALMER: Yes. 9 LORD JUSTICE HICKINBOTTOM: Whatever that means, but you 10 accepted, I think, that as part of deliverability there 11 was this uncertainty about whether HAL would actually 12 cooperate. That is my word. 13 MR PALMER: The words I used are "potentially material" 14 because then the significance of that point depends on 15 the view which is taken of the other points, about the 16 desirability of the schemes, the greatest benefits, 17 where the greatest net economic benefits lie, the 18 strategics benefits and so forth. Once you come down 19 squarely in the conclusion that the northwest runway 20 scheme offers the greatest net benefits, strategic 21 benefits, economic benefits, as the government did, then 22 that point just ceases to have any real force or cache. 23 Had you come to a different conclusion, these are 24 equally balanced schemes, we should keep them both in 25 the frame or should prefer one or the other, then the 27 1 deliverability point, and the potential weight that 2 might be attached to it, might or might not have more 3 significance. You can see it coming into the equation 4 on that approach. 5 MR JUSTICE MARCUS SMITH: Mr Palmer, I quite see if the 6 written guarantee point was ring-fenced and one carried 7 out a decision on the basis of respective merits 8 entirely segregating that point, then one can see the 9 force of your point, that if the third runway was 10 approved over and above the extended runway, one doesn't 11 need to get to the segregated point. It is only if one 12 has a decision the other way that one needs to look at 13 it. 14 The problem is that it doesn't seem as if that point 15 was segregated in the course of the consideration by the 16 Secretary of State. It looks like it is one of a mix of 17 points, all of which are being considered. 18 So, I don't see how you can say with such confidence 19 that the decision favouring the third runway was reached 20 on the merits, ignoring, leaving out of account this 21 written guarantee point because it just doesn't seem to 22 be segregated in the way that you would have to 23 segregate it in order for that to work. 24 MR PALMER: It is, in my submission, segregated at the point 25 of the Cabinet subcommittee's decision onwards. 28 1 Obviously, it is there in the mix as one of a number of 2 material considerations being considered up to that 3 point. But then the question is: what comes out of that 4 decision by the subcommittee, and what happens 5 thereafter? 6 What comes out of that decision of the subcommittee 7 is very clearly an acceptance of the Airports 8 Commission's recommendations on the greatest net 9 benefits and that being advanced, and that being 10 explained, the reasons given in the ANPS, on exclusively 11 those planning merit points, the guarantee never comes 12 back into it all the way up to the designation decision, 13 as I have just shown you, with that ministerial 14 submission, dealing with the merits points on the basis 15 that the government subcommittee had decided it on the 16 basis of the reasons, the three reasons set out in the 17 ANPS and treating the guarantee point as entirely 18 separate and now a matter for the CMA. 19 You see that segregation all the way through that, 20 you see it through the consultation process, and the 21 reason it was consulted on. You see it in the 22 parliamentary process with the Transport Committee, and 23 you see it in the final NPS with no reliance put on the 24 guarantee. 25 That is the basis of my confidence of segregation. 29 1 I entirely accept it was there as a potential material 2 factor on the way up -- previously up to that point, but 3 that is what comes out of the process. When you have 4 that conclusion it is impossible to say that, logically 5 or rationally, the addition of the guarantee point could 6 somehow sway that. 7 LORD JUSTICE HICKINBOTTOM: I thought -- we don't have to 8 look at it again -- in paragraph 99 of the briefing 9 paper to the Cabinet subcommittee, it said that 10 deliverability, including this issue, the fact that HAL 11 owned the site and they may not cooperate, that was put 12 into the pot. 13 MR JUSTICE MARCUS SMITH: It was in the speaking note. 14 LORD JUSTICE HICKINBOTTOM: It was certainly in the speaking 15 note. 16 MR PALMER: It was put into the point, but on the basis if 17 the words "if the ENR were selected". Now, the question 18 is: why was the ENR not selected? 19 The answer to that question is very clearly given, 20 in formally given reasons in the NPR, which are not 21 based on that. 22 So, because that report is prepared on the neutral 23 basis, setting out all the considerations which might 24 potentially be relevant and which they are being asked 25 to consider, it doesn't presuppose the answer to the 30 1 question: where do you think the greatest benefits lie? 2 After that, once that is clearly identified and 3 adopted, and the AC's recommendation, which we know is 4 completely uninfected by any question relating to the 5 guarantee, once that is explicitly accepted for the 6 reasons that the AC gave, you can say with confidence 7 that this is uninfected. 8 I did want to show you -- 9 MR JUSTICE MARCUS SMITH: Just so that I am clear, then, 10 about the question we must ask ourselves. I think you 11 are accepting that if one were faced with a situation 12 where it was simply the Secretary of State who 13 designated; there was no parliamentary committee; there 14 was no consultation; there was no subcommittee 15 involvement. It was simply the Secretary of State's 16 decision. The written guarantee would have been 17 a material factor on his decision, and the question 18 would be: was it legitimately or illegitimately 19 material? 20 You are saying because of the subsequent steps the 21 government's, the cabinet's engagement, the consultation 22 and the parliamentary engagement, those, as it were, 23 wash away the materiality of that element and render it 24 immaterial to the final question. 25 MR PALMER: My Lord, I would accept that if the premise of 31 1 that was right. 2 Of course, we don't have a formal statement of the 3 Secretary of State's reasons at the time for making -- 4 because it wasn't his decision at that point. It was 5 a government decision. So, we don't know, ultimately, 6 what he would have said at that point, but -- 7 MR JUSTICE HOLGATE: Sorry, which point? I beg your pardon? 8 MR PALMER: If he had been asked to make -- I think the 9 question is being put to me: if he, the Secretary of 10 State, personally, had been asked to make the preference 11 decision alone, this would have been a material 12 consideration going into his decision. The answer is: 13 yes, he would have considered it, but then what role it 14 played in his decision, we don't know. 15 MR JUSTICE HOLGATE: Well, forgive me -- 16 MR PALMER: If you have an immaterial -- just assuming that 17 the point is completely immaterial -- which I don't 18 accept -- consideration, the fact that it is considered 19 doesn't make that decision unlawful, unless it actually 20 influences the outcome of that decision. It has to play 21 some influence. So, if -- although you have that on 22 that the table in front of you and you say, "I take all 23 of these things into account", but then you look at some 24 of them and you say, "Right, well, if the AC is right, 25 that the clearest benefits lie with the NWR ..." The 32 1 fact that you are on top of that, you have something 2 which on the basis of the hypothesis is immaterial, 3 doesn't in fact affect the legality or lawfulness of 4 that decision. 5 MR JUSTICE MARCUS SMITH: No, but we do have the benefit, 6 for instance, of the final sentence that my Lord has 7 been mentioning on page 213, and provide some insight 8 into -- 9 MR PALMER: You do have the benefit of that, and you have to 10 ask yourself: should that be understood as the Secretary 11 of State thinking to himself, I am going to -- I do not 12 accept the -- I might otherwise not accept the 13 Airports Commission recommendation. 14 He has clearly said there is no reason for moving it 15 away, and what he's really saying is: there's an 16 additional reason for not moving away. 17 That might be right, it be might be wrong. Assume 18 against myself that it is wrong for the moment, that 19 doesn't logically make any difference to the principle 20 reason, which is the government -- and indeed he -- has 21 accepted the AC recommendation. 22 MR JUSTICE HOLGATE: Sorry, can we just pause for a moment 23 because there are a number of things wrapped up in what 24 you have just said? Some are submissions to law, to the 25 way the statute should be construed, and we need to come 33 1 back to that. We'll have to think about this very 2 carefully. 3 Just trying to get the facts clear, my Lord's 4 question was: assume this was a decision for designation 5 solely by the Secretary of State. Now, in terms of this 6 document at page 213, as you carefully pointed out when 7 you started reading from it, it says that Mr Goodwin 8 asked about the extent to which the guarantee was 9 a factor in the SOS's decision to designate. So, this 10 is bang on point, which is why in Low 2, paragraph 130, 11 she draws attention to it. I take my Lord's point, with 12 respect, Lord Justice Hickinbottom, that we can stare at 13 the last paragraph of this note for a long period of 14 time, but we will also stare, I suspect, at the middle 15 paragraph: 16 "A big factor in preventing me from moving way from 17 the AC view was that even if the AC had it wrong, there 18 was no guarantee it would be built." 19 In other words, this is suggesting that the extent 20 to which any consideration could be given to altering 21 the balance and assessment -- which the Airports 22 Commission had carefully arrived at -- was influenced, 23 at least to some extent, if not wholly, by the absence 24 of the guarantee. 25 MR PALMER: If that was -- 34 1 MR JUSTICE HOLGATE: Again, I take your point, we still have 2 to look at the whole document. 3 MR PALMER: Yes. 4 MR JUSTICE HOLGATE: I have that. But just taking the point 5 in isolation, I have a logic difficulty with that. 6 MR PALMER: Yes, but -- 7 MR JUSTICE HOLGATE: And that might be shared, by yourself 8 even. 9 MR PALMER: There is a logic difficulty with it. I accept 10 there is a logic difficulty of what is said in this 11 meeting. 12 MR JUSTICE HOLGATE: No, a logic difficulty about that 13 concept. If that was a freestanding sentence and it 14 wasn't saved by anything else, I don't understand how 15 that factor has anything to do with the decision as to 16 whether you agree or disagree with the Airports 17 Commission. 18 MR PALMER: And if it's stood in isolation -- 19 MR JUSTICE HOLGATE: Am I wrong? 20 MR PALMER: If it stood isolation, that would be right. It 21 doesn't, and the key point here is: nothing had changed. 22 There was no reason to move away. 23 If, hypothetically, there had been a reason which he 24 was -- and you can see he candidly acknowledges that in 25 the Gatwick case. So, if the guarantee had somehow 35 1 arisen in relation to the Gatwick scheme, rather than 2 the Hub scheme, you can see the problem that would arise 3 there because he is saying that is a difficult decision, 4 that was something that was finally balanced. But, 5 here, nothing had changed. There was no reason to move 6 away. 7 If there had been anything here, which he was 8 saying, "It was quite difficult. I was thinking about 9 this development. I was worried about the capacity", or 10 whatever it was, then there would be a problem for me. 11 But, in circumstances where this note is absolutely 12 clear that he is also saying that nothing had changed 13 from the AC and we accepted that recommendation, then 14 whatever the logic difficulties in this note, it cannot 15 be material to that decision because that is the key 16 point. There is no reason to move away. 17 MR JUSTICE HOLGATE: We will have to look at this as 18 a whole, but to be fair, there were some submissions 19 being put forward, rightly or wrongly, by a rival 20 promoter and it was down to the Secretary of State to 21 take a view about them. 22 MR PALMER: You are referring now to the revised -- 23 MR JUSTICE HOLGATE: Where, for example, without going 24 through all the material again, where the Hub were 25 disagreeing with the analysis by the Airports 36 1 Commission. The Secretary of State was fully entitled 2 to say, "Well, I have read those submissions and 3 disagree with them", but what he shouldn't be doing is 4 saying: my willingness to disagree with the Airports 5 Commission is pre-conditioned or affected by this 6 guarantee point. 7 Because it has nothing to do with the intrinsic 8 merits of the arguments. 9 MR PALMER: You can see, I have shown you the points about 10 moving away from the capacity estimates and so forth, 11 and there is nothing in them. They were reported to him 12 properly and considered on the basis that there was not, 13 and that was the basis that was not taken any further, 14 which is quite separate. Whatever is said in this note 15 here, that was quite separate and quite justified. 16 MR JUSTICE HOLGATE: Maybe this should come down to whether 17 the court should take a benevolent approach to the 18 interpretation of this document and its place in the 19 overall sequence. 20 LORD JUSTICE HICKINBOTTOM: We have to look at the whole 21 thing, haven't we? We can't treat this document, as 22 I said, as a statute. 23 MR PALMER: Nor as the decision. 24 LORD JUSTICE HICKINBOTTOM: No, that's an important point in 25 your submissions. That's one of the submissions you say 37 1 is important. 2 But we can't construe this as a statute. 3 MR PALMER: No. 4 LORD JUSTICE HICKINBOTTOM: So, we have to look at it in the 5 context of everything else. 6 MR PALMER: Yes. 7 LORD JUSTICE HICKINBOTTOM: It is a good job because, as 8 I said, the last two sentences are simply logically 9 inconsistent. 10 MR PALMER: There is nothing else I can say about it. 11 MR JUSTICE HOLGATE: You have been very candid. More than 12 that, one of the propositions is itself illogical. 13 But, then the other point, there is the legal point 14 about the place this occupies in the statutory 15 framework. 16 When we think about your construction of section 5, 17 you emphasised the words "national policy", and you 18 re-expressed that as "government policy". Is that the 19 provision -- first of all, you can have national policy, 20 which isn't necessarily government policy. It can be 21 a national policy created by a government department; is 22 that correct? 23 MR PALMER: Yes, that is correct. 24 MR JUSTICE HOLGATE: So, what is it that makes this 25 government policy? Is it in part the fact that it went 38 1 through consideration by Cabinet or Cabinet 2 subcommittee? 3 MR PALMER: Yes, this is Cabinet government and this was not 4 a decision, at that point, reserved to a particular 5 Secretary of State, but one taken at Cabinet level, 6 which the Secretary of State's input was only part of 7 it. 8 MR JUSTICE HOLGATE: My other question is: in terms of the 9 statute, is it simply the phrase "national policy" that 10 you are relying on -- are you suggesting that -- 11 MR PALMER: No, I am not. 12 MR JUSTICE HOLGATE: There is no legal requirement for 13 cabinet to be involved, is there, in the statute? 14 MR PALMER: No, no. 15 MR JUSTICE HOLGATE: Unlike the parliamentary requirements. 16 MR PALMER: Yes. 17 MR JUSTICE HOLGATE: So, the fact that the Cabinet was 18 involved was presumably not a legal decision, but 19 a political decision, so as to achieve collective 20 responsibility. Hardly surprising for a decision of 21 this nature. Is that a fair analysis? 22 MR PALMER: That is a fair analysis. It is a factual point. 23 I am not making a legal point there. I am not trying to 24 load -- it shouldn't be understood that I am trying to 25 load something into the meaning of "national policy". 39 1 I'm saying that when it is issued, it is issued as 2 a government policy, which reflects the way it has been 3 produced in contrast to simply a Secretary of State 4 policy. It is a collective decision, made collectively 5 by a committee chaired by the Prime Minister. So, it is 6 just important to understand the decision-making process 7 operated in that way, is my submission to you. It is 8 just an understanding of how the decision was reached 9 and by virtue of what process. 10 MR JUSTICE HOLGATE: It is important to get that analysis 11 right, perhaps because it may affect the extent to 12 which -- if there was a clear flaw, for the sake of 13 argument, in what the Secretary of State, taken in 14 isolation had done, there may be a legal issue as to the 15 extent to which that could be saved by the process 16 followed through Cabinet. That's the -- 17 MR PALMER: On a factual level, I would say. Just how is 18 a decision reached factually and, therefore, what can be 19 drawn from that? 20 MR JUSTICE HOLGATE: Whatever the Cabinet said, if the 21 decision-maker who is responsible for the policy 22 persists in taking a view for the sake of argument, 23 which is legally flawed, I am not entirely sure why 24 that's saved by the Cabinet process. 25 MR PALMER: If that were right -- 40 1 MR JUSTICE HOLGATE: Particularly if he is the final 2 designator. 3 MR PALMER: -- it would not automatically -- my key point 4 here is: look at what came out, look at the substance of 5 what came out and the way it was presented to the world 6 as being -- you have all my submissions on that and I 7 won't repeat them. I will just make some progress to 8 finish in time. 9 Can I just take you back to the AC final report at 10 bundle 7, tab 7, just to make good my point on this. 11 Just the passage I didn't show you when we went through 12 it before. Page 523. The beginning of chapter 13. So, 13 this follows, there has been a specific chapter on each 14 of the main criteria, if you like, a chapter dedicated 15 to each. Then this brings it all together for the 16 recommended option for expansion. You can see the 17 recommendation at 13.3 recording that: 18 "The Commission has unanimously concluded that the 19 proposal for a new northwest runway at Heathrow Airport, 20 in combination with the mitigation measures presents the 21 strongest case. It delivers more substantial economic 22 and strategic benefits than any other shortlisted 23 option." 24 Giving reasons for that, strengthening connectivity, 25 raising productivity, striking a fair balance, and 41 1 giving additional points, really: 2 "The Commission's terms of reference required it to 3 make recommendations designed to maintain the UK's 4 position as a global hub for aviation. Heathrow 5 expansion is the most likely route to achieving that." 6 That is bringing together what has gone before, and 7 then there is more explanation in that, including the 8 reasons for differentiating ENR. 9 If you just turn back to the earlier considerations 10 which informed that, at page 419 is the conclusion. The 11 end of the conclusions on the chapter, which is called: 12 "Strategic fit assessment." 13 As you can see, 6.91 to 6.93, about the NWR scheme 14 performing more strongly in the strategic fit appraisal 15 module. Reasons given. 16 You see 6.92: 17 "Those of the ENR would be broadly in line with the 18 NWR, but reduced in scale due to the smaller capacity 19 increase provided and the more ... enhanced freight ..." 20 6.93: 21 "These results are in line with the Commission's 22 macro-economic analysis of the GDP impacts." 23 Then you see the figures given. In particular, for 24 ENR it would be 131 billion, and NWR, 147 billion. 25 That's what comes out of the strategic chapter. 42 1 Then, the following chapter is the economic impacts 2 assessments, chapter 7. You find the conclusions on 3 that at page 435. At 7.50, the objective of maximising 4 economic benefits and supporting the competitiveness of 5 the UK economy: 6 "Heathrow Airport northwest runway option performs 7 most strongly." 8 Giving the figures showing the NWR outperforming. 9 A slight advantage, at the foot of the page, for NWR in 10 terms of employment. 11 Over the page, at 7.53: 12 "Benefits clearly outweigh the costs in all schemes, 13 but in particular when the net social benefits of the 14 schemes are calculated by offsetting economic benefits 15 against environmental and social disbenefits. All 16 schemes perform strongly, with the Heathrow northwest 17 runway providing the greatest net benefits." 18 Then 7.54: 19 "Overall, the northwest runway scheme performs most 20 strongly in respect of its economic benefits." 21 I just want to show you that, not to sort of 22 cherrypick particular paragraphs out, but just to point 23 out those are the conclusions of the Commission on 24 strategic benefits and the net economic benefits, which 25 when you see that reference later on, in the ANPS and, 43 1 indeed, the oral ministerial statement's accepting the 2 case that NWR has the greatest social benefits, the 3 greatest strategic benefits, the greatest net economic 4 benefits and so forth, that is what is being referred 5 to. 6 Of course, I have to accept that the different 7 capacity of the two schemes was a major input into those 8 decisions. If that were wrong, obviously there would be 9 a case of at least revisiting and seeing how it came out 10 in any new analysis. That is why Hub were consistently 11 putting that case, arguing their case on capacity all 12 the way through. 13 But once you dismiss those complaints, and you say: 14 I accept these points, and accept in particular the 15 respite resilience and impact of social considerations. 16 All of which impact on capacity. You are really 17 left, once you have done all that, with no identified 18 reason to move away from the AC's conclusions on those 19 matters; that is what the government says, anyway, that 20 is what the Secretary of State said, and that is where 21 you are left. 22 So, my primary submission on all of that is: it is 23 possible to show that the issue of the guarantee, whilst 24 correctly treated as a potentially material 25 consideration relevant to deliverability of the ENR, was 44 1 kept in the mix, considered as such, but then logically 2 falls away as soon as you accept that case and decide, 3 well, it doesn't matter, the NWR is the best scheme. 4 The government gave its reasons for accepting that 5 recommendation, the Secretary of State was clear that 6 there was no reason to move away from it. 7 The reasons I gave yesterday on grounds 4 and 5, it 8 is right not to accept, certainly entitled not to accept 9 the case that there was equivalent capacity. 10 When you get to that point, we say the court can 11 conclude that the position would not have been any 12 different if a request for a guarantee had never been 13 made. 14 MR JUSTICE HOLGATE: This is now discretion? 15 MR PALMER: It is even prior to discretion because if that 16 is right -- it is relevant also to discretion. If that 17 is right, there is just no error. If -- 18 MR JUSTICE HOLGATE: I think we had this discussion 19 yesterday. Some people call this an "immaterial error 20 of law" if it be an error of law, and then it crops up 21 again at discretion, but it is arguably much the same 22 thing; is that what we are talking about? 23 MR PALMER: My Lord, it may be. 24 MR JUSTICE HOLGATE: One way of looking at this area is to 25 say: well, has the court been shown anything which was 45 1 still in play for the Secretary of State to consider 2 other than the matters, for example, the subject of what 3 was originally grounds 4 and 5? The outcome of which 4 could have been affected by the guarantee point. In, 5 your submission, there is nothing. 6 MR PALMER: No. Everything was considered on its merits, 7 and you have seen the ministerial submissions on that, 8 treating it seriously, considering it, and saying, "Look 9 this doesn't change our assessment on the merits. At no 10 point does the issue of the guarantee play into that". 11 It is not enough for them to say there might 12 hypothetically have been something, and which the 13 guarantee might hypothetically have affected, all of 14 them were treated on a basis which did not include 15 consideration of the guarantee. If it had done, that 16 would be a different matter. 17 So, my Lords, just dealing -- since we are on the 18 question of relief. I need not turn up -- perhaps it is 19 easiest just to turn up the section 31 in authorities 20 bundle 1, tab 10. 21 These submissions obviously proceed on the 22 hypothesis the court were to identify an error of law in 23 consideration of the matter. Then you have the familiar 24 section 31(2)(a), which is a mandatory requirement on -- 25 the court must refuse to grant relief on application for 46 1 judicial review: 2 "If it appears to the court to be highly likely that 3 the outcome for the applicant would not have been 4 substantially different, if the conduct complained of 5 had not occurred." 6 We say that test is met and, indeed, by far 7 surpassed, we say, and it has had no material impact at 8 all. 9 LORD JUSTICE HICKINBOTTOM: I'm sorry, what hasn't? 10 MR PALMER: The consideration of the guarantee does not have 11 an impact on the decision to prefer the NWR over the 12 ENR. 13 LORD JUSTICE HICKINBOTTOM: I think we are moving almost 14 into a parallel universe here. 15 Your primary submission is that it was never taken 16 into account as a material consideration. 17 MR PALMER: Yes. 18 LORD JUSTICE HICKINBOTTOM: If it was taken into account as 19 a material consideration, you are still submitting that 20 it wouldn't have made any difference? 21 MR PALMER: Yes. Because of the clear conclusion on the 22 merits, which were put before Parliament. The Secretary 23 of State has justified, the government has justified its 24 policy and had it subjected to endless and rigorous 25 assessment, criticism, on the reasons which do not 47 1 relate to the guarantee. 2 So, were, hypothetically, that to be quashed -- if 3 you were presenting the same reasons as you presented 4 before, again, without reference to the guarantee -- 5 LORD JUSTICE HICKINBOTTOM: Is this the submission, really: 6 even if the Secretary of State had taken it into account 7 as a material consideration, when it was put to the 8 Cabinet subcommittee, first, and then Parliament, it was 9 not a material -- it was not included as a consideration 10 at all? 11 MR PALMER: It was included in the Cabinet subcommittee. 12 My Lord has that. It was there on the report for them 13 to consider as a potentially material consideration. 14 LORD JUSTICE HICKINBOTTOM: Right. 15 MR PALMER: But the conclusion came out: 16 "We accept the recommendation of the Airport 17 Commission ..." 18 Which if the reasons it gave -- about the greatest 19 net economic benefits, strategic benefits, social 20 benefits, environmental package, and: here are the three 21 reasons which differentiate this NWR scheme, in 22 particular, from the ENR. 23 Which particularly relate, at the heart, to 24 capacity, which obviously informs that earlier 25 conclusion. That is the way it was presented and 48 1 justified and put through and answered all the questions 2 on this. 3 LORD JUSTICE HICKINBOTTOM: I understand the submission. 4 MR PALMER: So, we say it is highly likely -- more than 5 highly likely that the outcome would not have been 6 substantially different. 7 Then, at 3C -- 8 MR JUSTICE HOLGATE: Sorry, could I just ask: in the 9 chronology -- I should know -- but when does the 10 Transport Select Committee conclusion come out? 11 MR PALMER: March 2018. I will give you the precise date. 12 It's the 23 March. 13 MR JUSTICE HOLGATE: That is fine, thank you. 14 MR PALMER: Then there is section 3C: 15 "When considering whether to grant leave to make an 16 application for judicial review ..." 17 Obviously this is a rolled up hearing, so the issue 18 of permission is live before your Lords: 19 "... the court may of its own motion consider 20 whether the outcome for the applicant would have been 21 substantially different if the conduct complained of had 22 not occurred and must consider that question if the 23 defendant asks it to do so." 24 I make that request: 25 "If, on considering that question, it appears to the 49 1 High Court to be highly likely that the outcome would 2 not have been substantially different, the court must 3 refuse to grant leave." 4 So, it is a logically prior question, in fact, the 5 question of relief. But since this is a rolled up 6 hearing, it is live before my Lords in those terms. 7 MR JUSTICE MARCUS SMITH: Do you say that this section 8 applies with equal force to the competition point? As 9 to the JR point. 10 MR PALMER: Yes, in exactly the same -- exactly the same 11 way. Notwithstanding the points that are made about the 12 EU law and the effectiveness. The reason for that is 13 this is a prohibition on the court granting relief. The 14 only relief which could be justified in relation to the 15 ground 1 complaint, in my submission, would declaratory 16 relief because of the role that the guarantee played in 17 the overall context of the decision-making. It doesn't 18 bear -- for the reason I made out yesterday -- that it 19 doesn't have a nexus with the ultimate decision. So, if 20 there were an identified breach of EU law, the 21 identified remedy would be declaratory in nature. 22 A declaration is a form of relief mentioned as -- 23 classed as relief, section 31(1)(b). The declaration is 24 relief, so the prohibition applies equally to 25 a declaration. There is authority on that, which can be 50 1 provided if necessary. 2 But the answer to the concern that I anticipate 3 my Lord has in mind, about the need to provide an 4 effective remedy in the context of EU law, would be 5 provided by a declaratory judgment. There is no 6 prohibition on the declaratory judgment. Again, the 7 Supreme Court authority that declaratory judgment is no 8 different -- is more or less effective or of a different 9 nature to a formal declaration. 10 A formal declaration does not have to be given for 11 a declaratory judgment to have equal force. 12 So, if I am right that the point on ground 1 can go 13 to a declaration, then that is the answer. 14 MR JUSTICE MARCUS SMITH: Do you say that a declaration may 15 be the appropriate remedy in the case of ground 1 16 because of your factual submissions as to the 17 significance of the written guarantee point? Or do you 18 say that, no matter what in a 102/106 situation, the 19 only remedy should be a declaration? 20 MR PALMER: Because of my factual and legal submissions 21 about the status of the reasons given under section 5(7) 22 as well. 23 MR JUSTICE HOLGATE: Yes, well, that was the point I was 24 going to come back to. Your nexus point was based on 25 your analysis of the statutory provision and the 51 1 provision which deals with -- is it section 5(7); 2 reasons for the policy? 3 MR PALMER: Yes. 4 MR JUSTICE HOLGATE: If we end up, having thought about 5 this, disagreeing with that construction of the 6 statute -- we had the discussion yesterday -- do you 7 accept that if ground 1 is made out, on that hypothesis, 8 it would be appropriate for the court to consider 9 quashing? 10 MR PALMER: Well -- 11 MR JUSTICE HOLGATE: And that declaration might not be 12 a sufficient remedy. 13 MR PALMER: It would depend on how you reached a result on 14 ground 1. I think in honesty, I would have to come back 15 to the basis of the court's finding. 16 MR JUSTICE HOLGATE: That's a fair point, but I suppose what 17 I am really trying to ask is this: assume that we were 18 to be against you, for the sake of argument, on your 19 reading of the statute in section 5(7) -- which is to 20 put that point to one side -- is a competition law 21 point, based on Articles 102 and 106, capable of giving 22 rise to a quashing order for a decision of this kind? 23 MR PALMER: It is capable of giving a -- if it gave rise to 24 an error which infected the decision-making. 25 MR JUSTICE HOLGATE: Yes, well, that's back to the next -- 52 1 MR PALMER: Obviously, a freestanding breach of competition 2 law, which had no -- would not, logically. But if 3 somehow it fed in to the decision-making process and was 4 an unlawful matter affecting the decision -- not just 5 there on the face of it, but actually affecting the 6 decision -- then yes. But, still, if you could still 7 say it is highly likely that it made no difference, 8 I would still say section 31 applies. 9 MR JUSTICE HOLGATE: Yes, but we have to approach each point 10 one by one. 11 MR PALMER: Yes. 12 MR JUSTICE MARCUS SMITH: That was really my point because 13 there's European Union case law regarding the existence 14 or otherwise of a de minimis test in Article 102, and 15 the law is a little difficult on this, but the 16 prevailing view, I think, is that there is no de minimis 17 requirement. 18 In other words, if you find there has been an abuse 19 of a dominant position, that's it. 20 MR PALMER: That's it, yes, in terms of establishing that 21 liability for an abuse of a dominant position. 22 MR JUSTICE MARCUS SMITH: In terms of breach of 102 and 23 (inaudible) breach of 106, so my question is: if that is 24 the proper view of European law under 102 and 106, how 25 far does that sit consistently with an application of 53 1 section 31? 2 MR PALMER: It does sit consistently. I understand the 3 force of the point and my Lord's concern about the high 4 likelihood test in that context. But what I would say 5 is: it doesn't follow from the fact that a breach of 6 Article 106/102 has been made out, whether de minimis or 7 not, that the appropriate remedy to vindicate a person's 8 EU law rights lies in quashing a decision. It may be 9 appropriate for there to be some other remedy, for 10 example, if they could establish causation, that 11 therefore caused loss to them, then that could still be 12 vindicated. But that doesn't -- there is no right in EU 13 law to have the specific remedy of a decision challenged 14 by way of judicial review quashed. That doesn't mean 15 that the effectiveness of those rights has not been 16 vindicated. So -- 17 MR JUSTICE HOLGATE: I wonder if we could approach it this 18 way: the highly likely test in section 31 is not the 19 same as the common law simplex for North East Derbyshire 20 test. There the question posed is: in the absence of 21 the supposed legal error, is it inevitable that the same 22 decision would have been taken? 23 MR PALMER: Yes. 24 MR JUSTICE HOLGATE: It might be said that is essentially 25 the same test as asking whether this error of law, which 54 1 has been identified, is immaterial? 2 MR PALMER: Yes. 3 MR JUSTICE HOLGATE: If you answer that question in favour 4 of the respondent, you don't actually get to the relief 5 question in section 31 -- 6 MR PALMER: Yes. 7 MR JUSTICE HOLGATE: -- and any difficulty introduced by the 8 enactment of that section, it might be said, by 9 introducing the highly likely test. 10 MR PALMER: Yes. 11 MR JUSTICE HOLGATE: I mean by definition you got over -- 12 MR PALMER: That is -- to be clear, that is -- 13 MR JUSTICE HOLGATE: -- the respondent would have overcome 14 a higher hurdle. 15 MR PALMER: That is my primary submission, that higher 16 hurdle is met. That is why I say -- it is the 17 underlying passage in the speaker note -- the position 18 would not have been any different if the request for 19 guarantee had not been made. That is the primary 20 submission, yes. 21 My Lords, I won't read out the rest of the note. 22 And I must move on to have any hope of finishing, as 23 I must, within time. There was a speaking note provided 24 yesterday evening to my learned friends. If I may ask 25 that now be handed up and around. 55 1 (Handed) 2 May I say I am indebted to Mr Bates for his 3 assistance with the production of this note. I won't 4 seek to read it all out to my Lords in the time that 5 I have. But I'll attempt to go through it picking up 6 the main points, and hope I can deal with any questions 7 which arise as we go through. 8 LORD JUSTICE HICKINBOTTOM: I am just keeping one eye on the 9 clock. We need a transcriber's break at some point. 10 MR PALMER: Perhaps now would be a good time. 11 LORD JUSTICE HICKINBOTTOM: I thought that if we broke now, 12 we could perhaps read this, or at least some of it. 13 MR PALMER: I am in my Lords' hands. 14 LORD JUSTICE HICKINBOTTOM: That may help. 15 MR PALMER: Yes, I am grateful. 16 LORD JUSTICE HICKINBOTTOM: Otherwise, how long do you think 17 you'll take to go through this? 18 MR PALMER: I am sure I could entertain the court all day, 19 but I was intending to go through it at pace. I know 20 that Mr Facenna is also going to be addressing the court 21 on similar points, so it is not the only opportunity for 22 these points to be raised and considered by the court. 23 But if the court has read it already, then I can -- 24 LORD JUSTICE HICKINBOTTOM: Go through it at pace. 25 MR PALMER: I can just pick out some main points. 56 1 LORD JUSTICE HICKINBOTTOM: Thank you very much. 2 (11.15 am) 3 (A short break) 4 (11.30 am) 5 MR PALMER: I am grateful for the court taking the 6 opportunity to read the note. 7 LORD JUSTICE HICKINBOTTOM: Yes. 8 MR PALMER: Can I just highlight then, as a matter of 9 overview, we say what has happened here in the context 10 of this policy making exercise doesn't ultimately engage 11 with the principles. Even if one gets to the end of the 12 analysis, Article 102, you have no engagement with the 13 principles or the matters which Article 102 is seeking 14 to control because, as we say in paragraph 2 of the 15 note: 16 "... it involves conduct by a dominant enterprise 17 which is liable to give rise to harmful effects on 18 competition in a market." 19 When you get to the end of the analysis, we say that 20 fundamental proposition is not made out by ground 1 in 21 the context of this policy making exercise. 22 That is why that point has been so fundamental to my 23 learned friend's submissions, that of course we have the 24 attempt to paint the ANPS policy-making exercise as akin 25 to a procurement. In a procurement you can create 57 1 a bidding market. You invite people to bid for 2 a contract that you wish to enter into, so you can 3 create a market in that way. 4 They seek to draw that analogy. We say that is 5 a bad analogy, that there is no market here and, 6 furthermore, that it is a requirement of law that there 7 should be a market in which harmful effects on 8 competition are identified, or potential harmful effects 9 as a result of the alleged abuse. 10 That is all by way of overview and it makes sense to 11 take it more formally. There are three steps. That is 12 common ground. 13 Our point on the State measure is principally that 14 it is important to be very clear as to what the State 15 measure is that is being complained about. There is no 16 room to be vague about that, or otherwise. 17 Despite that, it is sometimes put as the guarantee 18 is the State measure, but we take that as shorthand for 19 the "request for the guarantee". In our submission, it 20 can only be the request for the guarantee which is 21 capable of being the State measure on the logic of the 22 claimant's own argument, but what is done with the 23 outcome of that request, if anything, is a separate 24 matter, which is not in itself a State measure liable to 25 induce abuse. If there was any abuse induced, it must 58 1 have happened at a prior stage; that must have been, 2 logically, by reason of the fact of the request. 3 That is why we say that must be the measure that is 4 complained of. Then it is important to identify what 5 the nature of the request actually was. That is why we 6 pick out at paragraph 7 and, in particular, 7(b) that 7 there has been some changing of ground on this, it 8 seems, because there is a pleaded case as to what the 9 state measure is. It is specifically pleaded, defined 10 and identified, and we had, therefore, treated it as 11 being the measure relied upon; that was the request was 12 made that the guarantee must be provided, elevating it 13 to the status of a pre-condition. 14 The obvious problem with that on the facts is that 15 is not borne out. Moreover, that would have had to 16 be -- if it were to be elevated to a pre-condition in 17 order to bite that fact, if it was now a pre-condition, 18 would have had to be clearly communicated at the time to 19 Hub and, more importantly, to HAL as well, but we now 20 know it is accepted it was neither. 21 So, that's why we say there has been some peddling 22 back from the pleaded case. As we now understand the 23 way the case is put, it is a request to seek something, 24 providing an opportunity for HAL to adopt a stance that 25 could potentially influence the government's ultimate 59 1 decision. We say that's surprising, given that it is 2 otherwise accepted to be a potentially material 3 consideration. 4 But, at paragraph 11, we make the point that this is 5 by any means stretching the concept of a state measure 6 to an extraordinary degree. Of course, it is well 7 established and uncontroversial with us that a measure 8 can be an administrative measure. It doesn't have to be 9 legislation or anything of that kind, and it could be 10 that a request is an administrative measure and it is 11 something done by a member of the executive in its role, 12 capacity as a representative of the state. 13 But we do make the point there are no examples of 14 the mere possibility for an enterprise potentially to 15 influence a public body's decision towards proving that 16 enterprise's proposal over a rival proposal constituting 17 a State measure. Least of all, in the context where, as 18 Hub now seem to be arguing, it is that measure which, as 19 it is put here, it fulfills a special and exclusive 20 right test, as well as representing something that was 21 liable to actually induce the abuse. 22 Can I go to Ambulanz Glockner briefly? It is 23 heavily relied on by Hub in a number of contexts. It is 24 well to look at it. It is in bundle authority 7, 25 tab 159. You are going to have to turn past the 60 1 Advocate General's opinion to page 8141. The background 2 is explained in paragraphs 4 and 5. I won't take time 3 over that now. You see that the relevant measure is 4 identified in paragraph 7: 5 "A new provision was introduced. It is 6 paragraph 18.1 of the Rett DG 1991. That is set out 7 over the page, and it: 8 "... allowed authorisation to participate in this 9 market for private transport ambulances to be refused if 10 it would be likely to have an adverse effect on the 11 general interest in the operation of an effective public 12 ambulance service. Regard being had to reserve capacity 13 of the public ambulance service throughout the territory 14 and the actual use made ..." 15 Then, crucially, for the purposes of the Court of 16 Justice, the national court came to some factual 17 conclusions on the effect of that provision at 18 paragraph 8: 19 "The national court interprets that provision as 20 granting the medical aid organisations a de facto 21 monopoly on the market for emergency and patient 22 transport services, since the assessment [which the 23 measure requires] to determine whether or not there is 24 full utilisation of the capacities available to medical 25 aid organisations always results in practice in the 61 1 rejection of new applications." 2 That, in short, is because if you run an effective 3 public emergency ambulance system, you have to have 4 plenty of capacity in the system in order to be able to 5 be wherever you are needed at short notice. So, you 6 always have spare capacity in the system. So, if you 7 are asked -- faced with an application for private 8 transport services during the day, would this affect 9 your business, the viability of your business? The 10 answer the court found was always yes. 11 So, the enactment of that measure granted a de facto 12 monopoly to the four medical aid organisations who ran 13 the public emergency ambulance system, to provide 14 transport services as well as emergency services. 15 That was the background. Then, if you turn on to 16 paragraph 17, you can see the questions. The way the 17 question is put by the national court, and making the 18 reference: 19 "Is the creation of a monopoly for the provision of 20 ambulance services over a defined geographical area 21 compatible ..." 22 With what is now Articles 106 and 101, 102. The 23 first question is whether there are special exclusive 24 rights, but I turn on for a moment and come back to 25 that. Page 8151 is the section dealing with abuse of 62 1 a dominant position, and I can go to paragraph 41 for 2 context. The argument put forward by Ambulanz Glockner 3 is that indeed it is excluded from the market as 4 a result of the application of paragraph 18.3, which in 5 its submission: 6 "... enables the medical aid organisations acting in 7 consultation with the public authorities to restrict 8 access to that market." 9 That was the submission. 43 is the conclusion: 10 "It must be concluded that in enacting the measure 11 the application which involves prior consultation of the 12 medical aid organisations in respect of any application 13 for authorisation to provide non-emergency ... transport 14 services submitted by an independent operator, the 15 legislature gave an advantage to those organisations 16 which already had an exclusive right by also allowing 17 them to provide such services exclusively." 18 That is the key point here: it is not merely the 19 fact that they were being consulted. It is the fact 20 that because that act of consultation always produced 21 the same answer and therefore created the de facto 22 monopoly, they were through that process able, by reason 23 of application of the measure, always to establish the 24 grounds no further authorisation should be given because 25 they kept that public emergency service capacity always. 63 1 So, that is the key point. It is not authority for 2 the proposition that merely consulting somebody creates 3 a conflict of interest, and that in itself is liable to 4 give rise to an abuse of dominance. 5 Keep it open, in fact -- he says, having closed 6 it -- because the next matter is: what are special 7 rights? 8 You can turn back in the judgment to paragraph 24, 9 where the court set out the test which has since been 10 adopted in that familiar way of the Court of Justice; 11 the same words repeated often. You can see in 12 paragraph 24: 13 "The reservation of patient transport services to 14 medical aid organisations is sufficient for the measure 15 to be characterised as a special, exclusive right within 16 the meaning of Article 90(1)." 17 Here is the test: 18 "... for protection is conferred by a legislative 19 measure [in this case it could be any measure of course] 20 on a limited number of undertakings, which may 21 substantially affect the ability of other undertakings 22 to exercise the economic activity in question, in the 23 same geographical area, under substantially equivalent 24 conditions." 25 That has been developed in the FIFA case, which is 64 1 at tab 164. If I could ask you to turn to 2 paragraph 176/177. 3 176, just to see the recitation of the 4 Ambulanz Glockner case. This was a case about exclusive 5 broadcasting rights. The World Cup matches, but the key 6 point here is that Ambulanz Glockner test is then 7 expanded upon in 177, and different examples are given 8 as to where it may be fulfilled. So: 9 "Where the public authorities have granted 10 a monopoly [that is obviously the exclusive right] when 11 they can prevent the entry of a competitor into the 12 market sphere of the rights holder on grounds relating 13 to potential adverse effects on the operation and 14 profitability of the right holder's activities [that is 15 Ambulanz Glockner] or labour market requirements ..." 16 Then here are the words relied on by my learned 17 friend: 18 "... or where the rights holder was entitled [under 19 the relevant measure] to influence the terms under which 20 the activity in question may be pursued by his 21 competitors according to his interests, or according to 22 the consequences of their activity on that market or 23 even on a neighbouring market." 24 Those words "influence the terms" can be understood 25 to mean something like a right to play a part in fixing 65 1 the legal or other conditions under which competitors 2 can operate. It does not mean "simply be consulted 3 upon" or "be able to decide its own conduct", which may 4 affect a decision being made by a public sector 5 decision-maker, which we would be seeking to translate 6 to the present case. 7 In support of our submission -- which is at 8 paragraph 16 of the speaking note -- as to what that 9 means, may I just pick out two examples as good 10 illustrations of that in practice? You can see them in 11 the text of 177. The first is the GB-Inno-BM case, 12 which has also been referred to before my Lords as the 13 RTT case. That is the telecoms case, and my Lords have 14 that in tab 163. I don't go to it now, but you have the 15 reference there. It is paragraph 25. 16 Then the MOTOE case -- sorry, MOTOE is at 163 and 17 the RTT is at 53, in bundle 6. We say that provides 18 good examples of that interpretation of that measure in 19 practice as to what is involved. 20 So, on that basis, does HAL have special rights? 21 In view of the time, I will be very brief on this. 22 Four bases are put forward. We say it is 23 insufficient in and the authorities do not suggest that 24 simply by virtue of being a former State monopoly you 25 are automatically treated as having special, exclusive 66 1 rights. We say the authorities don't support that. Of 2 course, if you are a formal legal monopoly, that may 3 well have to be taken into account and may influence the 4 outcome of whether there has been any effects on 5 competition, but that is a different matter. 6 The submissions on licensing, we say -- we put this 7 in a -- may I just give you the reference to our 8 skeleton argument? Paragraph 43 through to 48. 9 We say, effectively what Hub is doing here is 10 turning the licensing regime upside down. As a matter 11 of drafting the Airports Act -- which is in bundle 1, 12 tab 3 -- it introduces a prohibition on charging in the 13 case of airports which are being identified as having 14 substantial market power. That is so conditions can 15 then be imposed on them by way of a licence, controlling 16 those airports. In particular, preventing them from 17 charging more than the regulator thinks they ought to be 18 charged. It is all set up to control market power, to 19 constrain and limit the activity of that operator, to 20 ensure that the consumer is ultimately protected. 21 In no universe can that sensibly be suggested as the 22 grant of a special or exclusive right. It is the 23 default position for an airport if they can charge what 24 they want. But where they are dominant, or maybe 25 dominant or identified under the market power test 67 1 within the Airports Act, they are constrained so that 2 they cannot charge what they like, and that is not the 3 grant of a special, exclusive right. 4 We set out in full our answer to the detailed points 5 as to why the mode of regulation adopted by the CAA 6 cannot be sensibly viewed as the grant of some 7 privilege. It is quite the opposite. 8 MR JUSTICE HOLGATE: So, on that analysis, the existence of 9 that statutory regime adds nothing to the monopoly 10 position, point one. 11 MR PALMER: No, of course, it is wrong to say that Heathrow 12 is now a monopoly. I know that was asserted. I know 13 that HAL have something to say about that, so I will 14 leave that to Mr Facenna in the interests of time. They 15 are not a monopoly. 16 But Mr O'Donoghue, as he said, only needs to get 17 through one of these gateways. He puts a case on four 18 alternate bases. One of them will do. We say each of 19 them are bad, and indeed clearly bad. 20 The State measure -- on page 9 of our speaking 21 note -- is referred to as also the measure conferring 22 special rights on HAL. We say that simply cannot be 23 right, given that the State measure concerned must be 24 the request, the request to seek a guarantee, that 25 doesn't confer special rights on HAL. They weren't 68 1 thereby given a de facto right to exclude competitors in 2 any economic market. That is a factual point, and we 3 will come on later to address the point about whether it 4 is in fact a market, in any event. 5 As you say, a right merely by one's own stance or 6 conduct potentially to affect or influence a regulatory 7 or planning decision on being consulted or otherwise is 8 not amounting to a special or exclusive right, and can't 9 sensibly be viewed as such. 10 Then you are left with the HAL status as statutory 11 undertaker. I say again, none of that confers a special 12 right. In particular, we draw attention to the fact 13 that Mr O'Donoghue was incorrect to suggest that 14 Mr Arora's presence here was somehow relevant to that 15 point. We have given you the reference to provisions of 16 the Planning Act, which make it clear any applicant for 17 DCO can seek compulsory purchase powers. It is not just 18 a statutory undertaker like HAL. It is difficult to 19 identify what special rights can be identified here. 20 Lots of airports have the certificate of being 21 a statutory undertaker. It is a simple turnover target 22 that needs to be met. It cannot be the case that each 23 of them has been granted special rights by virtue of 24 that regime relevant to planning and compulsory 25 purchase. 69 1 There is also some reliance on the relationship 2 framework document. We say that is completely 3 irrelevant and, as a matter of correction, it is not 4 right that 2018 document could equally have applied in 5 2016. Time has moved on. There are a whole series of 6 measures which are consequent upon the fact that, by 7 this stage, HAL has been identified as the credible 8 promoter of the preferred scheme. So, that doesn't take 9 the matter any further. 10 If we are right about those submissions, then that 11 is the end of ground 1. It is a qualifying bar which we 12 say is clearly not met. It is only if it is that you go 13 on to assess whether the request being made was liable 14 to an induce an abuse of dominance. 15 Again, we set out our submissions in full. There 16 isn't time to go through it all. May I just add, at the 17 end of paragraph 44, one reference? It is just picking 18 up on my Lord, Mr Justice Marcus Smith's de minimis in 19 this context. May I give you the reference to the 20 Streetmap case and the judgment of Mr Justice Roth, 21 which is at bundle 7, tab 173 and I will ask you to read 22 paragraphs 92 to 98 but especially 96 to 98. 23 "Where the alleged harmful effect is on the market 24 where the dominant company is not dominant [as in 25 a leveraging case, as is alleged here] the conduct may 70 1 not be condemned of an abuse if the effect is minor." 2 That is what Lord Justice Roth held, so it was if it 3 was de minimis or not appreciable, so there is that 4 qualification as well. 5 Just focusing on two of the key points which Hub 6 have advanced. We say critically it is not enough just 7 for Hub to point to a conflict of interest. There must 8 be a nexus with effect on a market restricting 9 competition, the structural restriction of competition. 10 It is very difficult to pin down what market is said to 11 be affected. I think there is little I can usefully add 12 in the time available to what is set out there. But you 13 can see all of the bases upon which it has been put or 14 it may be put or we have suggested it be put. The 15 central point is there is none of this supporting 16 analysis in the way this case was put. No supporting 17 analysis as to the dominance of Heathrow, no supporting 18 analysis as to the market which is identified has having 19 been affected, all of which would have to be in 20 a conventional law claim demonstrated, proved by 21 evidence. It is just asserted. For the reasons that we 22 have laid out that is not enough. 23 My Lords, there is a speaking note on the legitimate 24 expectation. I am going to hand it up almost as I sit 25 down and just give you my headline points on it. 71 1 MR JUSTICE MARCUS SMITH: Mr Palmer, you say no evidence but 2 do you say that we should attach no weight to the CAA's 3 own findings as to Heathrow's position in terms of HAL's 4 dominance there? 5 MR PALMER: Yes, because they apply a different test. 6 I know that Mr Facenna is planning to address you on 7 that specific question, so if I may I'll defer that. 8 MR JUSTICE MARCUS SMITH: Of course. 9 MR PALMER: Yes, because a test is different, but you'll 10 hear more on that. 11 I am going to hand up that speaking note. I will 12 stick to what I said. I will deal with legitimate 13 expectation very briefly and it maybe that is welcome 14 news to the court. 15 The difficulty here is identifying what the claimed 16 legitimate expectation is and what the source of it is. 17 It is now said to be that the legitimate expectation was 18 the absence of a guarantee by HAL, would not be used by 19 the Secretary of State as a material consideration in 20 reaching his decision. That is the way it is most 21 recently put. 22 But when you review the materials, as I did largely 23 yesterday, it was very difficult to identify any source 24 for that. There is some legal propositions as to what 25 is needed to require it, you simply say, whether express 72 1 or implied the effect must be something clear, 2 unambiguous and unqualified or, as Lord Justice Laws has 3 put it in the Bhatt Murphy case, a specific undertaking. 4 When you review the materials in relation to the 5 defendant's role, as it is put in the setting up of the 6 Airports Commission, or in the interaction between Hub 7 and the DfT in the meetings between 2015 to 2016, there 8 is, in my submission a complete absence of evidence for 9 any such proposition, least of all in sufficiently clear 10 terms to emerge to establish to form a substantive 11 legitimate expectation which is now claimed and relied 12 upon. 13 That in essence, despite the fact that you have many 14 submissions before you on the law and what may or may 15 not be constitute legitimate expectation and how it is 16 to be dealt with, that is the fundamental difficulty 17 with the legitimate expectation. Once it is conceded, 18 as it is, this is a material consideration and it 19 requires some form of generation of the legitimate 20 expectation to defeat that, then I say the search for it 21 is fruitless, in particular from a third party for the 22 Airports Commission which is wholly independent of the 23 Secretary of State. 24 So that is the short point and unless there are 25 questions on that, those are my submissions on that 73 1 point. 2 LORD JUSTICE HICKINBOTTOM: Thank you very much. 3 MR PALMER: I am very grateful for the time I have been 4 allowed. 5 LORD JUSTICE HICKINBOTTOM: Thank you. 6 Submissions by MR HUMPHRIES 7 MR HUMPHRIES: My Lords, just to give you the division of 8 tasks. I will deal with some factual matters of context 9 for HAL's submissions and Mr Facenna will deal with the 10 competition law submissions. For my part of the 11 submissions I have a speaking note which I think is 12 being circulated and copies for everyone else, I think 13 they are also being circulated and my speaking notes are 14 genuinely speaking notes, no purple prose from me, I am 15 afraid, just notes. 16 My Lords, I start by just placing some context on 17 the submissions and I make the point, which I know is 18 obviously very familiar to your Lordships, that of 19 course in this claim Heathrow Hub was not the proposed 20 developer for its own scheme. It wanted a third party, 21 Heathrow Airport Limited, to be the developer and thus 22 Hub's whole raison d'etre was to try to achieve policy 23 support for its ENR scheme in order to sell the 24 intellectual property rights to HAL. 25 That in my submission from our perspective gives 74 1 rise to three issues which I will deal with. The first 2 is HAL's planning concerns about the ENR concept for an 3 additional runway. Secondly, Hub's failure to engage 4 adequately with HAL. Thirdly, the circumstances 5 surrounding the request for a commitment that HAL 6 construct and operate an extended northern runway. 7 Firstly, HAL's planning concerns about the scheme. 8 I start with a short point and make it absolutely clear 9 that HAL has promoted the northwest runway from the very 10 start of the process. It has never wavered in that you 11 have before you -- I give the reference, there is no 12 need for you to look at it -- documents as early as 13 2014. Taking Britain Further you have some extracts in 14 the references I have given. 15 I also deal in passing, although I say it has no 16 bearing on anything, on the point raised in the 17 claimant's grounds relating to a Daily Mail Article 18 from November 2014 which reported Mr Holland Kaye as 19 being relaxed about which of the two Heathrow schemes 20 was selected, and Mr Holland Kaye deals with that at his 21 paragraph 18. He says he doesn't remember saying that 22 but he could have. But it is important to note that at 23 that time, November 2014, HAL had not completed any 24 assessment of the extended northern runway concept. It 25 did of course undertake such an assessment, and I'll 75 1 come to that in a minute. But certainly when it had 2 undertaken its assessment and formed its view it ceased 3 to be relaxed about the ENR concept, if it ever had 4 been. 5 The next point I move to is this: HAL's planning 6 concerns abouts the ENR were made very clear in its 7 response to the Airports Commission's initial 8 assessment, and Mr Holland Kaye sets out in summary what 9 those concerns are. I am going to take you to some of 10 the detail but he sets out in summary what some of the 11 concerns are at his paragraph 14, and he summarised the 12 concerns as being sixfold. 13 One was runway capacity. Two was respite, and 14 my Lords you will have understood this is the concept of 15 runway alternation giving relief from air noise to those 16 under the flight paths. Three is air noise effects. 17 Four, deliverability. Five, costs and six, safety. 18 Here I will take you just to HAL's submissions to 19 the Airports Commission on this. And you can see the 20 reference. These are from February 2014 in the 21 supplementary bundle 15, tab 6. 22 My Lords, what you have here is 16 pages of 23 submissions. I am not going to take you to the detail. 24 I am taking you to it in outline, however, so that you 25 can see the depth and extent of HAL's representations on 76 1 the extended northern runway scheme and the level of its 2 concerns, which were very considerable, about that 3 concept. 4 Page 80 in the bundle you can see the section on 5 sustainability in effect, a number of points there about 6 section 1.5.1, only the northwest runway can deliver 7 real noise respite from overflights. Quite detailed 8 discussions there of the numbers of hours of respite 9 between the different schemes. 10 At 1.5.2, in addition to respite the northwest 11 runway scheme will affect fewer people in its noise 12 footprint than the ENR scheme. 13 Over the page, 1.5.3, the northwest runway scheme 14 can be delivered three and a half years earlier than the 15 ENR scheme. 16 It is worth sort of pausing on that for a moment. 17 We'll come back to a couple of these points. But there 18 are two aspects of that. One is, as it says: 19 "The very real complexity inherent in the commercial 20 arrangements necessary to move the ownership of ENR 21 concept to Heathrow Airport Limited. These cannot be 22 wished away. They are inherent in a proposal promoted 23 by an external company with no ability to deliver it. 24 This would delay the start of construction by at least 25 18 months. There are also additional physical 77 1 complexities in the water infrastructure, motorway 2 solutions, and runway interface required by the ENR 3 scheme which would require a further 2 years to be added 4 over and above the NWR delivery programme. Together, 5 these mean that at least 4 years will be added." 6 Now, 15.4 touches on cost. 7 1.5.5, again makes the overall point that NWR is 8 more sustainable. 9 If we turn on and again, I'll touch on headings, 10 occasionally dipping into things. 11 The whole section 5.16.1 was about runway capacity. 12 But it points, you can see in 5.16.1.2 to a section with 13 more detail. That is section 5.22 .1 which we have in 14 the bundle. 15 So I'll turn on to page 85 and look at some more of 16 the capacity analysis there. Section 5.23.1. This was 17 Heathrow's capacity analysis of the ENR scheme. 18 You will see on page 86 in some of those tables our 19 assessment of our own scheme having an ATM capacity of 20 740,000 ATMs and ENR, 617. And then different tables 21 throughout this, fairly detailed analysis, work on 22 different assumptions. 23 My Lords, you don't need, I respectfully suggest, to 24 grapple with the detail or who is right. What you need 25 to understand, however, is Heathrow had the very clear 78 1 perspective that the ENR scheme delivered very much less 2 by way of capacity. 3 Over the page, page 88, we critiqued the proposed 4 taxiway network for the ENR scheme and we drew attention 5 to deficiencies in that. 6 Again, I will skip over things. For example, 7 page 92, delivery analysis. That includes, on page 93, 8 5.25.2, commercial issues. And again, you can look at 9 the detail of it. I am not going to read it because 10 I don't have the time. But clearly there real and 11 I would say proper concerns, my Lord, we say proper 12 concerns about the time it would take to sort out the 13 commercial details. 14 My Lord, this is in the context of a multi-billion 15 pound project, a project that will be one of the largest 16 development projects in Europe for many, many years, 17 a project where Hub was proposing to sell intellectual 18 property rights for about £100 million. Clearly there 19 would have to have been, as we suggest here, very 20 considerable due diligence, very considerable checking 21 of patents, safety cases and other things in order for 22 us to contemplate taking such a project forward. 23 At page 94 we carry out a critique on the 24 construction duration of the project. Again, this is 25 where you get, on page 95, the reference to an 79 1 additional two years. That is in the coloured box at 2 paragraph 5.25.4.3. 3 And 5.25.6. We set out our concerns about the 4 operating concept. This whole concept of an inline 5 runway. Again, the throwaway line from the claimants 6 about being three in parallel runways not being proven. 7 There are I think some 17 or 18 airports worldwide, most 8 of them in the United States, with three or more 9 runways, Schipol alone, I think, in Amsterdam has five 10 or six. So there is very real understanding of how to 11 operate large numbers of runways; very little 12 understanding of how to operate an inline runway. 13 My Lords, what I will make clear to you, and you can 14 put that bundle away for the moment, what I will make 15 clear to you is those issues had not been resolved 16 through engagement with Hub. Even in August 2016, about 17 the time of the request for the assurance, HAL was still 18 expressing concerns on a range of issues. 19 On page 2 of my note, (d), HAL also made 20 representations to the Department for Transport. On the 21 first draft ANPS about the flaws in the ENR concept. 22 This is now May 2017. Again, it might be worth just 23 touching on these. This is bundle 17, tab 3, page 18. 24 Again, I will try not to be tiresome and take you 25 through all the detail, but you can see our submissions 80 1 to the department, section 2.9, towards the bottom of 2 that page: 3 "The best Heathrow option". 4 Paragraph 2.9.2, we endorse the reasons in the draft 5 NPS for preferring our scheme to other schemes. At 6 paragraph 2.9.3 we say: 7 "In addition to these matters, Heathrow's own 8 assessment of the ENR option highlighted the 9 following ..." 10 Again, six fairly detailed points at which HAL sets 11 out, what I respectfully suggest, are very carefully 12 considered reasons why it thinks the ENR scheme is 13 unacceptable. 14 If you look at paragraph 2.9.4, you can see our 15 conclusion on this: 16 "These inherent difficulties with the ENR mean that 17 it is unsuitable to be selected as the government's 18 preferred runway option." 19 Again, those matters were not resolved and whilst 20 Heathrow Hub may think that HAL is wrong on these 21 issues, some of those points are implicit or explicit 22 indeed in grounds 4 and 5, that is to miss the key 23 point. Hub was not proposing to develop the scheme. It 24 was Heathrow that was going to have to develop the 25 scheme. It was Heathrow that was going to have to take 81 1 on the risk on these, what we say, were very 2 considerable, very substantial shortcomings with the 3 entire ENR concept. 4 In that context we say it was entirely proper for 5 HAL as the proposed developer, the proposed developer by 6 Hub, to have a view on the suitability of the ENR 7 concept in planning terms and to express that. And some 8 of these risks represent consenting risks and some risks 9 to delay. 10 Consenting risks, my Lords, because insofar as we 11 were saying that there is reduced capacity on the one 12 hand and greater air noise impact and no respite on the 13 other, looking at, as we discussed last week and earlier 14 this week, the section 104(3), section 104(7) balance 15 under the Planning Act of whether the adverse impacts of 16 the proposed development outweigh its benefits, what we 17 could see was a less consentible scheme, a scheme where 18 the benefits were reduced and the impacts were 19 increased. 20 We were also concerned, as I say here, about delay. 21 I took your Lordships to those two sections in our 22 representations to the Airports Commission on delay. Of 23 course delay would be of particular concern at a time 24 when Heathrow itself is under severe pressure and there 25 is strong need for additional capacity to maintain the 82 1 UK's hub status. 2 So the decision, my Lords, by HAL not to offer an 3 assurance or guarantee needs to be understood in the 4 overall context of its very strong planning objections 5 to the very concept of the ENR. 6 I turn to the next heading. I would put that bundle 7 away, my Lords, although you will need another bundle in 8 a moment. 9 My Lords, Mr Clake in his witness statement sets out 10 his recollection of engagement with HAL during the 11 2015/2016 period. I draw attention particularly to his 12 paragraphs 27 to 31, there may be others. 13 Mr Holland Kaye's response, again, I just draw your 14 attention to the paragraphs so that you can easily find 15 them, paragraphs 23 to 26. 16 I am going to breakdown the engagement into two 17 parts: commercial discussions, which I will deal with 18 first, and then technical discussions. 19 As far as commercial discussions go, there were some 20 discussions in early 2015. There was certainly 21 a meeting between Hub and HAL on 12 February. 22 Mr Holland Kaye refers to that. Although he also notes 23 that there were no follow-up actions agreed. 24 But following that meeting on 20 March, and it 25 perhaps is worth looking at this letter, HAL wrote to 83 1 Hub. This is bundle 15, tab 10. So this is the letter 2 that we wrote following some commercial, and as I'll 3 come on to, some technical engagement in early 2015. 4 The letter is from Mr Holland Kaye to Steven Costello. 5 It says: 6 "Dear Steven, thank you for your letter of 7 24 February and for sharing with us your emerging view 8 of the updated noise data for your scheme. 9 "While there may be merits in your scheme, we would 10 like to be very clear that we believe that our plan for 11 the expansion of Heathrow is preferable, principally for 12 the improved respite that it will deliver for people 13 living close to the airport and secondly, for its 14 improved runway capacity and business case. 15 We therefore do not intend to make an offer at this 16 stage to acquire any of the rights that you may have in 17 the extended runway scheme. 18 "We would like to keep the conversation open and 19 will of course continue to work with you constructively 20 to promote Heathrow as being the right answer to airport 21 expansion and to build local and political consensus 22 around this." 23 So a number of points there. First, as early 24 as March 2015 it was made very clear that we do not 25 intend to make an offer, but also made clear that we 84 1 have not closed our minds, we say at this stage, and we 2 say we would like to keep the conversation open. It 3 cannot be said against HAL that it just shut out the 4 rival, in the words of Heathrow Hub, it clearly didn't. 5 It made it very clear that it was willing to keep a 6 conversation open. 7 But in fact, what happened was, and I am still on 8 commercial discussion, there was in fact very little 9 engagement on commercial matters between HAL and Hub, 10 particularly following the Airports Commission's final 11 report in July 2015. There was some contact, Jock Lowe, 12 the former Concorde pilot did have some meetings with 13 people, but there was very little contact and very 14 little other than the Jock Lowe contact. 15 My Lord, I mention that in the context, and you were 16 taken through this yesterday by my learned friend 17 Mr Palmer, various minutes of meetings between Hub and 18 DfT, particularly in late 2015 where it appeared to be 19 being suggested that DfT had real concerns about 20 progress that Hub was making in discussion with HAL and 21 Hub appeared to be suggesting that progress was being 22 made. 23 My Lord, from our perspective, we didn't consider 24 that any real progress was being made. Indeed, it was 25 within this time period that we were publicly 85 1 criticising the ENR concept in our response to the 2 Airports Commission and later to the DfT. 3 Indeed, the next commercial meeting between 4 John Holland Kaye and Mr Clake was only on 7 July 2016. 5 That's almost 18 months after the early February 6 discussions. 7 As far as the technical discussions were 8 concerned -- 9 LORD JUSTICE HICKINBOTTOM: Just pausing there for a second. 10 The latter part of the chronology you have just been 11 through is post-Commission final report. 12 MR PALMER: 13 MR HUMPHRIES: Yes, that was July 2015. 14 LORD JUSTICE HICKINBOTTOM: That report recommended, at 15 least primarily on what might be called technical 16 grounds as opposed to commercial grounds, northwest 17 runway. So it would be understandable if Hub focused on 18 the technical issues. 19 MR HUMPHRIES: My Lord, I don't criticise Hub, it is 20 as matter for Hub. 21 LORD JUSTICE HICKINBOTTOM: No, of course not. 22 MR HUMPHRIES: All I say is in a context where they were 23 relying entirely on Heathrow Airport Limited to take 24 forward their project, it is very clear that although we 25 had left the door open for further conversation, see the 86 1 20 March 2015 letter, we weren't being pressed. Now, 2 they may say, "Well we didn't want to press you, we were 3 doing other things." Our door was open. They were not 4 beating a path to it during this period, apart from 5 some, you know, some minor contacts and we acknowledge 6 that. 7 LORD JUSTICE HICKINBOTTOM: Yes. 8 MR HUMPHRIES: Technical discussions, again, there were 9 technical meetings in early 2015 and then again on 10 26 August 2016. There was very little technical 11 engagement again following the Airports Commission 12 report until that date in August 2016. 13 In August 2016 there took place what was described 14 as an initial due diligence meeting on the 26th. That 15 was a one day meeting. There were some action points. 16 I am not entirely sure whether they were meeting points 17 that arose prior to the meeting to be discussed or 18 points that arose during the meeting, but there were 19 a number of questions that were posed for Heathrow Hub 20 advisers to answer, but I make it absolutely clear this 21 cannot by any stretch of the imagination be described as 22 full technical due diligence of what would have been 23 something like 12 billion-pound scheme. As I described 24 before, that would take 18 months of work. 25 HAL put, following this meeting, a paper to its 87 1 executive committee. It is not the board, the executive 2 committee. That was on 6 September. It is worth 3 looking at that. So that is bundle 16, tab 13. 4 Page 143 is the start and you can see it is headed 5 "Heathrow Hub initial due diligence review", 6 6 September. It is a paper to the executive committee 7 and it is reporting on the 26 August initial due 8 diligence review. 9 It sets out at the beginning of that page who was 10 present. We can see more detail of that later. It 11 describes what happened in the morning, discussion 12 focused around operational and environmental aspects of 13 Hub's proposal and in the afternoon a review of 14 financial and construction elements. 15 Then, under the subheading: 16 "Initial review findings." 17 This: 18 "A review of findings demonstrates that although the 19 ENR solution can be considered as a viable solution 20 towards the Heathrow expansion, there is considerable 21 immaturity in the Heathrow Hub proposal for it to be 22 considered by Heathrow Airport as a workable solution. 23 Significant further planning and design by the Heathrow 24 expansion team would be required before any decision to 25 deploy the Heathrow Hub proposal could be considered by 88 1 HAL." 2 Then it sets out a lack of detail on the next page. 3 These are just examples of things that are set out. 4 I don't need to go through all of them. In case you 5 wondered what "rets" and "rats" are, those are rapid 6 exit taxiways and rapid access taxiways. Those are the 7 ways you get onto and get off runways quickly, to 8 improve runway performance. Under the headings, 9 "Operational" and "Environmental", and also "financial" 10 and "construction". "Conclusion": 11 "Our assessment concludes that considerable work 12 would need to be done on the ENR scheme if it is to be 13 a workable solution. Initial due diligence suggests HH 14 cost plan to be 30 per cent lower than HAL's historic 15 out turn costs with the additional disbenefits of lower 16 levels of respite and/or capacity in comparison to HAL's 17 scheme." 18 So, what HAL was saying at this point -- what it 19 noticed is, although Heathrow Hub were coming forward 20 with costs for this project, HAL were saying: those 21 costs just look too low. We are just not achieving 22 those. We are building buildings at Heathrow, they are 23 coming in with costs for their buildings 30 per cent 24 what we, as a regulated company, are able to achieve. 25 Therefore, we had -- if I may put it like this -- 89 1 considerable suspicion about the cost figures. I don't 2 mean "suspicion" in some improper sense, but we just 3 didn't accept them. They just looked way too low. 4 Then you can see, on the next page -- 5 MR JUSTICE HOLGATE: Just read the recommendation. 6 MR HUMPHRIES: Sorry: 7 "Dialogue should be maintained with Heathrow Hub to 8 grow our understanding of specific technical issues of 9 how their scheme might operate and could continue until 10 a government decision. No further action." 11 Again, this is exactly the point I made before. 12 Heathrow Airport Limited being very careful not to close 13 the door on the promoter of another scheme, but also 14 being absolutely candid about its criticisms of that 15 scheme. It did not think it was a very good scheme. 16 Over the page, you get some of the attendees and the 17 broad programme. 18 Then, over the page, 146 and 147, what I have called 19 the sort of action -- what seemed to be some action 20 points. Maybe they are agenda items again. 21 I draw attention to those because Mr Clake, this is 22 towards the bottom of page 4 on my note, 3(c) action 23 points at the end of the meeting, Mr Clake, 3(b), says: 24 "Apart from one minor issue, all issues 25 satisfactorily addressed." 90 1 And: 2 "No areas of technical agreement remain 3 outstanding." 4 "Matters addressed" were just some of these -- 5 I say, "post-meeting", that might be unfair. You should 6 perhaps knock out "post", I don't know if it is post or 7 during the meeting. 8 But some of these meeting action points are 9 completely wrong, we say, to suggest that this means no 10 outstanding areas of technical agreement. 11 HAL thought that the ENR concept was poor, and it 12 also thought that the design it was being presented 13 with, which it was being asked to purchase, was 14 immature. 15 There was, in fact, we say, only limited due 16 diligence by HAL on the ENR scheme, and 17 John Holland Kaye makes the point in his evidence, at 18 paragraph 23, that HAL would have needed up to 12 months 19 to undertake thorough due diligence. So, that's quite 20 apart from all the other things in the 18 months in the 21 earlier submission. We would have needed at least 22 12 months to undertake thorough due diligence. 23 Certainly, it wasn't going to be done in a one day 24 session. 25 Mr Holland Kaye makes the additional point at his 91 1 paragraph 23 that HAL could not reasonably be expected 2 to commit the considerable resources required to develop 3 the ENR scheme before designation. Look at the way this 4 is put in Mr Kingston's speaking note. I give the 5 reference there, paragraph 5.3.3(a). This was not, as 6 you will see, some refusal or unwillingness to continue 7 to engage. It was a recognition that the level of 8 resources that would have been needed to carry out 9 a full technical due diligence were absolutely enormous 10 and just not something that HAL could take on. It 11 reflects that report to the executive committee, which 12 talked about "significant further planning and design" 13 being needed before HAL could consider such a project. 14 Furthermore, what one can say is that the limited 15 due diligence that HAL was able to undertake simply 16 confirmed its view that the ENR concept had considerable 17 problems. So, far from there being a convergence or 18 a meeting of minds, actually quite the opposite: the 19 more we saw of the scheme, the more it threw up 20 problems. 21 I come then to the next heading: 22 "Hub's request for an assurance guarantee." 23 My Lord, I draw attention, first, to the Heathrow 24 Hub's Statement of Principles, June 2016. Now, that 25 Statement of Principles reflects Hub's own decision that 92 1 it did not propose to develop the ENR scheme itself, but 2 the terms of the Hub Statement of Principles -- I draw 3 attention particularly to paragraphs 3.1 to 3.6. You 4 were taken to them. I don't want to do it again -- set 5 out certain requirements for Hub to procure certain 6 actions from HAL. 7 But, my Lords, HAL hadn't seen the Hub Statement of 8 Principles, and HAL didn't know about this at that time. 9 Mr John Holland Kaye makes that very clear. Paragraph 10 28, he says: 11 "We had asked to see other parties' statements of 12 principles. This was refused." 13 So, we didn't know what they had committed 14 themselves to do. 15 Interestingly, though, my Lords, it was not raised 16 by Heathrow Hub with HAL before or at the time of, or of 17 it actually entering into the Statement of Principles. 18 It wasn't even mentioned there was a meeting, as 19 I stated before, between Mr Holland Kaye and I think 20 Mr Clake on 7 July. This was shortly after the 21 Statement of Principles had been finalised. You would 22 perhaps expect they would raise it at this point. Not 23 raised. Just not aware of these requirements. 24 The next subheading, we then get to the Hub meeting 25 with the DfT on 17 August. It is said that, at that 93 1 meeting, the Secretary of State requested Hub to get 2 a written assurance or guarantee from HAL. I said "it 3 is said that", because, of course, HAL was not 4 represented at that meeting. We are happy to accept 5 that there was a discussion about some sort of 6 commitment. 7 What we do get though, on the next day, is Mr Clake 8 contacts John Holland Kaye asking for some form of 9 assurance or guarantee, as it has been called, something 10 in writing confirming that if the ENR scheme were 11 chosen, the Secretary of State would be prepared to 12 deliver it. 13 But, my Lords, despite what I characterise as the 14 encouragement that Hub may have given to the department 15 on progress with HAL on commercial terms and technical 16 matters, there had been no real progress on commercial 17 or technical matters on the ENR scheme, as I have 18 described. 19 Such an assurance guarantee was completely contrary 20 to HAL's longstanding position that it considered the 21 ENR concept to be unsuitable -- see our representations 22 to the DfT -- and it considered that there would be 23 considerable -- there is a typo there -- considerable 24 delay in conducting due diligence and concluding 25 commercial arrangements on any ENR scheme. 94 1 Again, a longstanding position of HAL expressed to 2 the Airports Commission, absolutely public, nothing had 3 changed on that. 4 So, the HAL board did have a meeting by telephone on 5 13 September and, amongst other things -- it wasn't the 6 only item -- that meeting considered the ENR scheme and 7 the request from Hub. 8 There was an oral briefing from Mr Holland Kaye to 9 the board on the proposal. Mr Holland Kaye drew 10 attention to the recent due diligence meeting on 11 26 August and, my Lord, you may want to sort of, in 12 a sense, just make a mental note of these things in the 13 dates. Very little contact. Not no contact, but very 14 little contact with Hub since early 2015. The Secretary 15 of State meeting on 17 August 2016, contact with us on 16 18 August. Then, goodness, we are suddenly asked for 17 a due diligence meeting on the 26 August, not having had 18 anything for some 18 months. 19 So, Mr Holland Kaye reports that and says: look, we 20 were asked for this request, we arranged a due diligence 21 meeting. We have had this. 22 But points out -- has to point out -- that HAL still 23 has a number of concerns, including on things like cost, 24 and this must also be seen in the context of HAL's 25 longstanding position of rejecting ENR on a number of 95 1 unresolved grounds. 2 Hub did request of us disclosure of any other board 3 papers for that meeting relating to ENR, and we 4 confirmed that there were none. But this decision to 5 reject the request should have come as no surprise to 6 Hub at all. We had made it very clear that it would 7 take very considerable due diligence before we could 8 even consider this type of proposal for which we had 9 very considered and very clear objections. 10 Mr Holland Kaye then sent an internal email to 11 his -- sorry, I missed a step there. 12 Mr Holland Kaye spoke to Mr Clake by telephone on 13 20 September. He explained that HAL was not willing to 14 give the commitment sought by Hub. Then later that same 15 day, Mr Holland Kaye sent an internal email to senior 16 colleagues. We could perhaps just look at that because 17 the circumstances are slightly in dispute. It is bundle 18 16, tab 14. 19 LORD JUSTICE HICKINBOTTOM: Could you just give me 20 a reference, just the reference to the email, the 21 18 August email? That is the email in which the request 22 was made. The reference in the note is to the reference 23 to that email in Mr Holland Kaye's statement, which 24 is -- I wondered -- 25 MR HUMPHRIES: Yes, I will get someone to look at it. It is 96 1 somewhere in the bundles, I believe. 2 MR KINGSTON: 16/8. 3 LORD JUSTICE HICKINBOTTOM: Thank you very much. 4 MR HUMPHRIES: Thank you. 5 16/14 is the email from John Holland Kaye to 6 a number of senior people at Heathrow, Lord Deighton, 7 Carol Hui, Claire Harbord, Emma Gilthorpe, and so on. 8 Including Tony Caccavone, who signed one of the witness 9 statements in the other claims in this set of hearings. 10 He said: 11 "I spoke to Anthony Clake and told him that we would 12 not be able to give him a letter on support on Heathrow 13 Hub. I reiterated that if government chooses Heathrow 14 Hub, we would talk with them in good faith and see 15 whether we could make it work, but could not make or 16 imply any commitment to build it. 17 "He pushed for different forms of words, but I said 18 that while we would tell the department what our 19 position is, we could not put anything in writing. 20 "He asked me to keep trying and we agreed to keep in 21 touch." 22 Again, entirely consistent pattern here of 23 behaviour. We have considerable concerns about the ENR 24 concept. We are not willing to sign up to say that we 25 will build it. However, we do not exclude the other 97 1 promoter. We say that we are willing to continue to 2 discuss and engage with them. 3 Mr Clake's internal email, which is in fact on the 4 next page. So, it is tab 15. It puts a very different 5 complexion on the discussion. This is dated the 6 following day, the 21 September, it said: 7 "JHK phoned me last night to update me on the board 8 decision. Despite he and Deighton being positive on our 9 proposal and being happy to issue a letter of intent to 10 instigate an extended runway, should it be chosen, the 11 shareholders are not happy with this." 12 His explanation is as follows: 13 "The shareholders worried that Heathrow Hub could 14 hold them to ransom -- we agreed this was a non-point, 15 given I had agreed a maximum price (5 million GBP per 16 year, which is negligible) and pledged to give my 17 proceeds to charity. 18 "The shareholders have invested a lot of time and 19 money in the third runway. They feel they would lose 20 face if they accepted our scheme, despite it being 21 quicker and cheaper. 22 "They would make less money from the our scheme as 23 the RAB would move less. 24 "And, technically, (and this is the only legitimate 25 point) they feel that they need to do more due diligence 98 1 to commit to the detail of our scheme. I reiterated 2 that the scheme detail was irrelevant. What Grayling 3 wants to know is that they accept the concept of an 4 extended runway. 5 "I said that this was extremely frustrating and that 6 he should ask to them to produce a letter saying that 7 they don't accept our scheme and wish to make a choice 8 between the 3rd runway and Gatwick. He chuckled and 9 said they certainly didn't want to do that, as he knows 10 they'll accept our extended runway in an instant, when 11 they get the call from ministers. What I can I do? 12 I feel political pressure is needed. At the moment, 13 consumers will end up paying [via] (user charges) 14 billions more and we will end up with a more complex 15 solution just to keep Farrovial happy." 16 As Mr Holland Kaye has made very clear, he does not 17 accept that characterisation of the meeting at all, 18 which as you can see does not accord with his own. 19 My Lords, the suggestion that, in effect, the CEO of 20 a major company, a very high profile figure, would 21 actually, on a telephone conversation, say, "Look, 22 actually, we don't want to go with your scheme because 23 it doesn't cost enough, and we want more money so we can 24 up our RAB", is frankly extraordinary. Of course 25 Mr Holland Kaye didn't say that or anything along those 99 1 lines. 2 So, finally, my Lords, I say that Mr Holland Kaye 3 had put to the HAL board, as he was requested to do, the 4 issue of how giving of a written commitment to construct 5 the ENR if selected, as selected as DfT's preferred 6 scheme. But the HAL board was not prepared to provide 7 a written assurance in the form requested, and in all 8 the circumstances, we say that was entirely reasonable 9 and based on proper planning and technical grounds. 10 So, my Lords, unless I can assist you further, for 11 my part of our submissions, I have no further points and 12 it will be Mr Facenna who speaks next. 13 LORD JUSTICE HICKINBOTTOM: Thank you very much, 14 Mr Humphries. 15 Submissions by MR FACENNA 16 MR FACENNA: My Lord, I know you will be disappointed if 17 I hadn't produced a speaking note, so I have and I hope 18 that will be speed matters up. 19 (Handed) 20 My Lord, on the competition points, HAL obviously 21 supports, and indeed adopts, the submissions of the 22 Secretary of State and our position on Article 106 TFEU 23 is set out in our skeleton argument, at the paragraphs 24 mentioned in the speaking note, 9 to 14 and 25 paragraph 18. 100 1 By way of preliminary observations, I would like if 2 I may to make the following points: ground 1 of this 3 judicial review claim of course seeks to establish 4 a breach of EU law by the Secretary of State and, in 5 order to do so, it asserts a breach of competition law, 6 or at least the risk of a breach of competition law by 7 my client, HAL. 8 For reasons that have been explained by the 9 Secretary of State and by my learned friend 10 Mr Humphries, on proper analysis those EU and 11 competition arguments are misconceived as a matter of 12 fact and law. 13 But, obviously, from my client's point of view such 14 allegations are a matter of serious concern. There are 15 obvious reputational and legal risks for HAL attached to 16 the claimant inviting this court, in the context of 17 a judicial review and without any proper evidence, to 18 make determinations on controversial matters of economic 19 regulation and HAL's market position. 20 As I'll come on to develop, and was already, 21 essentially, the central plank of my learned friend's, 22 Mr Palmer's, submissions, the court simply does not have 23 the material that would be necessary to make any finding 24 that Article 102 of the treaty has been breached or is 25 at risk of being breached. In particular, the court has 101 1 no evidence that seeks to define, properly, any relevant 2 market in which HAL are said to be dominant, nor any 3 separate market said to be affected or at risk of being 4 affected by alleged anti-competitive conduct. 5 Without that evidence or economic analysis, it is 6 simply not for the claimants to establish that Articles 7 102 and 106 are even engaged, let alone that HAL has 8 breached or is at risk of breaching it. 9 In the time before the short adjournment, what 10 I would like to do briefly is to come on to the 11 regulation of HAL under the CAA's ex ante price 12 controls, and I will in particular pick up the point my 13 Lords and Mr Justice Marcus Smith made about the CAA's 14 market power determination. 15 So, the essential point is this -- which doesn't 16 come as news to the courts: HAL is not only subject to 17 ex-post competition law under the Competition Act and 18 the treaties. It is of course a regulated business, 19 subject to rigorous ex-ante regulation by the Civil 20 Aviation Authority, including regulation of the prices 21 that HAL can charge to airport users, which includes 22 both airlines and passengers, and therefore its ability 23 to recover any expenditure. 24 The relevant licensing provisions have been 25 summarised and agreed in the statement of common ground, 102 1 and I have given you the reference there. There are 2 also in the authorities bundle. If I can ask you to 3 have a look at those. They are in authorities bundle 1, 4 tab 3. 5 Frankly, the statutory test is not straightforward 6 to understand, but I'll give you the provisions and I'll 7 take you to the market prior to determination and you 8 will see the essentials of how it works. 9 As you have already heard, there is, first of all, 10 a prima facie prohibition, which you find there. You 11 should have section 3 at the beginning of that tab. 12 There is a prohibition where for a relevant period 13 a person is the operator of an airport area, that is 14 a dominant area or part of a dominant area. The area is 15 located at a dominant airport and the relevant person 16 doesn't have a licence in respect of it. You see, if 17 those circumstances apply, then under subsection (2), 18 the persons mentioned in subsection 3 -- which are 19 essentially P and persons connected with it -- may not 20 require a person to pay a relevant charge in respect of 21 airport operation services provided during that period 22 in relation to the relevant area or other parts of the 23 same airport. 24 So, that's the prohibition. Essentially, if you 25 satisfy those tests, you are not entitled to charge 103 1 anyone for using your airport services unless you have 2 a licence. 3 You then go on to section 5 over the page, there you 4 find that, for the purposes of this part, an airport 5 area is dominant if the CAA has made a determination the 6 market power test is met in relation to the area. 7 That is in section 6. That is the airport area. 8 Then, under subsection (2): 9 "If the airport is dominant, if all or part of its 10 core area is a dominant area or part of a dominant 11 area." 12 I hope it begins to make more sense as you go 13 through. 14 The market power test is then set out in section 6. 15 You will see there are three elements to it. 16 The market power test -- so that is the test as we 17 have just seen for establishing that an airport area is 18 dominant -- is satisfied if in relation to the relevant 19 operator the three tests are met. Test A is that the 20 operator has or is likely to acquire substantial market 21 power in a market; are they alone or with other relevant 22 persons? 23 Test B is the competition law, which you will see is 24 defined in subsection 9 as both the relevant provisions 25 of the treaty and the Competition and Enterprise Act. 104 1 So ex-post competition law does not provide sufficient 2 protection against the risks the relevant operator may 3 engage in abuse of that substantial market power. 4 Then, test C is that, for users of the services, the 5 benefits of regulating them by means of a licence are 6 likely to outweigh the adverse effects. 7 So, those are the three elements of the test the CAA 8 has to consider before the prohibition kicks in, and 9 then in relation to whether there is a licence. 10 I am asked to refer you to 6.10, and the point is, 11 there, that in applying those tests, the CAA has to have 12 regard to relevant notices and guidance issued by the 13 Commission and under section 52 of the Competition Act 14 and the Enterprise Act. It is not controversial. 15 Indeed, when I come to the market power test, you will 16 see there is an aspect of that I was going to pick on. 17 That's the test. While we are in the Act, if 18 I can -- 19 MR JUSTICE HOLGATE: By the way, this all relates to -- 20 well, in part relates to section 3, subsection (2), and 21 a prohibition has been pointed out on charging for 22 airport operation services if the MPT is satisfied; 23 where are the airport operation services defined, 24 please? 25 MR FACENNA: That is a good question. 105 1 MR JUSTICE HOLGATE: Because if ex-post -- I will probably 2 get it the wrong way round -- is not sufficient, then 3 this says you can regulate charges for that sort of 4 service. 5 MR FACENNA: Exactly, yes. 6 MR JUSTICE HOLGATE: But it goes only that far. 7 MR FACENNA: It goes only that far. I don't know off the 8 top of my head what the provision is, but I will find 9 out. 10 Again, when we come to the market power 11 determination, there is a lengthy explanation of what 12 services are covered in the relevant market. 13 Just to finish on the legislation, if one looks at 14 section 14 -- and this in a sense goes to the one of the 15 arguments that is made, that the grant of a licence is 16 somehow special privilege. You will see that, under 17 section 14, an application has to be made in the 18 relevant form and manner. 19 Then, subsection (2): 20 "If you have an application which is made, the CAA 21 has to either grant the licence or refuse the licence." 22 Unless it is withdrawn. So, there is no discretion 23 in a sense. 24 Then, just to note there, in subsection 4, that 25 a person is deemed to have made an application -- sorry, 106 1 if subsection 3 applies, ie they are an operator on 2 an airport area on a day in which the area becomes a 3 dominant area at a dominant airport, then essentially 4 they are deemed to make an application. 5 So, if the underlying test is satisfied, you either 6 make an application -- which is in practice what 7 happens, or has happened -- or you are deemed to do so. 8 Just to note that the grounds for refusal of 9 a licence are extremely limited. They are in 10 section 16, and you will see that the CAA may only 11 refuse to grant a licence if, essentially, the relevant 12 tests aren't satisfied under 1(a), (b) and (c). 13 So, it considers the applicants not the operator of 14 the area, or not likely to become the operator, if the 15 area is not a dominant area or part of a dominant area 16 and not likely to become so, or if where the area is 17 located is not a dominant airport and it is not likely 18 to become so. 19 The only other basis on which there can be a refusal 20 is if the applicant is a person following within 21 subsection (2), which is essentially somebody who has 22 previously had their licence revoked. 23 There are, as you have heard, then there is a broad 24 power to include such conditions in the licence as are 25 necessarily expedient in relation to risk of abuse of 107 1 the substantial market power. You see those in 2 section 18. 3 Just to note, because in a sense it goes somewhat to 4 my Lord's, Mr Justice Holgate's point, that the 5 conditions in the licence regulate both the risk that 6 the CAA perceives as to abuse of substantial market 7 power in the market for airport operation services, but 8 also such other conditions as the CAA considers are 9 necessary or expedient having regard to its duties under 10 section 1. 11 For some reason, section 1 hasn't been included in 12 this tab of the bundle. It is in the statement of 13 common ground. If you just want to have a quick look at 14 that. It is in the core bundle, at volume 6. It is 15 paragraph 77 of the statement of common ground. 16 You see there that the CAA's obligations include: 17 "A duty to carry out its functions in a manner which 18 it considers will further the interests of users of air 19 transport services regarding the range of availability, 20 continuity, costs and policy." 21 Then under 2: 22 "It must do so [ie carry out those functions] in 23 a manner which it considers will promote competition in 24 the provision of the airport operation services." 25 Just pausing there, that is, as I understand it, at 108 1 least one of the markets that is said either to be the 2 market on which there is dominance, or indeed where 3 there is alleged to be an anticompetitive effect. 4 I will come on to that when I come on to issues of 5 market definition. 6 You will see there are a series of "have regard" 7 duties under section 1.3, and that includes -- just to 8 take (c), for example: 9 "The need to promote economy and efficiency on the 10 part of the holder of the licence in its provision of 11 airport operation services at the airport to which the 12 licence relates." 13 Then, there is a series of other relevant regulatory 14 considerations that the CAA has to take into account. 15 So, tying that back to where we were in the 16 legislation, under section 18(1)(b), the licence has to 17 include the conditions the CAA considers necessary also, 18 to meet those general obligations. 19 Then, finally, just the final point on the 20 legislation, going back to the 2012 Act, there's 21 section 19, and you will see there, there is a reference 22 to a price control condition. The obligation of the CAA 23 under 19.2 is: 24 "The licence must include such price control 25 conditions as the CAA considers necessary or expedient, 109 1 having regard to the risk referred to in 2 section 18(1)(a)." 3 So, that is the risk of abuse for the substantial 4 market power in airport services. 5 It may not make sense quite why I have shown you all 6 those now. I hope it will start to make sense when we 7 come on to talk about the question of the abuse and 8 market definition, and so on. 9 That is probably a convenient moment, my Lord. 10 LORD JUSTICE HICKINBOTTOM: Yes, thank you. How long do you 11 think you have to go? I am just wondering how we are 12 going to fit all this in? 13 MR FACENNA: You will have seen in my note there are lots of 14 references. I certainly don't intend to take you to all 15 those case. 16 My plan is to be half an hour, and my understanding 17 is that Mr Banner will only need half an hour, so 18 I think we are broadly on track. 19 LORD JUSTICE HICKINBOTTOM: Yes, thank you very much. 20 2 o'clock. 21 (1.00 pm) 22 (Luncheon Adjournment) 23 (2.00 pm) 24 MR FACENNA: It is exactly the right atmosphere for us to 25 the look into the niceties of the competition law. 110 1 I had taken you to -- incidentally I have handed up 2 section 68 from the 2012 Act, which includes the 3 definition of airport operation services, which my Lord, 4 Mr Justice Holgate, was asking for before the short 5 adjournment. As you would expect, it refers to all the 6 kinds of things which happen at an airport. 7 I was going to take you, next, to the CAA's market 8 power determination. It is in the supplementary bundle 9 volume 14, at tab 11. 10 The actual date, although I think on the document 11 itself, at page 207, there is a date of 2013 in the 12 copyright notice, I think it was issued in January 2014. 13 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 14 MR FACENNA: The relevant part for our purposes is the 15 market definition. If I can pick it up in the summary, 16 which starts at page 212, you will see that in the first 17 paragraph, 2.1, it is said: 18 "The CA has defined the relevant product market as 19 the provision of airport operation services to full 20 service carriers and associated feeder traffic 21 airlines." 22 So, those are all airlines. The CAA has also 23 defined the relevant geographic market to the area that 24 is limited to Heathrow. That is unchanged from the 25 consultation document, and I will take you to the reason 111 1 in a moment. 2 Just while on that page, at 2.3, you then find 3 the summary of the other finding, that the CAA has 4 decided that Hub does have substantial market power in 5 that market, which is defined at 2.1. 6 So, the relevant section starts on market definition 7 starts at 223, but the definition itself is on page 231, 8 at paragraph 4.28. It pretty much repeats -- although 9 the reasoning precedes it -- what we have seen in the 10 executive summary. 11 So, taking account of the framework, the statutory 12 framework -- and those words are important -- the 13 analysis outlined in the consultation, the responses to 14 the consultation and the starting point for the SSNIP 15 test. 16 I don't know if I need to descend into the meaning 17 of SSNIP test at the moment. It is essentially a well 18 established -- and may be familiar to your Lordships. 19 It is a well established test for establishing the 20 relevant market when one is looking at competition law. 21 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 22 MR FACENNA: It stands for -- I need to make sure I get this 23 right -- a small but significant non-transitory increase 24 this price. 25 The CA concludes: 112 1 "The relevant market for HAL is the provision of 2 airport operation services for a full service carrier 3 form the associated feeder traffic." 4 The paragraph I also wanted to draw attention to is 5 actually on the preceding two pages. So, in a section 6 which starts at paragraph 4.23, there is a summary which 7 responds to concerns that HAL has raised about the CAA's 8 market definition. You see that the first bullet point 9 under 4.2.3 is: 10 "The CA doesn't consider that it is bound by 11 previous statements about market definition." 12 Sorry, HAL's views themselves are summarised in the 13 bullet points immediately above that, at 4.21. You will 14 see that they had numerous concerns, including it was 15 inconsistent with extensive precedent and other views 16 taken by the other competition authorities, indeed by 17 CAA itself in earlier market assessments, and it wasn't 18 supported by evidence. 19 So, the CAA says: we are not bound by any previous 20 statements. 21 There is then a series of other points, but the 22 important one, I say, is the last bullet point on 23 page 229, where the CAA says: 24 "Market definition is a time sensitive and context 25 specific exercise. It is based on analysis of the 113 1 structure of the market and competition prevailing at 2 a particular point in time." 3 It cites there the leading practitioner test, 4 Bellamy & Child. 5 Hence: 6 "An assessment will change over time as market 7 circumstances evolve. A prior finding of dominance by 8 the European Commission or a national competition 9 authority (or even a national court) is therefore not 10 binding." 11 Then there is reference to the Coca-Cola decision of 12 the EU General Court. You will see that the court there 13 makes it clear: 14 "Even the European Commission has to start a new 15 analysis on the condition of competition in the course 16 of making any new decisions. The court makes it clear 17 that in the course of any decision applying article 86 18 [that is now Article 102 of the treaty] the Commission 19 must define the relevant market again, and market [and 20 I think that should be 'make'] a fresh analysis of the 21 conditions of competition, which will not necessarily be 22 based upon the same condition considerations as was 23 underlying the previous finding of a dominant position." 24 So, what I draw from this -- because you will 25 understand that essentially the only evidence that has 114 1 been put before the court and is relied on in relation 2 to market definition is this: the fact that Heathrow has 3 been found to satisfy the statutory test, the market 4 power test. 5 As you can see from the CAA's own document, this is 6 a relevant market definition which is defined 7 specifically by reference to the statutory scheme. So, 8 that is the first thing that you see at paragraph 4.28. 9 It takes into account the statutory framework. 10 There is, in my submission, no read across from that 11 test for dominance under -- sorry, for a dominant 12 airport operator under the statutory test to dominance 13 for the purposes of Article 102 of the TFEU or indeed 14 other contexts, and that is precisely what the CAA is 15 saying in the last bullet point on page 229; that it is 16 time sensitive, context sensitive and that it is only 17 really suitable to be used for the specific purpose for 18 which the CAA is using it in this particular decision. 19 Those were the only points I had on this document, 20 so you can put that away. 21 Just for your reference -- actually it is in this 22 bundle. I wasn't going to take you to it, but the 23 reference is in my speaking notes. The subsequent 24 decision on the licence is at tab 13A, which I hope has 25 been inserted into your bundles. You will see I have 115 1 given you the reference, at paragraphs 1.21 to 1.28 in 2 particular, there is a detailed description of how the 3 licence furthers the CAA's statutory duties and you will 4 recall, under section 18 and section 19, that the 5 obligations of the CAA to have regard to those duties 6 when imposing licence conditions. 7 I should say on that document, I think that is the 8 document that is relied on at one point for a statement 9 where it is suggested that the form of regulation 10 provided for HAL is an unusually benign one. I simply 11 say you -- it is taken out of context, you actually need 12 to look at all of those paragraphs on 360.6 to 360.7. 13 I would, if anything, draw attention in particular to 14 the bullet point at 360.7, which refers to the 15 regulatory environment being challenging, but fair on 16 HAL. 17 So, moving on from the regulatory regime, can I then 18 come on to Article 106 itself. I hope that since you 19 had the benefit of reading Mr Palmer's speaking note and 20 hearing his submissions, some of this I can take fairly 21 quickly because essentially we take broadly the same 22 position. We take the same position, but there are some 23 points of detail that I would like to add. 24 Paragraph 8 of my speaking note, just to understand 25 what Article 106 is about -- and the reference I have 116 1 given you there is to the Inno case, which is at 2 volume 6, tab 152. You need not turn it up. What is 3 made clear there -- it is one of the earliest cases -- 4 is that there is, in the treaties, an overriding 5 obligation on the member states not to do anything which 6 essentially undermines EU law or the achievements of 7 what is now the European Union. What is said at 8 paragraphs 31 and 42 of Inno, is that 106 is simply 9 a particular application of that general principle of EU 10 law. What it does, essentially, is allocate 11 responsibility. So, you have the substantive 12 competition prohibitions in Articles 101 and 102, and 13 those apply to undertakings. So, businesses themselves 14 cannot enter into anti-competitive agreements and cannot 15 be abused on position. 16 What 106 does is say: in circumstances where you 17 have a member state which is doing something, obviously 18 the general principle under EU law is that member states 19 can't undermine the provisions of the treaty, so all 20 that 106 does is say that member states cannot take 21 action that will inevitably give rise to a breach of the 22 substantive competition provisions. 23 That arises, as you have seen from the case law that 24 has been referred to, classically where you have a state 25 monopoly or some exclusive rights which is given to an 117 1 undertaking, which puts it in a position where 2 essentially, inevitably, an abuse of dominance arises. 3 So, it is common ground what the three issues are 4 that arise under 106: whether there is a state measure; 5 whether HAL has been granted special or exclusive rights 6 to come within the scope of the provision, and then the 7 substantive question of whether if there is a measure it 8 gave rise to risk and an abuse of a dominant position, 9 or a risk of such abuse. 10 Turning, first, to the question of state measure, 11 you have heard the submissions from my learned friend 12 Mr Palmer on the facts and on the analysis, and you have 13 also heard from my learned friend Mr Humphries on the 14 facts insofar as HAL is concerned, what actually 15 happened here. 16 I am not going to go back over those matters. The 17 position is there was a request made and there was no 18 insistence on a guarantee as a pre-condition, and there 19 certainly was not the grant of any veto to HAL in 20 respect of the ENR scheme, or indeed any of the other 21 50-odd schemes that were submitted. 22 The assertion that what the Secretary of State did 23 in this case amounts to a state measure under 106 is not 24 consistent with the body of case law. 25 Now, you have seven volumes, at least, of 118 1 authorities and countless cases, but you haven't 2 actually been taken to very many of them. I certainly 3 don't have time -- even if I wanted to or you wanted 4 to -- to take you to all these cases, but what I have 5 set out there is essentially a crib of all of what's now 6 the Article 106 cases. I have described in each one, 7 with the relevant paragraph reference, what the measure 8 in question was. So, just running through them quickly. 9 The first case, which is Inno, there was state 10 legislation, which allowed tobacco manufacturers and 11 importers in Belgium to fix the retail price. That was 12 found not to be a special, exclusive right because all 13 manufacturers and importers had that right. 14 RTT was the Belgium telecoms former state monopoly, 15 which had a complete discretion, essentially on an 16 arbitrary basis, if it wished to do so, to decide 17 whether anyone else could connect their telephones or 18 other equipment to the network. 19 ERT is the Greek television monopoly. So, there was 20 a monopoly in Greece that had the statutory, exclusive 21 right to transmit any television programmes or 22 broadcasts in Greece. Obviously, that was a state 23 measure granting an exclusive right. 24 Raso was a monopoly on dock workers, in the port of 25 La Spezia. Again, note there couldn't really be any 119 1 dispute there was an exclusive right. There was 2 obviously a state measure. Danish Railways was the 3 Danish Railways board owned the relevant ports and again 4 had, under Danish law, the power to impose port charge 5 and to exempt itself or other trading partners from 6 those charges. 7 The Italian post case, which is tab 157. Again, 8 a legislative measure, which required those, like TNT, 9 who wished to provide non-universal postal services to 10 pay, essentially, a fee to Poste Italiane every time 11 they did so. So, again, it was a clear legislative 12 measure. 13 Connect Austria, the measure in question was the 14 allocation by the regulator of additional spectrum to 15 the former state monopoly telecoms provider without 16 imposing any fee. 17 Ambulanz Glockner you have been taken to and, as you 18 were shown, contrary to the way in which that case has 19 been characterised, it is very clear, and in particular 20 from paragraph 43, that what was in fact going on there 21 was that there had been a grant of a de facto monopoly, 22 which limited the market only to the relevant 23 undertakings. 24 Motto is the case where, again, under Greek 25 legislation, the organisation was given the exclusive 120 1 rights to organise motor cycles races in circumstances 2 where it was also competing on that market. 3 SOA is a pretty incomprehensible Italian case. 4 Essentially, one sees at paragraph 25 that it was about 5 the exclusive -- sorry, it was about the right of those 6 organisations to certify whether businesses were 7 suitable to participate in bidding for public works 8 contracts. In fact, again, that was found not to be a 9 special exclusive right because there wasn't a limit on 10 the number of organisations who would be given that 11 right. 12 Then DEI is the lignite case, where again there was 13 a clear regulatory provision which granted an exclusive 14 licence to exploit ground coal, Greek lignite. 15 So, in all these cases, in every single one of them, 16 there was a quite specific legislative administrative or 17 regulatory measure, which had a clear and identifiable 18 economic effect on an identified economic market. None 19 of these cases is remotely analogous to the factual 20 circumstances in this case where what's complained about 21 is that any planning policy process, the Secretary of 22 State made the relevant request, which it is agreed that 23 he made in relation to HAL's position on a planning 24 proposal which HAL was itself expected to purchase and 25 then promote. 121 1 So, I make the same submission that Mr Palmer made, 2 that it cannot simply be accepted that anything that any 3 administrative authority does is an irrelevant state 4 measure for the purposes of 106. All of the case law 5 relates to really quite clear legislative or 6 administrative measures. 7 On a separate point, at paragraph 12 -- and it is 8 really the point that Mr Humphries was making in his 9 submissions -- as a matter of plain fact it was always 10 Hub's plan that it would be HAL that would take that 11 proposal forward. So, to now say that HAL's position in 12 relation to that proposal is somehow a state measure is 13 really putting the matter back to front. 14 HAL's position was made inherently relevant by Hub's 15 own approach because of the deliverability of its plan 16 was always dependent on HAL. 17 The second element is whether in fact HAL is 18 a privileged undertaking, which has been granted 19 exclusive or special rights. I think there is broadly 20 common ground that the relevant definitions are those 21 which Mr Palmer referred you to in Ambulanz Glockner at 22 paragraph 24, although I have given you the later quote 23 from the SOA case, which as he said just the CJU 24 reciting the same words from previous case law, and then 25 the FIFA case. 122 1 Now, at the bottom of that page in my speaking note, 2 I have set out the four ways, composite ways, in which 3 it is said that HAL is a privileged undertaking. 4 So, the submission I make is: the question the court 5 has to ask in relation to those four items is whether 6 they fall within the descriptions that one sees in the 7 excerpts set out there from SOA and in FIFA. 8 So, SOA again confers protection on a -- the measure 9 in question confers -- sorry, the privilege confers 10 exclusive or special right, protection on a limited 11 number of undertakings which may substantially affect 12 the ability of other undertakings to exercise the 13 economic activity in question, in the same geographical 14 area, under substantially equivalent conditions. 15 Then, on FIFA, Mr Palmer made some submissions on 16 it, including in his speaking note. The only point 17 I would add to what is said at the Secretary of State's 18 speaking note is: if one looks again at the examples of 19 the cases given, so in relation, I think the position is 20 that the claimants rely on the third underlined category 21 in FIFA, ie were rights holders entitled under the 22 legislation to influence the terms, et cetera? 23 The cases which are relied on there, again, you 24 don't have the France and Commission case, but it is 25 exactly the same factual situation as the RRT case, 123 1 which is described here as the Inno case, ie former 2 state monopolist telecoms provider who has the exclusive 3 right to decide whether anyone else can connect 4 telephones or other equipment to the public switch 5 telephone network. 6 So, that is France and Commission. ERT is the Greek 7 TV monopolist case. Inno is the case I have just 8 referred to, the exclusive right of the former State 9 monopoly telecoms provider. And MOTOE again, an 10 exclusive legislative right by the relevant body to 11 authorise other people's motorcycle races. 12 That is a long-winded way of saying that we agree 13 with the submission that you would fine in the Secretary 14 of State's note, speaking note, paragraph 16, as to the 15 way in which that third category under FIFA is to be 16 interpreted. 17 Now, that being the test, the four ways in which it 18 is said that HAL has been granted special rights are, 19 first of all, that it was a former state monopoly. 20 Well, that is not right because HAL was never 21 a state monopoly. It was part of the British Airport 22 Authority, and that also was not a state monopoly. It 23 was stated owned, but it was never a statutory monopoly. 24 At the time of the privatisation, as my Lord, 25 Mr Justice Marcus Smith, made clear on Wednesday, BAA 124 1 became a regulated business. So, the privatisation and 2 regulation were -- I think the words your Lordship used 3 were "joined at the hip". Of course, BAA was itself, 4 when it became privatised subsequently required to vest 5 itself of other airports by the Competitions Commission 6 in 2009 and now only owns Heathrow Airport. 7 HAL, of course, remains heavily regulated by the 8 CAA, as I have shown you, and the cases relied on by the 9 claimant -- which are Connect Austria and Slovak 10 Telekom -- simply do not support the interpretation 11 given to them, and they don't support the view that 12 simply having the status of a former publicly owned 13 undertaking or a former state monopoly amounts to an 14 exclusive or special right under Article 106. That 15 point is expanded again slightly more fully in the 16 Secretary of State's speaking note, paragraph 19, and 17 I adopt what's said there. 18 The second basis on which it is said that HAL was 19 privileged is the licensing regime. Again, I can't 20 really do more than agree with what Mr Palmer said about 21 this. It simply turns the whole idea of ex-ante 22 licensing on its head. It is not a privilege. Absent 23 the licensing regime, HAL would be entitled to charge 24 whatever it likes for the use of its airport and should 25 cover any costs it incurs from those that use the 125 1 airport. 2 The idea that being subject to a prohibition, which 3 then turns into a licence in circumstances where the CAA 4 then imposes price controls and efficiency requirements 5 and so on, to suggest that is a privilege is really -- 6 it is unsustainable. It is a completely bizarre 7 characterisation, in my submission, of the licencing 8 arrangements under the Civil Aviation Act. 9 MR JUSTICE MARCUS SMITH: But reading your first two points 10 together, one might ask: why is such a regime put in 11 place? 12 The answer is: it is put in place because without 13 such a regime there is a danger that the significant 14 market power that exists will be abused. 15 MR FACENNA: Precisely. As I showed you, that is an 16 explicit aspect of the market power test. Ex-post 17 competition controls alone would not be sufficient to 18 protect competition and the interests of consumers. 19 The statements -- I have dealt with the statements 20 that have been made about the so-called benign nature of 21 the regime, which are wrong and highly selective. 22 The other point that Mr O'Donoghue made in his 23 submissions on Wednesday was about HAL's ability to 24 recover whatever is essentially added on to the 25 regulatory asset base. Of course, that is entirely 126 1 dependent on approval by the Civil Aviation Authority. 2 Hub does not have an unrestrained right to simply incur 3 expenditure and then stick it on to RAB and expect 4 airlines and passengers to meet those costs. There are 5 stringent efficiency requirements which the CAA imposes 6 on Heathrow, via the price control process. 7 A specific example you were given was the CAA's 8 allowance of £10 million a year for what are called 9 category B costs for the planning process. 10 Of course, hardly surprising that if those cost are 11 efficiently and properly incurred by HAL, they should be 12 allowed by the CAA. 13 But, again, it is not the case that HAL could simply 14 spend a billion pounds on the planning process and then 15 stick it on to the RAB. The CAA has to determine 16 whether those costs have been efficiently incurred, 17 having regard to all of the statutory duties and the 18 matters I have shown you in section 1 of the Civil 19 Aviation Act. In fact, the amount that is in the public 20 domain, that amount that HAL has incurred in some years 21 far exceeds the £10 million which was allowed in the 22 document shown to you, and its ability to recover that 23 is dependent on the CAA subsequently approving them as 24 being costs that were efficiently incurred. 25 So, the characterisation of the licencing regime is 127 1 simply wrong. Indeed, if it was right, any licensed 2 business, whether it be a pub or a sex shop, or any 3 other regulated business, would effectively be regarded 4 as having been granted the privilege or special right 5 for the purposes of Article 106. 6 It is notable that although there are many pages of 7 my learned friend's speaking note addressing this point, 8 there isn't a single authority that is referred to in 9 any of those paragraphs because there is no supportive 10 authority for this argument. 11 The third basis on which it is said that HAL has 12 exclusive or special rights is the measure itself, 13 ie the request for the guarantee. 14 Now, you have had lengthy submissions on that from 15 my learned friends, as to the precise nature of the 16 request, the two cases which are relied on as being 17 supposedly analogous are Ambulanz Glockner, which you 18 were taken to, and the MOTOE case which is the Greek 19 motorcycling federation. 20 On Ambulanz Glockner, again, I need not do more, 21 I think, than refer you back to paragraph 43, which 22 makes it clear. Indeed, I think Mr Palmer took you to 23 it, but he stopped just before he came to the end of 24 paragraph 43. If you are looking at it again, I would 25 invite you to read, in particular, the last sentence of 128 1 paragraph 43 of Ambulanz Glockner -- it is tab 159 -- 2 where it is said explicitly: 3 "The application of the relevant law about ambulance 4 services has the effect of limiting markets to the 5 prejudice of consumers within the meaning of 6 Article 86(b)." 7 So, you will recall in Article 102 there are 8 specific examples of abuse, and what's said at 9 paragraph 43 is that the effect of the de facto monopoly 10 for those ambulance providers is it falls into exactly 11 that category of abuse under Article 102, ie limiting 12 the market. 13 So, it is not a case where the relevant 14 objectionable measure or the right itself is something 15 to do with being consulted or being asked your opinion. 16 It is a case where the state had effectively created 17 a monopoly and stopped other people from entering into 18 the market. 19 Again, on MOTOE that's a case where there was an 20 exclusive legislative right on behalf of the Greek 21 motorcycle federation to regulate all of its potential 22 competitors' activities. So again, hardly comparable. 23 The only comparison that could be drawn is if in 24 this case HAL had in fact been given a right of veto or 25 approval over all other competing or potentially 129 1 competing schemes. And it was not given any such right, 2 either in relation to this scheme or the 50 odd others 3 which were submitted. 4 The final point is the HAL is the statutory 5 undertaker. I have set out a relatively detailed and 6 technical response to that. But essentially there are 7 three points. First, it is said that the general 8 permitted development order meant that HAL was exempted 9 from various planning permission requirements. That is 10 technically wrong because in fact the effect of the 11 development order is to grant planning consent. It is 12 a facet of ownership of the airport ie it applies to all 13 relevant airport operators so it can't be said to be 14 special or exclusive to HAL. 15 In fact, it doesn't extend anyway to this kind of 16 construction given that the capacity and so on would 17 exceed the scope of permitted development. And of 18 course permitted development is something which is 19 granted to all kinds of people including householders. 20 So it is difficult to describe that as a special 21 privilege. 22 The so-called protection from having land 23 compulsorily purchased, there is a misstatement of what 24 the legal test is, but again it is not special or 25 exclusive to HAL, it is something that applies to all 130 1 statutory undertakers and, finally, the same point to 2 acquire land compulsorily. 3 First of all it is subject to all the statutory 4 tests and it doesn't give any greater privilege that can 5 be secured by any other applicant for development 6 consent. As you are going to hear from Mr Banner 7 shortly, the position is that the formally the ANPS is 8 promoted as neutral so anyone could come along with 9 a scheme and would be able to apply for a compulsory 10 purchase order. 11 In short, on each of the four limbs on which it is 12 said that HAL is an undertaking with special exclusive 13 right under Article 106 we say there is no good 14 authority supporting that and the point is simply wrong. 15 If we are right about that, the analysis stops there 16 because Article 106 simply doesn't apply. So, you don't 17 even get into the question of abuse or risk of abuse of 18 a dominant position. 19 I have an eye on the clock, and I am going to go 20 slightly over the time I gave you, but I hope by not too 21 much: 22 "Article 102 of the treaty establishes a prohibition 23 on the abuse by an undertaking of a dominant position 24 within the internal markets or a substantial part of it, 25 insofar as it may affect trades between member states." 131 1 I have described, at 16 of the speaking note, that 2 the purpose and function of that is to prevent harm to 3 competition in economic markets by prohibiting dominant 4 undertakings from negating an abuse of practices with 5 the specific examples given in Articles 1.28(d): 6 "... weaken competition the market and thereby harm 7 the interests of consumers." 8 I have given you a reference to Mr Justice Roth in 9 Streetmap. I am going to ask you to open that in 10 a moment, but the relevant quote is actually set out in 11 the Secretary of State's speaking note, at paragraph 56. 12 I will show you it when we come to it in a moment, but 13 Mr Justice Roth makes the point at paragraph 96: 14 "It must always be borne in mind that the purpose of 15 competition law is to prevent arrangements or practices 16 which distort competition and to safeguard the interest 17 of consumers." 18 That applies no less to Article 102 than to 19 Article 101. 20 So, the various assertions and really arguments that 21 have been made about a competitive environment or 22 analogies of procurement and so on, are wrong for the 23 reasons you have already heard from Mr Palmer yesterday. 24 This is a situation where, frankly, competition law 25 simply doesn't apply to the matter which is complained 132 1 of. 2 I set out, at 18, the elements that would be 3 necessary to establish even a prima facie breach of 4 competition law. I am going to deal with each of them 5 in turn, but you will see the first one is a definition 6 of the economic market in which the undertaking is said 7 to be dominant. 8 Secondly, the identification of a market in which 9 the anticompetitive arm is alleged to arise. 10 Third, the question of abuse, and there is -- as my 11 learned friend made the point earlier this morning -- 12 a de minimis requirement which applies here, we say. If 13 not, I will show you the relevant Streetmap again in 14 a moment. 15 Then there are two other requirements that haven't 16 been mentioned yet, but which are absolutely, clearly 17 established: 18 "The conduct must be shown to affect trade between 19 member states." 20 And: 21 "It is also well established in the case law that 22 conduct will not be abusive if it is objectively 23 justified." 24 Those are important elements which, again, the 25 claimant's case either simply doesn't address them or, 133 1 in my submission, it fails at each one of these levels. 2 So, on market definition, I am not going to take you 3 to those cases, but I don't think it can be disputed 4 that the starting, critical step in every abuse of 5 dominance case is to establish the relevant market on 6 which the undertaking is alleged to be dominant. You 7 see it as long ago as the Hoffmann La Roche case -- have 8 given you the reference there at 21 -- all of those 9 other cases, the starting point -- and every single one 10 of them, and this isn't by any means exhaustive, even in 11 the cases in the authorities. 12 But all the EU cases there. Then the last two of 13 that page are the two domestic authorities you have, the 14 Purple Parking and Streetmap. 15 You will see that I have quoted in particular from 16 paragraph 36 of the Danish Railways case, where it is 17 said: 18 "The definition of a market was of fundamental 19 significance, as is the delimitation of a substantial 20 part of the common market on which the undertaking may 21 be liable to engage in abuses." 22 In Connect Austria, you will recall that was a case 23 where the former telecoms, state telecoms provider of 24 Austria still had an absolute exclusive right over one 25 part of the spectrum and, even there the CJU did not 134 1 accept at face value the suggestion that it could be 2 assumed that the provider was dominant in a relevant 3 market. It identified a series of further questions 4 about the extent to which that part of the spectrum 5 might compete with other parts of the spectrum, whether 6 consumers would regard them as one product, which as was 7 said in the paragraphs I referred you to: the national 8 court really needs to look at this. 9 The same is true in Ambulanz Glockner. Again, even 10 though you might think on the facts it was -- the fact 11 the case says there is a de facto monopoly. 12 Paragraph 31, and in the dispositive at the end of the 13 judgment, it is clear that the Court of Justice was 14 saying to the national court: you need to examine the 15 facts as to what the relevant market is; is it 16 constrained to this part of the member state? Are there 17 ambulance services going across borders? 18 A whole series of questions here, which in the 19 national court would have to look at. 20 In Asemfo the CJU simply said: we haven't been given 21 any information at all by the relevant markets, so the 22 question is inadmissible. We don't have the information 23 we need even to begin to address the abuse questions. 24 Motto MOTOE, again, motorcycle federation had the 25 right to control all motorcycling in the whole of the 135 1 member state of Greece, and yet the Court of 2 Justice says it is not clear what the relevant market 3 is; whether there is dominance this the relevant market: 4 "The national court needs to go away and look at all 5 these questions." 6 Then Purple Parking in particular, it is a decision 7 of Mr Justice Mann. It is a decision against my client, 8 but you will see at paragraphs 109 and following, so it 9 might be worth taking out volume 7 because I am going to 10 take you to it in a moment anyway. Volume 7, tab 172. 11 Paragraph 109, Mr Justice Mann identifies that -- 12 the very first thing he says: 13 "In competition law, it is likely to be necessary to 14 identify the markets involved." 15 Mr Justice Roth had made an order that there should 16 be a presumption about the upstream market and the 17 facilities market, and that HAL is dominant in that. 18 So, it was proceeded on a presumption, but there was an 19 issue as to the downstream market: 20 "To which it has to be assessed whether competition 21 is hampered or eliminated." 22 Then you see at paragraphs 110, and in the following 23 paragraphs, a lend fee description of how the market 24 definition should be carried out. 25 You see at paragraph 115 the reference to the 136 1 experts material that had been put before the court. 2 That is then described in paragraphs 116 and in the 3 paragraphs following. 4 In the Purple Parking case, which is in the next 5 tab, again, it proceeded on a presumed basis that Google 6 was dominant in the market for online search. One sees 7 that at paragraphs 41 to 43. But, again, it was the 8 very starting of the analysis and those are both abuse 9 of dominance cases. 10 As I said, the claimant's only evidence on this 11 point is the CAA's determination under the 2012 Act, and 12 for the reasons I have already given it is simply not 13 possible to adopt that assessment for present purposes. 14 It was a determination made by the CAA over five years 15 ago, in a different context, for a different statutory 16 purpose, and it cannot be relied on to determine the 17 relevant market and question of dominance now. Of 18 course, the CAA expressly rejected the idea that you 19 could transfer market definition from one context and 20 one time period to another. 21 Paragraph 22, there is a clear statement by 22 Mr Justice Roth, in Streetmap, that an alleging an abuse 23 of dominant position or risk of such abuse: 24 "The burden of establishing the undertaking in 25 question holds the dominant position rests on the 137 1 claimant." 2 That is paragraph 40. Again, the basic submission 3 is that the claimant has not adduced any evidence on 4 this. So, there is no material before the court in 5 which you can even begin to engage with the very first 6 critical step that is always required in abuse of 7 dominance cases. 8 Again, for that reason, the 106 and 102 case simply 9 doesn't get off the ground. 10 The same problem arises in relation to the market in 11 which it is alleged that the anticompetitive effect 12 arises. This has been slightly shifting sands. I think 13 where we thought we had come to on the pleadings was it 14 was alleged there was a market for runway design and 15 runway expansion in the South East of England, and that 16 is how we addressed it in our skeleton. 17 In the course of exchanges on Wednesday, what seems 18 to be now being said is that either the effect is the on 19 the market for airport services at Heathrow or in some 20 other putative market for runway design, for expansion 21 at Heathrow, and it is not clear to me whether that's 22 said to include all other entries which might have been 23 under consideration in relation to Heathrow, or only ENR 24 and NWR at the end. 25 Again, there is simply no evidence on this. The 138 1 court doesn't have the material on which it can safely 2 reach any conclusion about the competitive structure of 3 any such market, or whether any alleged effect on it is 4 serious or appreciable. 5 There is an analogy which you will have read in the 6 Secretary of State's speaking notes about a design for 7 a hypothetical 17th century manor house, and if somebody 8 produces designs for that manor house, they are not 9 transferable to any other building, perhaps, but you 10 can't then simply assert: there must be a market for 11 designs for that particular manor house. 12 The relevant market obviously would be wider than 13 that, architectural services or specific parts of it. 14 So, again, merely coming along to court and 15 asserting in the way that it has been asserted that 16 there is a market and that there is an appreciable 17 effect on the competition in that market is simply not 18 good enough for these purposes. 19 The point at (iii) goes to the question of abuse and 20 appreciable effect, and it really follows on from the 21 points I have been making. 22 Again, paragraph 40 of Streetmap makes it clear that 23 both the definition of the markets and the need to 24 establish abuse is a burden that rests on the claimant. 25 That is paragraph 40. 139 1 The applicable test set out by Mr Justice Roth -- 2 set out at paragraphs 88 and 90 of Streetmap -- is that 3 the claimant has to show that the impugned conduct is 4 reasonably likely to harm the competitive structure of 5 the market. Mr Justice Roth makes it clear, there, that 6 in determining that question the court will take into 7 account, as a very relevant consideration, evidence as 8 to what the actual effect of the conduct has been. 9 Of course, again, we don't have evidence about the 10 market or the relevant competitive structure, which is 11 said to have been affected. 12 Paragraph 32 of my note is the de minimis point. 13 I know you have been given the reference. I don't know 14 if you have had the opportunity to look at it, but shall 15 I just show it to you quickly, my Lords? 16 We are in bundle 7 of the authorities, tab 173. It 17 is paragraphs 96 and 97. 18 Actually, the argument that is being addressed is at 19 paragraph 92. So, you will see there that Streetmap, 20 who was the claimant alleging abuse by Hudel(?) 21 submitted that there is no de minimis principle 22 applicable to the abuse of dominance. That is at 23 paragraph 92. 24 Mr Justice Roth then looks at the relevant case law, 25 and the conclusion is at 96 and 97. 140 1 At 96, the conclusion is: 2 "It doesn't follow that conduct will constitute an 3 abuse where the effect is on a separate market where the 4 undertaking is not dominant if that effect is not 5 serious or appreciable." 6 Then there is the statement I read out earlier, 7 about the purpose of competition law and its impact on 8 consumers. 9 Then, at 97: 10 "I do not regard the pronouncements of the ECJ, to 11 which I have referred, is precluding me from holding 12 that where the likely effect relied on is on a 13 non-dominated market, a de minimis threshold applies and 14 constitutes an abuse. The effects must therefore be 15 appreciable." 16 Then there is a reference to various leading 17 practitioner texts. 18 Again, it is not simply that you can assert that 19 there is an abuse of dominance. There is a burden on 20 a claimant who makes such an assertion to demonstrate 21 what the relevant market is, what the abuse is and the 22 impact on competition, and to show that the threshold of 23 appreciability has been satisfied, in so far as one is 24 talking about a market in which there is not dominance. 25 One of the arguments which is made is that, simply, 141 1 the ability of Heathrow to expand the size of its 2 market, or the alleged market in which it is dominant, 3 was enough. That was I think what was being said in 4 relation to the market for airport services. 5 My response to that is: have a look at the MOTOE 6 case. If I can ask you just to open that briefly. So, 7 it is in the same volume at 163. This is the agreed 8 motorcycle federation. Paragraph 48. So, you will see 9 there that the relevant provision conferred on ELPA, 10 which can itself take on the organisation of 11 motorcycling events and the commercial exploitation, the 12 power to give to consent to applications for 13 authorisations to organise other events, without that 14 power being made subject to restrictions. It should be 15 recalled that the mere creation or reinforcement of 16 a dominant position through the granting of expressly 17 exclusive rights is not in itself incompatible with 18 Article 82. 19 So, merely because you have a measure which either 20 creates or reinforces a dominant position is not 21 equivalent to an abuse of a dominant position. 22 Moreover, if one then goes to the dispositif at the 23 end of the judgment, the finding in the Greek motor 24 cycle case -- and it is at paragraph 53 and then also 25 reflected in dispositif is that, it is the usual 142 1 extremely lengthy ECJ finding, but if one looks at the 2 second sentence in dispositif: 3 "The relevant Articles preclude a national rule 4 which confers on a legal person, which organises 5 motorcycling events, the power to give consent to 6 applications for authorisations to organise other 7 competitions, without that power being made subject to 8 restrictions, obligations and review." 9 That element of the finding picks up the Advocate 10 General's conclusion, which is earlier in the tab, so it 11 is paragraph 113 of the Advocate General's opinion. 12 Advocate General Kokott, her conclusion, which the court 13 adopted, again you see at (ii), under 113 is that the 14 treaty Articles prohibit these provisions, insofar as 15 the exclusive rights given to the motorcycle federation 16 to refuse consent without it being subject to any 17 restrictions, obligations or control. 18 So, there was nothing wrong in principle with the 19 motorcycle federation having an exclusive right to 20 determine whether others could run motorcycling events. 21 If one looks at paragraph 89 of Advocate General 22 Kokott's opinion, what she says there is: 23 "Not every exercise of the right of core decision 24 can automatically be regarded as abuse." 25 She makes the point, first of all, that if it is -- 143 1 behaviour of an undertaking of a dominant position can 2 be objectively justified, in which case it is not abuse, 3 and there might be good objective reasons why an 4 association refuses to give its consent to other 5 motorcycling events. 6 You will see there set out all the obvious things 7 you would say about the safety of racers and spectators, 8 technical safety requirements, the interests of the 9 sports persons, spectators and public. 10 Then, at 93, the mere fact that this organisation 11 had the power to give or withhold consent, subject to 12 compliance with recognised rules and standards, couldn't 13 automatically be regarded as abuse. 14 Then, it continues in more or less a similar vain. 15 At 98, of Advocate General Kokott's opinion -- well, 16 at 97 she makes the point that irrespective of whether 17 there is any actual abuse, it is sufficient for 106 18 purposes if a state creates a risk of abuse. So, 19 obviously, there is a risk of abuse in relation to the 20 motorcycling federation, and she goes on to say what 21 that risk of abuse is. 22 At 98, she says there is a conflict of interest 23 because it itself organises competing events, and so it 24 has legal means that would allow it to effectively 25 exclude other providers. 144 1 Secondly, it is not subject to any restrictions, 2 obligations or controls in relation to the grant of 3 refusal, which makes it easy for it to refuse consent. 4 There are then the provisions which cite the earlier 5 case law. 6 At 104, you will note that the Greek government said 7 it is actually subject to some controls because it has 8 to comply with the law and it is subject to judicial 9 review. 10 At 105, Advocate General Kokott says that is not 11 what the order from the referring court says, so we have 12 to take that as the factual basis. If that is the 13 factual basis, then it is clear that when granting 14 consent it is not subject to any restrictions, 15 obligations or controls. 16 That is then an element of the finding in her 17 conclusion, and the finding of the court, as to what is 18 actually contrary to Article 106. It is the giving of 19 an unrestrained ability to veto other competitors, or 20 potential competitors events, without either objective 21 justification and without any ability for review or 22 regulation. 23 Now, applying that to Heathrow, this is not a case 24 where it is alleged that there is some right to veto 25 a whole range of other competitors' activities. There 145 1 is only one incidence that is being complained of. 2 Namely, Heathrow's position in relation to Hub's 3 application. 4 That was not a situation in which it could be said 5 that there was an unconstrained ability of Heathrow to 6 promote its own interests at the expense of Hub. 7 Moreover, you then get into the question of 8 objective justification, but just taking the first 9 point. First of all, it was all always the Secretary of 10 State's state decision, irrespective of what Heathrow's 11 position was. So, Heathrow did not have the exclusive 12 right, essentially, to rule out Hub's proposal. 13 Secondly, Heathrow is, as I have said, a highly 14 regulated business by the CAA, and indeed under ex-post 15 competition law. What actually in fact happened here is 16 that there was a complaint to the CMA that Heathrow's 17 conduct was contrary to the Competition Act. 18 So, it is not the same as ELPA, and what is said in 19 the MOTOE case is that the real problem with giving an 20 exclusive right is if you do it in a way that creates 21 the risk of that body pursuing its own interests, and 22 then doesn't include any checks or balances which 23 prevent it from doing so. 24 The final two elements are effect on trade between 25 member states. I need not take you to the cases. The 146 1 references are there in the speaking note. It is an 2 important element of Article 102. It has not been 3 addressed at all by the claimants and, again, there is 4 no evidence -- 5 MR O'DONOGHUE: I hesitate to rise, but the first question 6 is: where's this pleaded? 7 It hasn't been. 8 MR FACENNA: Well, this is the claimant's claim for judicial 9 review in which they seek to establish a breach of 10 a dominant position. It is well established in the case 11 law that Article 102 of the treaty requires an abuse to 12 have an effect on trade between member states. So, it 13 is -- if anything, the burden was on the claimant to 14 plead it. It is quite right for Mr O'Donoghue to say it 15 is not pleaded. I am quite entitled to say: if it is 16 not pleaded, the court can't possibly be satisfied that 17 the requirements for abuse are met. 18 MR JUSTICE MARCUS SMITH: I must say, Mr Facenna, I think 19 were you to lose on market definition dominance abuse, 20 then given that this is a hub airport across the world, 21 you would be on pretty sticky ground regarding -- 22 MR FACENNA: I am not entering into the substance of whether 23 it could be established that there was an effect on 24 trade between member states. 25 MR JUSTICE MARCUS SMITH: No, you are simply saying the 147 1 point has not been pleaded. No, I understand. 2 MR FACENNA: Again, if you look at those cases, those are 3 cases where there is a national monopoly. The Poste 4 Italiane case, in particular. A universal postal 5 service, a state monopoly. Even there, the court says 6 there is a factual question as to whether there is an 7 effect on trade between member states. 8 Of course, Heathrow, there are all kinds of 9 arguments that one can make about Heathrow's effect on 10 trade between member states, but again one needs to look 11 at the precise factual circumstances in this case. 12 Insofar as it is alleged, for example, that the relevant 13 market is the market for the provision of runway design 14 at Heathrow, it is far from clear, in my submission, 15 that any effect on that market -- if it indeed exists -- 16 is one which could be said to have an effect on the 17 internal market or trade between EU member states, so 18 that element is missing. 19 Finality, my Lord -- I am sorry, I have probably 20 been the first counsel for two weeks who has exceeded 21 the time limit. 22 LORD JUSTICE HICKINBOTTOM: I think you are the first to 23 double it. 24 MR FACENNA: The question of objective justification. 25 I have shown you what Advocate General Kokott says in 148 1 MOTOE. Again, you find it in all of the case law. 2 In Purple Parking, Mr Justice Mann's judgment, there 3 is a lengthy consideration as to whether Heathrow's 4 position in relation to parking was objectively 5 justified. He found that it wasn't because it was 6 essentially pursuing commercial interests. 7 In Streetmap, Mr Justice Roth -- 8 MR O'DONOGHUE: I do hesitate, but this is a defence and it 9 should be pleaded. 10 MR FACENNA: Well, in fact, if one looks at what Mr Justice 11 Mann says and Mr Justice Roth -- let me step back. 12 This is not a claim in which there is an allegation 13 of a substantive breach of competition law against 14 Heathrow Airport Limited. This is a claim where it is 15 said that the Secretary of State has breached 16 Article 106. We are an interested party in this claim. 17 I didn't understand it to be that the court is being 18 invited to make findings that Heathrow Airport has 19 actually breached competition law. So, the pleading 20 point doesn't really go anywhere. 21 But if one looks at what Mr Justice Mann says and 22 Mr Justice Roth, it is possible to characterise it as 23 a defence, but those judgments also say: you don't need 24 to characterise it as a defence. It is clear that if 25 there is objective justification for conduct, it doesn't 149 1 amount to an abuse. 2 So, it is not necessarily correct, on those 3 authorities, always to characterise it as defence, is my 4 response to that. 5 MR JUSTICE MARCUS SMITH: Can I ask you a little bit more 6 about abuse, Mr Facenna. Here we have a situation where 7 it is accepted that the Hub proposal required HAL to 8 implement it. So, that's, as it were, the background 9 context to the request for a written guarantee. 10 Now, let's suppose that the request is made of HAL 11 to provide a written guarantee that it will build the 12 alternate scheme if it is preferred by government. To 13 what extent does it make a difference for the abuse that 14 HAL's response is not a no? That's one way of putting 15 it, simply: we are not providing it. 16 Or, as was suggested this morning, it was not so 17 much a no as: we have serious issues with this proposal. 18 It will require 18 months for us to examine it to see if 19 it is compliant. Therefore, if and to the extent you 20 want a meaningful assurance, we can't give it to you 21 because we haven't done the work. 22 So, would you say, assuming all the other 23 requirements -- 24 MR FACENNA: All the other elements, yes. 25 MR JUSTICE MARCUS SMITH: -- are what are required. That 150 1 there is a distinction between an unreasoned "no, we are 2 not providing it" and a reasoned no, in terms of what 3 constitutes an abuse for purposes of Article 102? 4 MR FACENNA: Yes, on the premise that all the other elements 5 are satisfied. 6 MR JUSTICE MARCUS SMITH: Let's assume that we are against 7 you on everything else. 8 MR FACENNA: I would say -- so, the answer is yes, and 9 perhaps I can say what I was going to say on objective 10 justification, because I think it falls under that area. 11 MR JUSTICE MARCUS SMITH: I hear Mr O'Donoghue's pleading 12 point, but I think it would assist because I think there 13 is an unclear division between what constitutes an abuse 14 and what constitutes an objective justification of 15 abuse, so it would be helpful to hear your answer -- 16 MR FACENNA: First of all, on the claimant's case, it 17 wouldn't matter because their position is: even asking 18 the question amounts to a breach of Article 106 because 19 it created inequality of opportunity, and so on, and all 20 the things which are said. 21 So, on the case which is now advanced it doesn't 22 matter. The implication of that appears to be that even 23 asking HAL's position is a breach of EU law, and no 24 matter what HAL said would effectively have amounted to 25 an abuse or a risk of abuse of its dominant position. 151 1 So, that's the claimant's case. If that's their 2 case, then whatever HAL's position was is, strictly 3 speaking, irrelevant. 4 The question of abuse, thinking about the definition 5 in Hoffmann La Roche for example, raises a question as 6 to whether the undertakings conduct is abusive having 7 regard to the normal rules of competition and the normal 8 conduct one would expect on undertaking that position. 9 I am paraphrasing. 10 So, we would say that Heathrow's perfectly 11 reasonable position -- which has been set out by 12 Mr Humphries by reference to the documents -- cannot 13 properly be characterised as abusive. It was being put 14 forward as the person who would be promoting and 15 building this scheme. So, I mean, both as a matter of 16 public law and then when you look at it through 17 a competition lens, it is difficult to see how it can be 18 said that Heathrow Expressing what, in my submission, 19 were valid and legitimate concerns, could ever be 20 regarded as abusive. 21 It is not abusive. It was a perfectly reasonable 22 legitimate, reasonable position that HAL had taken over, 23 in fact, many years in relation to this proposal and had 24 been consistent about. 25 If HAL had said -- again assuming all the other 152 1 elements and so on -- if HAL's position was: we are not 2 ever contemplating anyone else's scheme than our own 3 because we are only interested in building our own 4 scheme. 5 Then you might start to have the basis of an 6 argument assuming dominance and so on, that that was an 7 abusive position for HAL to take, but that is very far 8 from where we are. 9 So, it does go to the question of whether it is 10 abusive at all. Again, as I have said, the burden rests 11 on the claimant to demonstrate that there is abuse and 12 it has not done so. 13 MR JUSTICE MARCUS SMITH: Yes, to be clear, I don't think 14 the claimants are going so far as to the mere making of 15 the request without more is the abuse. It is the making 16 of the request which, because it is made is material to 17 the thinking of the Secretary of State, ergo the 18 response to that request is a matter that affects his 19 thinking. If, for instance, therefore HAL had come back 20 and said: no problem, we'll give you the written 21 guarantee. 22 That would have been a factor that would have 23 militated in favour of the HAL. 24 MR FACENNA: Yes, it is difficult -- the claim -- there is 25 a public law element to it, as to whether it was 153 1 relevant to ask it and so on, relevance consideration. 2 But so far as 102 and 106, and 102 -- ground 1 in 3 other words -- is concerned, it is quite difficult to 4 separate the asking of the request from what HAL's 5 response to that might be because there was only 6 a breach to 106 if you have triggered an abuse of a 7 dominant position or created a real risk of a dominant 8 position being abused. 9 So, it is not clear to me, in fact, that you can 10 separate the complaints about the Secretary of State's 11 position -- at least underground 1 -- from what HAL's 12 position is, which is why I started by saying: they 13 can't make out Article 106 unless they are able to 14 establish that HAL's response essentially was an abuse 15 of the dominant position. 16 But anything other than a yes was HAL effectively 17 exercising a veto or influencing the rights of others in 18 the way that you find in MOTOE and Ambulanz Glockner. 19 LORD JUSTICE HICKINBOTTOM: I think the way it was put by 20 Mr O'Donoghue meant that it was -- the request that was 21 the trigger was because the request was never ever going 22 to be answered yes. Hence the question gave rise to the 23 risk. I think that was how it was put. 24 MR FACENNA: That may be how it was put. Again -- 25 LORD JUSTICE HICKINBOTTOM: But your response is the same. 154 1 MR FACENNA: My response is the same. The implication of 2 that is that it would always be unlawful, both under EU 3 law -- and there would always be an abuse of the 4 dominant position, unless HAL said yes. 5 MR JUSTICE HOLGATE: Depending on timing, the stage at which 6 the question was asked. My Lord's question was in the 7 context of a particular stage. 8 MR FACENNA: Of the policy decision when being taken -- 9 MR JUSTICE HOLGATE: When the person noted might be 10 responding to the question was at the same time 11 promoting their own scheme and therefore had the 12 incentive to say no or not reply. That is the way the 13 question is being put. 14 LORD JUSTICE HICKINBOTTOM: A sort of overwhelming 15 incentive. 16 MR JUSTICE MARCUS SMITH: Before the choice of the preferred 17 scheme has been made, the question regarding HAL's 18 willingness to undertake it is raised, so there are 19 rival schemes. What the raising of the question of 20 HAL's attitude does is, it gives HAL an influence into 21 how the rival scheme is seen. 22 The reason I asked my question was, obviously, if 23 there is a yes/no, problem we'll do it, then the issue 24 goes away. The point is that wasn't the answer. 25 What I'm pressing you on is whether there is 155 1 a difference in terms of characterising this as an 2 abuse, whether the no is, as it were, an unreasonable no 3 or a no that is based upon the fact that, for entirely 4 understandable reasons, HAL had issues with the 5 alternative scheme. 6 MR FACENNA: Yes, well, the answer to that is yes, and that 7 is the MOTOE case. So, those paragraphs in Advocate 8 General Kokott's opinion. 9 Nothing wrong in principle with an organisation 10 which has a complete right to decide whether other 11 people run competing motorcycle competitions, and there 12 are very good reasons why you might want to have that 13 and there are very good reasons why it might say no in 14 some cases. 15 If you look at those paragraphs again, what she 16 essentially says is it would be abusive if it was 17 effectively only doing it to promote its own commercial 18 interests and didn't have any other legitimate basis for 19 the conduct, but it doesn't amount to an abuse if it 20 does have legitimate concern and so on, and that is the 21 case here. 22 So, both as to the question of whether it was 23 abusive in the first place, and on objective 24 justification. It does make any difference. 25 MR JUSTICE MARCUS SMITH: It may be a question for 156 1 Mr O'Donoghue, but suppose HAL had come back to Hub and 2 said: no problem, of course we'll sign up to this scheme 3 provided we have done our 18 months of due diligence and 4 provided we are satisfied on all the other matters that 5 Mr Humphries raised this morning, no problem, but there 6 are a page and a half of subjectivities that will have 7 to be satisfied before our yes actually becomes in any 8 way effective. 9 Whether that would have been an abuse is perhaps 10 a point for debate. 11 MR FACENNA: Yes, well, and indeed that may be a more 12 accurate characterisation, broadly speaking, of what 13 HAL's position was, which is: we are not able to give 14 you the guarantee you are asking for in relation to this 15 at this stage, given all of our concerns. 16 LORD JUSTICE HICKINBOTTOM: Particularly as the email from 17 Hub to HAL, which indicated that the Secretary of State 18 wanted comfort or a guarantee, both as to the concept 19 and to timing and to delay. No delay. 20 MR FACENNA: Yes, the nature of what was being asked again 21 goes to the question of both whether HAL's conduct 22 could, on any sort of common sense view, be regarded as 23 abusive in competition law terms, and also as to whether 24 it was objectively justified. 25 On objective justification, the only point I wanted 157 1 to make was the case which is really relied on is the 2 Hilti case about nail guns. Of course, the analogy is 3 an imperfect one. There you had Hilti the dominant 4 manufacturer of the nail guns saying: we don't really 5 like the fact that other people make nails, which we 6 regard as inferior, and then sell them for use in our 7 nail guns. 8 The outcome was: it is not really for you to police 9 the safety of other people's nails. 10 This is not what is happening here. What was 11 happening here was HAL was being asked to purchase and 12 actually then build and promote the scheme itself. 13 The analogy would be if Hilti had been being 14 asked -- well, if someone had gone to Hilti and said, 15 "You need to start buying nails from me and then selling 16 them yourself for use in your nail guns", at which point 17 Hilti would have been entitled to say: I am afraid we 18 are not going do that because we have some real concerns 19 about the safety and the quality of your nails, and 20 we'll be the ones on the line if anything ever comes 21 about. 22 That would have been objectively justified. 23 So, again, if you have to get as far as that -- and 24 obviously my submissions are you don't get anywhere near 25 the question of objective justification -- then HAL's 158 1 position -- the assertion that was made was that it was 2 none of HAL's business, and that's simply an assertion 3 that cannot be sustained, whether it is a matter of 4 public law in planning law or competition law, or simple 5 common sense, given the factual matrix here. 6 My Lords, I am sorry to have taken time on that. 7 LORD JUSTICE HICKINBOTTOM: Thank you very much, Mr Facenna. 8 Again, could I just take stock of where we are? Are 9 you still where you were, which is half an hour? 10 MR BANNER: Yes, my Lord, I may be less. I hope I will be. 11 LORD JUSTICE HICKINBOTTOM: What about the reply? You have 12 heard most of what you have to reply to. 13 MR KINGSTON: Yes, I have. Without wishing to depress 14 everyone on Friday afternoon, thinking how nice it would 15 be to be able to go home at a reasonable time, 16 I estimate the reply would take between an hour and 17 a half and two hours, depending on, to some extent, your 18 Lordship's reaction and the need to hear some points 19 dealt with. But that's the best estimate, and I hope an 20 honest one. 21 LORD JUSTICE HICKINBOTTOM: Can you just give us one moment? 22 (Pause) 23 Mr Kingston, we will obviously hear from Mr Banner 24 now and hopefully he'll be through by about 3.30. We'll 25 have to have a break then. But, in the timetable you 159 1 had an hour, and it looks as though we won't be able to 2 give you much more than an hour. I don't know how we 3 are going to occupy that hour most efficiently and best. 4 MR KINGSTON: My Lords, especially at this time of day on 5 a Friday, I don't wish to appear a churl, but we kept 6 very carefully to our time estimates, at some cost in 7 terms of the overall legibility of our case. Not taking 8 your Lordship to every document, not asking you to turn 9 it up, in order to ensure that we assisted the court 10 with the references, made the points but didn't overrun 11 the time. 12 It is not a complaint. My learned friends needed to 13 make their case, but we have had, I think, over an hour 14 beyond the time estimate on some submissions and more 15 than doubling the submission your Lordship has just 16 heard, in terms of time estimate. 17 LORD JUSTICE HICKINBOTTOM: How do you propose to get your 18 two hours in before 4.30 or even 5.30? 19 MR KINGSTON: Court, time to pot. 20 LORD JUSTICE HICKINBOTTOM: No, because the transcribers 21 will have to have a break after Mr Banner. 22 MR KINGSTON: My Lords, I agree. I have two practical 23 suggestions. One in relation to parliamentary 24 privilege, I have a fairly good narrative speaking note. 25 I'm prepared to hand that in as the speaking note, to 160 1 direct your Lordships attention to the relevant parts of 2 it, but not read it, and to receive any questions that 3 your Lordships may have on it. 4 LORD JUSTICE HICKINBOTTOM: That would help. 5 MR KINGSTON: That would save a significant amount of time. 6 I prepared the note on the basis that it might be 7 necessary to do that. 8 In relation to the reply itself, I have again 9 a fairly full note, but I am reluctant to turn myself 10 into a newsreader and simply read through a note, which 11 is about as exciting as -- I won't say what, but -- 12 LORD JUSTICE HICKINBOTTOM: I am sure you are being 13 overmodest, but what we'll do is we'll hear Mr Banner. 14 We'll have the break. We'll take your parliamentary 15 Article IX note, and read it just to make sure that 16 there is nothing in that that we want to explore with 17 you. Then we'll see how quickly we can get through the 18 balance of your reply. 19 MR KINGSTON: My Lords, may I just assure the court that we 20 are not here to either cause difficulty or -- 21 LORD JUSTICE HICKINBOTTOM: No. 22 MR KINGSTON: But, from our point of view, this is an 23 important part of the proceedings because some of what 24 we have heard, particularly on behalf of the Secretary 25 of State, requires a little examination to see where it 161 1 leaves the court in terms of what has been admitted or 2 not. 3 LORD JUSTICE HICKINBOTTOM: I see that. Let's hear from 4 Mr Banner and see where we get to. 5 Submissions by MR BANNER 6 MR BANNER: Thank you, my Lord. 7 You should have before you one further addition to 8 your speaking note. You may be relieved to see it is 9 only a three page addition. 10 Like my skeleton argument, I though submissions 11 should only focus only on ground 1, the competition 12 ground. Within that ground, I don't wish to add to the 13 debate at the first two stages, namely was the request 14 for a guarantee a state measure and, secondly, do HAL 15 have special exclusive rights? My focus is on the third 16 stage of the analysis. 17 That is where I pick up at paragraph 1. I say, at 18 that first stage, should it arise, when considering 19 a complaint that a state measure conflicts with 20 Article 106, taken with Article 102, it is necessary to 21 consider whether the potential or actual consequences of 22 the measure are -- or are liable to be anti-competitive. 23 I take that from the DEI judgment. I have provided the 24 reference. There are others, too. 25 In the present case, my Lords, the state measure 162 1 complained of is, of course, the request for 2 a guarantee. That came about in the context of 3 a process, the end result of which was the adoption of 4 the airports NPS in the form before this court. 5 That process was not a procurement exercise, 6 a competitive tender designed to identify a particular 7 developer or operator, to undertake particular specified 8 works. What it was was a process designed to result 9 in -- and which did result in -- the formulation of 10 a planning policy statement to govern the determination 11 of future DCO applications by any future applicant for 12 new airport development within the terms of the NPS. 13 That, I suggest, is obvious, but if I need more, 14 I rely on what Ms Low says in her witness statement. 15 I give you the reference. 16 Therefore, I suggest to the court that the 17 consequence of the process within which the alleged 18 state measure, ie the request for guarantee, occurred 19 was the adoption of the NPS in its final terms. That is 20 where it led to. That was the destination. Add the 21 applicability of those terms to future DCO applications. 22 It follows, I suggest, that in considering whether 23 the alleged state measure had potential or actual 24 anti-competitive consequences, the formulation used by 25 the court, it is relevant to have regard to the terms of 163 1 the NPS which, after all, is the target of ground 1, 2 like the rest of the JR. That is the challenged 3 decision. See in the claim form. It is of course the 4 public law Act with legal consequence. 5 As to the final terms of the NPS, I would like to 6 remind the court of what I say in my skeleton argument. 7 Could I ask the court to turn up my skeleton argument, 8 paragraph 21, which if your pagination is like mine 9 should be on page 8. That may be a big "if". There are 10 various versions. 11 LORD JUSTICE HICKINBOTTOM: Yes. 12 MR BANNER: I pick up about halfway down, the line ending 13 with the words "whilst the NPS". I will just read out 14 the last part of 29: 15 "Whilst the NPS endorses the northwest runway scheme 16 in favour of the ENR and the Gatwick scheme, it 17 expressly leaves open the prospects of elements of the 18 NWR scheme being promoted and carried out by different 19 parties." 20 It doesn't fix the parameters of the future 21 additional reconfigured terminal facilities in such 22 a way that means that only HAL could deliver them, and 23 it doesn't preclude an alternative approach such that 24 currently being promoted by the Arora group. 25 The case for introducing competition in the 164 1 construction operation of terminal and associated 2 facilities remains open for a prospective competitor to 3 HAL to make at the DCO stage. 4 I refer the court then in subparagraphs (a), (b) and 5 (c) to the relevant provisions of the NPS. Given the 6 time, I won't, unless you want me to, ask you to turn 7 them up. You have the references there. 8 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 9 MR BANNER: The critical point, going back to the speaking 10 note, 4(a) and (b), is that the NPS applies not just the 11 runway, but to the terminal infrastructure. The NWR 12 scheme endorses the collective whole of all the elements 13 to which the NPS relates, and it expressly contemplates 14 that different elements may be contemplated in different 15 DCO applications and by different applicants. 16 The conclusion, on the next page of my skeleton 17 argument, paragraph 23, follows from this. 18 In short, the NPS allows for meaningful competition 19 to come forward through bodies other than HAL, making 20 their case at the DCO stage. On a level playing field, 21 pursuant to an NPS which is applicant neutral. 22 Returning to the speaking note, paragraph 6, none of 23 the other parties' pleadings, skeleton arguments or 24 dispute the characterisation set out in my skeleton, 25 which was in virtually identical terms in my summary 165 1 grounds and detailed grounds. 2 The Secretary of State's skeleton is consistent with 3 it and, indeed, Mr Facenna for HAL, a few moments ago 4 appeared to endorse that characterisation. 5 The uncontested evidence before the court 6 demonstrates that the opportunity that the terms of the 7 NPS as adopted provides for bodies other than HAL to 8 make their case at the DCO stage, to develop and/or 9 operate elements of the scheme, particularly terminal 10 infrastructure, the evidence demonstrates that 11 opportunity, firstly, is genuine and will be considered 12 by the Secretary of State with an open mind. It is not 13 theoretical or a sham. 14 Can I ask the court to turn up supplementary bundle 15 12. When you have that bundle it is tab 20. The 16 original text of my note said 30. I hope you have my 17 manuscript correction to tab 20. 18 LORD JUSTICE HICKINBOTTOM: Yes. 19 MR BANNER: If you go to the cover page, at page 537, you 20 will see this is a note or memo from the Secretary of 21 State to the Cabinet subcommittee dealing with the 22 airports NPS. The date is of some significance, 5 June, 23 because that is when the ANPS was laid before 24 Parliament. It subsequently being designated on 25 26 June. 166 1 Can I now ask the court to go to pages 572 and 573, 2 which are a double page spread. This is what the 3 Secretary of State told its Cabinet colleagues. 132, 4 bottom left-hand page: 5 "Separate to the consultation process, the Arora 6 Group, land owner and hotel operator around Heathrow, 7 has set out alternative terminal proposals and has 8 proposed the competition be introduced for the design, 9 development and operation of a new terminal. 10 "The Heathrow airline community welcomed Arora 11 Group's proposals and the CA has set out its expectation 12 for HAL to engage in good faith with airlines and third 13 parties as proposals developed and, if necessary, will 14 make this a condition of HAL's operating licence." 15 Skipping along then to 133: 16 "Whilst it would be highly challenging for another 17 developer to come forward (I have no quarrel with 18 that)." 19 Nothing in this matter is easy. That is why the 20 Arora Group has an army of professionals working on this 21 extremely hard: 22 "Given the land ownership and extent of cooperation 23 that will be needed with HAL, the proposed airports NPS 24 does not preclude third party applicants from doing so. 25 Any such application would be considered properly and 167 1 with an open mind, based on the evidence presented." 2 So, this -- at the time confidential -- memo from 3 the Secretary of State to his colleagues on the day the 4 NPS went before Parliament, indicates that what he said, 5 he meant. 6 MR JUSTICE HOLGATE: Can I just ask one question? This is 7 in the context of the DCO process, which is going to be 8 determined in the light of the ANPR and that has said 9 which scheme is going to be -- I don't see how this 10 relates to ground 1. 11 MR BANNER: My Lord, that is what I tried to get across in 12 paragraphs 1 and 2. 13 The final terms of the NPS are the consequence of 14 the process which Hub complained about. Because the 15 request for guarantee didn't happen in the abstract. Of 16 itself, it had no legal consequence. It wasn't even 17 a public law decision. It is not challenged. What is 18 challenged is the NPS. That is the end product, the 19 result of the process that Hub complained about, within 20 which the request was made. 21 So, when the court comes to judge the consequence of 22 the -- or consequences of the alleged state measure and 23 asks itself: does that state measure have potential or 24 actual anti-competitive consequences? 25 I suggest to the court that this end result of that 168 1 process is at least relevant. You can decide whether it 2 is determined, but I don't need to go that far. It is 3 plainly there. 4 I suggest to the court there is actually an element 5 of realism in Hub's claim, in that it founds its 6 challenge not just on ground 1, as it happens, it founds 7 its challenge to the NPS without any reference to what 8 the NPS says. It is what it says that has the legal 9 effect under the planning right and consequences there. 10 So, that is the first point. 11 I should add for the sake of the avoidance of doubt, 12 the last sentence: 13 "The department considers that HAL is currently the 14 only credible scheme promoter who could deliver the 15 entire scheme alone." 16 That is no problem for me because my client does not 17 wish to deliver the entire scheme. The "however" is 18 plainly contrasting with previous sentences, which are 19 encouraging competition. 20 That is the first point, 7A. 7B. The opportunity 21 the NPS provides for competitors to come forward at the 22 DCO stage has been met with enthusiasm by the airline 23 community. You see that in paragraph 132 of the memo. 24 Mr Arora's witness statement says the same thing at 25 paragraph 17. 169 1 Thirdly, the opportunity has generated market 2 interest by a respective terminal operator developer, 3 who wishes to take up the opportunity NPS provides. 4 That is my client. The Arora Group. There, can I ask 5 the court -- or given the time, I won't take you to 7 to 6 14, but can I ask the court to take up paragraphs 31 to 7 36 of Mr Arora's statement. That is bundle 5. 8 I may respectfully ask the court in its own time to 9 look at 7 to 14 to refresh your memory of what the Arora 10 Group's proposal is. 11 So, bundle 5, tab 10, just to make good my 12 proposition that this is a serious market interest in 13 the opportunity presented by the NPS. Paragraph 31 14 through to 36, and pages 413 to 414. Would the court 15 mind briefly reading those paragraphs, 31 to 36? 16 (Pause) 17 LORD JUSTICE HICKINBOTTOM: Yes. 18 MR BANNER: The story continues, page 3 of my skeleton, 19 paragraph 7, and Mr Arora promised at the end of his 20 witness statement to update the court if anything 21 further happened. You find that update in the second 22 sentence of paragraph 7 of my skeleton, and footnote 23 there too: 24 "Since the date of the witness statement, further 25 progress includes submission of an Environmental Impact 170 1 Assessment, scope of the report and several meetings of 2 the planning inspectorate and the national significant 3 infrastructure project entry on the website of the 4 planning inspectorate. 5 The fourth point in relation to the reaction to the 6 opportunity presented by the NPS, point (d) on page 2, 7 page 7 of my speaking note, has been taken by the CAA. 8 Mr Arora's witness statement, which again I ask the 9 court to read in its own time, sets that out. 10 Pulling those strands of paragraph 7 together and 11 turning to paragraph 8 I suggest to the court that it 12 follows from those four points that the opportunity 13 provided by the final terms of the NPS for bodies other 14 than HAL to seek a DCO for significant elements of the 15 northwest runway scheme, particularly terminal 16 infrastructure is real and not illusory. That is the 17 critical point that you get from those four 18 subparagraphs at 7. It is at the DCO stage of course 19 that the merits of such proposals will be considered. 20 It is not obviously for the court to comment on those 21 merits. 22 This opportunity is a consequence of the adoption of 23 the NPS in its final terms which, as I have said, is in 24 turn, the end result of the process about which Hub 25 complained, and in which context the alleged State 171 1 measure happened. 2 I suggest it is through this prism that the court 3 should consider whether the State measure complained 4 about has the potential or actual anti-competitive 5 consequence. 6 I would like to test it briefly, if I may, by 7 reference to the two of the cases that Mr O'Donoghue 8 referred to in his speaking note. If you have the 9 speaking note to hand it may help to get it up on this 10 part. 11 Paragraph 5.5.3.3 on page 27 is the first stop. The 12 proposition that my learned friend appears to seek to 13 draw from the Ambulanz Glockner case is whether HAL is 14 able to object to or conclude new competition from 15 independent operators. What I suggest is that that 16 question should be considered against the provisions of 17 the NPS and the NPS doesn't have that consequence. It 18 expressly allows independent operators to make the case 19 at the DCO stage. It doesn't give HAL a veto on any DCO 20 information by any party. 21 The second illustration of the point is at page 29, 22 it is the one double page on, the Connect Austria case 23 from which Hub draw the proposition that there should be 24 equality of opportunity between economic operators. 25 In that context I say the NPS promotes equality of 172 1 opportunity. Its terms are equal to all potential 2 applicants for a DCO in relation to any elements of the 3 northwest runway scheme. Its terms do not preclude 4 anyone from making such an application or impose 5 different or more demanding policy tests on independent 6 operators. 7 I interject there. Of course it would be open to 8 Hub to make an application. Obviously they are not 9 going to stand very much chance of succeeding getting 10 a DCO for the ENR scheme. There is absolutely nothing 11 to stop them recasting their business model applying, 12 for example, for a DCO for the terminal. This does not 13 preclude Hub in principle from entering into the market. 14 Finally, my Lords, I turn to the new and unpleaded 15 points made in relation to Arora at the very back of my 16 learned friend's speaking note. He didn't actually read 17 it out, he said he was going to save it for reply but 18 this is my only chance of responding to them. 19 The first point my learned friend makes at 20 paragraph 5.37 is that what happens at the DCO is 21 irrelevant. I think I need say no more than that 22 because my Lord Mr Justice Holgate asked the same 23 question and I provided my answer so I will take, if I 24 may, paragraph 11 of my response as read. 25 The second point Mr O'Donoghue makes at paragraphs 173 1 38 to 39 is that the prospect of an independent operator 2 of one or more elements of the northwest runway scheme 3 is, he says, at most a remote, theoretical possibility. 4 With great respect to him, I suggest to the court 5 that is a wholly speculative and unevidenced assertion. 6 It is contrary to the evidence I have summarised at 7 paragraph 7 that I took the court through a moment ago. 8 It is not gain said in any evidence submitted by anyone, 9 let alone Hub, and it is wholly inappropriate, 10 I suggest, for the claimant to comment on the prospects 11 of success of HAL's or the Arora Group's future DCO 12 applications. The critical point is the NPS allowed 13 that future debate to happen on a level playing field. 14 What is expressed to be the final point but isn't 15 actually the final point at 5.40 and 5.41 and 42 is that 16 it is said Arora only proposed to develop part of the 17 northwest runway scheme so won't really introduce very 18 much competition. That appears to be in essence the 19 point. 20 As to this I say the following. Firstly, the 21 terminal infrastructure will be a very significant 22 component. The terminal is the principal experience 23 passengers have of an airport and terminals have 24 significant consequences, or the arrangement of 25 terminals I should say, have significant consequences 174 1 both for passenger costs and airline costs. There is 2 evidence of that in Mr Arora's witness statement. As he 3 says introducing competitions, in relation to terminals 4 at Heathrow have substantial potential benefits both in 5 terms of user experience and cost. 6 Secondly, it is important to note that the potential 7 for competition in this respect is not simply within the 8 confines of the northwest runway scheme. It is not 9 competition within the delivery of the scheme. It would 10 introduce a terminal that would compete with the 11 existing HAL terminals at Heathrow, so it would 12 introduce Heathrow-wide competition not NWR-specific 13 competition. 14 Therefore, I suggest, this is paragraph (c) that the 15 potential introduction of the competition that the NPS 16 allows for subject to the case being made for any 17 particular proposal at the DCO stage is meaningful and 18 not peripheral as Hub suggests. 19 Finally, this is to be contrasted with Hub's own 20 so-called scheme which wouldn't introduce any meaningful 21 competition at Heathrow. You have already heard from 22 Mr Palmer and either Mr Humphries or Mr Facenna, I can't 23 remember which, that what Hub's proposal involves is HAL 24 paying them an awful lot of money to carry on acting as 25 the sole operator but using Hub's idea. So that doesn't 175 1 introduce competition in real terms at all. Therefore, 2 the NPS in its final terms I suggest allows for 3 a significantly more meaningful competition than Hub's 4 own scheme would have done. 5 Finally, paragraph 5.43, coming after the final 6 comment makes a further point, in essence saying if you 7 sought a guarantee from us why didn't you seek one from 8 Arora? I'd suggest on analysis it is a jury point. We 9 will see how it elaborated, if at all, in a moment. 10 Two points I say, in any event. Firstly, the Arora 11 Group accept that deliverability will be relevant at the 12 DCO stage. It would be surprising if it was not. It 13 will be relevant to HAL's application as well. 14 Secondly, there is of course a very big difference 15 between what the Arora Group proposes and what Hub 16 proposes. I alluded it to a moment ago. We propose to 17 deliver our scheme ourselves. They do not. It is 18 a pretty big distinction in terms of the context of the 19 guarantee because Hub have always been reliant on 20 somebody else delivering their scheme. We are not. 21 My Lords, unless I can assist you further, I think 22 I have just about achieved my half past goal. 23 LORD JUSTICE HICKINBOTTOM: Thank you very much, Mr Banner. 24 Shall we have the speaking note on Article IX. 25 MR KINGSTON: It is coming now. (Handed) 176 1 LORD JUSTICE HICKINBOTTOM: We'll break for ten minutes. 2 (3.32 pm) 3 (A short break) 4 (3.50 pm) 5 Submissions by MR KINGSTON 6 LORD JUSTICE HICKINBOTTOM: Mr Kingston, we have read that. 7 I don't think that any of us have anything that we want 8 to develop in that. Thank you very much. 9 MR KINGSTON: Thank you. 10 Then I have repented the thought that I would not 11 give you a speaking note for the reply for the very 12 simple reason that I think it will take me less time to 13 read it out than it will if I effectively extemporise. 14 LORD JUSTICE HICKINBOTTOM: Yes. 15 MR KINGSTON: And that will relieve it, I am afraid, of any 16 excitement of any kind at all or anything approaching 17 advocacy in an oral sense but I hope it will assist the 18 court. 19 (Handed) 20 Perhaps I could say to my learned friends who must 21 be absolutely aggrieved and upset not to receive it that 22 I simply don't have enough copies because I was not 23 expecting to hand it in. It will be sent by email. 24 Some copies will be available. My apologies. 25 LORD JUSTICE HICKINBOTTOM: They will just have to listen. 177 1 MR KINGSTON: They will have to listen. I won't say that 2 that would make a change because that would be unkind. 3 But, my Lords, let me start then, perhaps by 4 explaining first of all that I shall do the first part 5 of this note to the end effectively of the factual 6 background, stop where I am going to deal with ground 4 7 and 5 and then Mr O'Donoghue will deal with ground 1. 8 I shall come back, and to the extent there is any time 9 left and any patience in the court, I'll read out what 10 I have said about grounds 4 and 5. 11 LORD JUSTICE HICKINBOTTOM: Thank you very much. 12 MR KINGSTON: Thank you very much indeed. 13 Then the starting point. What was agreed prior 14 to August 2016. This is about the Statement of 15 Principles. 16 The claimant has already, in our speaking note 17 number 1, provided all of the references which make it 18 clear beyond doubt that prior to the all change, as we 19 have called it, the defendant made it clear that HAL's 20 willingness or otherwise to endorse the claimant scheme 21 before the defendant took his preference decision was 22 off the table as a consideration. That is the 23 preference decision would not be affected by it. 24 We say for obvious and rational reasons it would be 25 a leg up for HAL and a hurdle for the claimant that it 178 1 could never surmount. Instead these matters would be 2 dealt with post-selection. 3 The starting point is that this common position was 4 recorded in the Statement of Principles which made 5 clear, paragraph 3.4 and elsewhere, that the claimant 6 had committed to 30 days best endeavours post-selection 7 to secure HAL's agreement and that in the meantime the 8 claimant had to fully commit to funding its scheme to 9 progression. 10 For a good deal of yesterday afternoon my learned 11 friend tried to row back from the clear position as 12 recorded in the Statement of Principles in various 13 respects. As it happened, this turned out to be 14 a largely pointless exercise since it was conceded after 15 some probing from Lord Justice Hickinbottom that the 16 Statement of Principles envisaged an agreement being 17 reached post-selection with a 30 day obligation kicking 18 in after that on the assumption the ENR designation was 19 made. 20 Accordingly, we say, the claimant is right to say 21 that this issue was put to bed before the new Secretary 22 of State came on board and that his raising the 23 guarantee for the first time on 17 August 2016 was at 24 odds with the carefully negotiated position set out in 25 the final Statement of Principles. Hence, why I said 179 1 correctly, I submit, all change. 2 The short answer, therefore to the defendant's 3 speaking note 1 undergrounds 1 and 2 in the subheading 4 "The facts relating to the guarantee request", which 5 took the court to references in the material in an 6 attempt to establish that at all material times the 7 defendant noted that gave rise to less certainty and 8 clarity about delivery is that this is merely, if I may 9 say so, a somewhat selective treatment of the 10 negotiations leading up to the Statement of Principles 11 and that what the defendant needs to grapple with is the 12 fact that the governing document and final settled 13 position was the Statement of Principles which, as we 14 have noted, agreed a post-selection agreement and no 15 obligations in this regard pre-selection. 16 A number of immediate consequences flow from this. 17 In the first place the defendant introducing the 18 guarantee posts the Statement of Principles agreement 19 was a curious and unwarranted on the evidence departure 20 from these principles. 21 Secondly, the upshot by the time the Statement of 22 Principles was finalised in the summer of 2016 was that 23 the process adopted by the defendant was one that gave 24 the claimant a clear understanding and expectation that 25 HAL's willingness or otherwise to implement the claimant 180 1 scheme would not be a material consideration feeding 2 into the defendant's preference decision. 3 Thirdly, the references to which the defendant took 4 the court go to another point completely. They 5 establish the uncontroversial point that the defendant 6 wanted to know if he selected the claimant's scheme the 7 commercial arrangements under which HAL would implement 8 the claimant's scheme and how long it would take to 9 negotiate these. There are references which all go to 10 consideration of the post preference scenario whereas 11 the Statement of Principles made clear that the claimant 12 had no pre-selection obligations in this regard, 13 recognising that to do so would discriminate against the 14 claimant as the only non-operator left in the 15 competition. 16 I turn then to the introduction and impact of the 17 guarantee. 18 The fact of the guarantee request on 17 August 2016 19 is common ground. The claimant says that after much 20 obfuscation from the defendant the defendant has now 21 conceded that the core of his case turns on a purely 22 factual point as to whether the guarantee was a reason 23 for the defendant's decision to designate the ANPS. 24 First, we have the defendant's section 5(7) argument 25 with regard to the reasons not given in the ANPS. They 181 1 cannot be reasons. We now understand, I think, the 2 reason why paragraph 6 of the skeleton referred to 3 formal reasons, but the discussion there came out that 4 it was a question of fact to be determined by the court, 5 not simply by reference to the contents of the ANPS 6 itself. 7 There is now an extract from yesterday's transcript 8 which is an exchange between my learned friend, 9 Mr Palmer and Mr Justice Holgate. Would your Lordships 10 allow me simply to note that this is from page 76, line 11 25 to page 77, line 16. And it concludes with Mr Palmer 12 conceding that it is a factual question, and my Lords 13 saying it is a factual question, it is not determined by 14 the content of the NPS. We agree. 15 Secondly, and similarly, the claimant argued that 16 the Cabinet subcommittee formed a view on the planning 17 merits of the NWR before the planning guarantee was 18 taken into account making the -- the defendants argued 19 not the claimant, making the guarantee issue in some way 20 academic. But this again was accepted by the defendant 21 to be a factual issue. I give the references, Day 2, 22 page 146, lines 3 to 5, 20 to 25, page 147, lines 1 to 23 20. 24 Both the reasons argument and the planning merits 25 decided first argument come back to the same essential 182 1 factual issue. That is, was the guarantee a reason for 2 not selecting the ENR and selecting the NWR? 3 The answer to that question we say is undoubtedly 4 yes. We start with the 17 August 2016, the defendant 5 specifically asking the claimant to procure a written 6 commitment from HAL that it would implement the claimant 7 scheme if selected as the preferred option. That is: 8 get me a commitment pre my decision on the preference. 9 As we have now canvassed at length, he did that 10 despite the absence of any advice from his officials 11 that this needed to be raised and despite being told he 12 should be in listening mode. 13 Secondly, the existence or otherwise of such 14 a commitment from HAL at that stage would serve no 15 purpose for the defendant unless he wanted to factor its 16 existence or nonexistence into his decision on 17 preference. He claims at that stage he had an open 18 mind. 19 Thirdly, the claimant interpreted the request as one 20 for a written guarantee and immediately approached HAL. 21 HAL considered the matter sufficiently important for it 22 to be raised at board level. It too had been told about 23 the guarantee. Why, we ask rhetorically of course, 24 would HAL raise the matter to board level if it was 25 totally unimportant? 183 1 Fourthly, the claimant wrote to the defendant on 2 7 October 2016 -- the letter is in supplementary bundle 3 16 at tab 21 -- making a number of points among them the 4 following: he described the guarantee as written 5 confirmation from HAL as to whether they would implement 6 our scheme. He indicated the intention rapidly to 7 transfer the intellectual property to HAL. He reported 8 on meetings with HAL in August and September. Noted the 9 lack of HAL's response in terms of shareholders sitting 10 on the issue. Noted the regulated asset base perverse 11 incentive, the area charge rises from HAL scheme but not 12 under Hub's. 13 So the claimant told the defendant directly about 14 reasons why HAL would not give a guarantee. He said 15 that if the definitive guarantee was required pre the 16 cabinet subcommittee it is now down to the government to 17 obtain one and he noted the Hub's commitment to fund the 18 scheme following selection consistent with the Statement 19 of Principles at paragraph 3.8 so the guarantee did not 20 have to be pre-selection. It is notable the defendant 21 did not write back and seek to disabuse the claimant of 22 its acting on the guarantee in this manner. 23 25 October 2016 paper for the subcommittee was 24 written by the DfT and made clear that deliverability to 25 include the question of HAL's reaction post preference 184 1 was not a factor that could be used to mark the scheme 2 down. 3 This, I think, is one of only two points to which 4 I am going to ask your Lordships to take out a document 5 as I go through and for this you will need volume 16, 6 tab 16. The document will be familiar I think because 7 it is the report that you have been taken to before. 8 You have been taken previously to paragraph 99, the 9 content of which has been read to you. It will be 10 familiar. I wasn't proposing to read it again. 11 I simply invite you to note that it does not support the 12 proposition that something more is needed in order to 13 provide a reasonable assurance that if the ENR were 14 selected some form of guarantee or assurance was needed. 15 The last sentence needs to be noted also in the 16 context of the issue which has arisen with regard to 17 capacity, the last sentence: 18 "Notwithstanding this [that is the matter that has 19 gone before] the department does not believe this would 20 delay the delivery of new runway capacity by 2030." 21 Your Lordships will recollect from paragraph 11.51 22 of the Airports Commission report the objective of the 23 exercise was to deliver the new capacity by 2030. So 24 quite clear advice here, there is nothing to be 25 concerned about in terms of delivery, hub or other 185 1 schemes in terms of meeting that objective. 2 The other paragraph which I invite your Lordships to 3 look at is at page 174, and we might start just at the 4 previous page, 173, and see that the heading is 5 "Deliverability and risks". If you will forgive the 6 colloquialism, this is on the money from the point of 7 view of what's going to be delivered, where are the 8 risks and the like. 9 Paragraph 64 notes in the middle of the paragraph: 10 "Delivery dates for the Heathrow schemes are 11 therefore likely to be more risky than the Gatwick 12 extended northern runway scheme. The extended northern 13 runway scheme faces further uncertainty given that it is 14 an international untested scheme and its owner is not an 15 airport operator. Discuss later in this paper." 16 That of course is the 99 reference. 17 If your Lordships then go to 66 on page 174 this 18 contains the following, which is important: 19 "Neither the Commission's work, the department's 20 further analysis, nor engagement with developers have 21 provided evidence that this means that the 2030 22 requirement for new capacity [note please the reference 23 to capacity] is unachievable for any of the schemes. 24 Economic analysis concludes that provided the schemes 25 are delivered by 2030 the economic cases will not be 186 1 significantly affected if the promoters do not achieve 2 the dates they are claiming given the 60-year appraisal 3 period." 4 You will recollect the claim date from Hub's point 5 of view was 2026 but the objective date was 2030. 6 Hence, the difference between paragraphs 11.42 of the 7 Commission's report and 11.51 to 1154, a point 8 I referred you to before. 9 So there was the advice that was being given to the 10 Secretary of State and to the cabinet subcommittee. 11 I return to the speaking note at paragraph 2.66 on 12 page 8. 13 As the defendant's speaking note for the 14 subcommittee meeting shows, that was not, that is what 15 you have just seen at paragraph 66 and 99, that was not 16 the defendant's position. He did not follow the line in 17 the advice that was given to him on deliverability or 18 capacity. He clearly viewed and treated HAL's 19 unwillingness to give an up-front guarantee as something 20 that undermined the deliverability credentials. The 21 reference is one your Lordships have had before and you 22 will note he said: 23 "I also have no certainty. The airport will deliver 24 this scheme if we choose it." 25 Clearly not a material consideration to which he had 187 1 regard in not choosing the ENR. That is also why it 2 does not work we say, for the defendant to say we should 3 not dwell, and I am going to show your Lordships this 4 paragraph in a moment, 5.99(e) because it merely 5 reflects paragraph 99 of the paper for the subcommittee. 6 What was said by the defendant at the subcommittee -- 7 this is the only other document I am going to take you 8 to -- "was deliverability is the biggest issue". And 9 that word "biggest" is, as it were, the thread, isn't 10 it, that runs through the defendant's comments from the 11 cabinet subcommittee, Parliament in October on 12 25 October, through to the Select Committee 13 in February 2018 and even post-decision 14 in September 2018, biggest it was, and for him that 15 meant what it said. 16 This is the second document which I was going to 17 invite your Lordships to look at. For this you will 18 need core bundle volume 4, tab 1, first of all and 19 within tab 1 page 228, paragraph 599. Ms Low tells us 20 that: 21 "At the 2016 subcommittee on 25 October 2016, the 22 Secretary of State said in regard to the ENR scheme ..." 23 I won't read it out because your Lordships can read 24 it, but you see the biggest issue is there at (d). 25 Immediately followed by the challenge to provide the 188 1 written confirmation, no such confirmation had been 2 received. 3 And as a separate issue, riskiness is identified at 4 (f). 5 Paragraph 600: 6 "In summary, the Secretary of State set out a number 7 of reasons why the NWR scheme was preferred over the ENR 8 scheme during the October 2016 subcommittee. He did so 9 by providing a high level summary of the matters which 10 had been set out in more detail in the subcommittee 11 paper." 12 I remark again, he was not faithful to the paper. 13 He followed his own line. The biggest issue 14 deliverability could not on any view emerge from the 15 advice that he had received. It was in his mind though 16 the biggest issue. 17 What we have is the reasons why the Secretary of 18 State said NWR was preferred over ENR. Paragraph 600 19 tells us that those were the reasons and in order to be 20 sure that this is a complete record, my Lord, 21 Mr Justice Holgate will remember we had a short and more 22 or less entertaining discussion about disclosure at the 23 pre-trial stage. One result was Ms Low's third witness 24 statement which is at tab 5 of the same bundle. If you 25 go to the second page, please, of that witness statement 189 1 at 452, paragraph 3 and 4: 2 "The minutes of the economy and Industrial Strategy 3 airport subcommittee meeting 25 October were before me 4 when drafting my first witness statement and I confirm 5 that the contents of paragraph 599 of my first statement 6 are a complete and accurate record of the discussions 7 about the extended northern runway scheme as recorded in 8 the minutes of that meeting. I understand the question 9 of my attendance was raised at the PTR and I can confirm 10 that I observed the meeting. I wrote my first witness 11 statement based on the minutes of that meeting and 12 satisfied the minutes accurately record both the content 13 and extent of the discussions that were in the ENR." 14 Your Lordships therefore have it as a matter of 15 record that the matters which are set out in 16 paragraph 599 of Ms Low's first witness statement are 17 the reasons which were used by the Secretary of State, 18 presented to the cabinet subcommittee as to why the NWR 19 was preferred to the ENR and you should note that it 20 embraces all matters (a) to (f). There is not even 21 a hint that there was somehow a break in the discussion. 22 Let's just think about the following matters: are we 23 going to select the NWR on the basis of those or the 24 ENR? A decision one way or another and, oh by the way 25 I haven't had, it is perfectly obvious and on the basis 190 1 of Ms Low's witness statements we say beyond doubt that 2 both the Secretary of State and the cabinet considered 3 all of those matters in reaching a decision. 4 My Lords, that, as I said, that is the only document 5 I shall trouble you with. The rest we shall do by way 6 of references. 7 Paragraph 2.67, pages 8 and 9. I have effectively 8 taken your Lordships through just a moment ago in 9 looking at the statement and 2,68, as we have noted, 10 paragraph 600 gives us the reasons. 11 At 2.69 our submission is that the issue of the 12 guarantee was operating on the mind of the defendant, 13 the decision-maker at the time of the preference 14 decision, and indeed that was accepted yesterday on more 15 than one occasion. So was the issue of the guarantee 16 operating on the mind of the decision-maker accepted on 17 more than one occasion? And here we have some more 18 transcript from yesterday, page 90, lines 11 to 22. 19 Mr Palmer, my Lords, I think I could forebear from 20 reading out the transcript unless your Lordships would 21 like me to read it through, but you can see the 22 substance is from paragraph 2,6.10 what we have 23 emphasised, Mr Palmer saying: 24 "Of course it is right that the Secretary of State, 25 in particular, was concerned and told the cabinet 191 1 subcommittee that he was concerned that if it was chosen 2 there was a lack of certainty as to whether it would 3 come forward." 4 There was then an exchange prompted by questions 5 from both my Lords Mr Justice Holgate and 6 Mr Justice Smith, the substance of which you can see set 7 out. The emphasis is of course ours. 8 But the upshot of those exchanges is, we submit, 9 clear. It was being accepted that this was a matter 10 that is the guarantee was a matter which was in the 11 defendant's mind and operating on it at the time of the 12 preference decision. So, I invite your Lordships to 13 consider those extracts from the transcript. 14 Then, paragraph 2.7, this was said on more than one 15 occasion, that is that the guarantee was also part of 16 the planning merits. I give you from page 154, lines 5 17 to 13, my learned friend making it clear there that this 18 was part of the merits, page 157, lines 9 to 17. 19 Mr Palmer saying: 20 "Deliverability is obviously part of the planning 21 merits which need to be taken into account as part of 22 the overall planning judgment." 23 Pages 162 to 163, an exchange between my Lord, 24 Mr Justice Holgate, and Mr Palmer, which concludes -- 25 and obviously your Lordships must read the whole. If 192 1 you will forgive me, I won't read it all out, but the 2 last paragraph: 3 "As I will show you [said Mr Palmer] Hub were 4 limited in the extent to which they could provide any 5 assurances as to what could be delivered and what was 6 promised. Now, that was an inevitable feature. It is 7 not a point taken against them. It is not that they 8 were treated unequally for that. It is just when you 9 look at the merits of their scheme, that is a feature of 10 it." 11 That last submission we say is curious and 12 completely confusing. The Commission, chapters 11 and 13 12, conclude there was no issue on the deliverability of 14 the ENR, but the defendant is saying the ENR scheme was 15 inherently less meritorious because we are not an owner 16 operator. 17 That, of course, is precisely what the Statement of 18 Principles was designed to guard against. 19 May I just ask you to add a reference which I won't 20 go through, but from today's transcript, page 25, lines 21 14 to 16, and pages 25 to 28. That is of today's 22 transcript. Again -- 23 The top of my -- 24 MR JUSTICE HOLGATE: Sorry to interrupt, sometimes when the 25 final transcript comes out the pagination is different, 193 1 its formatting and so on. Can you just give us a clue 2 as to what the topic is? 3 MR KINGSTON: I will ask someone who looked it up to give me 4 the a clue and then I will pass it on. 5 MR JUSTICE HOLGATE: Thank you. 6 MR KINGSTON: Then, page 164, lines 11 to 21, your Lordship 7 will see the whole of what Mr Palmer was saying. The 8 part we draw particular attention to: 9 "That means your scheme is assessed on the planning 10 merits, on the basis which -- you put it forward on the 11 basis of the Statement of Principles." 12 But we note again, no issue taken on deliverability. 13 As set out in the Statement of Principles, that forms no 14 part of anyone's reasoning anywhere. 15 So, despite these clear concessions, what the 16 defendant then attempted to do is to get round this by 17 suggesting that Ms Low's paragraph, 591, is just what 18 the Secretary of State said to the Cabinet subcommittee 19 meeting. That should be ignored, because the decision 20 to prefer the NWR was taken by government, not the 21 Secretary of State. There are two answers to that. 22 First and foremost, the relevant decision-maker here 23 is the defendant, section 5 of the Act. It is his 24 decision to designate, which sets out the preferred 25 scheme at the preferred site. 194 1 That is the NWR, which of course is being 2 challenged. 3 Secondly, it is factually inaccurate and entirely 4 ignores what we have taken your Lordships to in Ms Low's 5 third witness statement, at paragraph 3. Then what 6 follows in my note is what I have taken you to already 7 and, as we emphasised at the end of that paragraph, so 8 paragraph 599, records the decision and the reasons in 9 a complete manner. It doesn't simply record the 10 Secretary of State's view. 11 I will come back with the reference in a moment 12 because I am not sure I quite follow the note. 13 Tying that together, if Mr Palmer is prepared to 14 concede -- as he already has on the basis of Ms Low's 15 paragraph 599 -- that the ENR was a concern for the 16 defendant, and if Ms Low's evidence is right, that 17 paragraph 599 also represents an accurate and complete 18 record of what was discussed at the meeting, that 19 logically means that Mr Palmer's concession extends to 20 a concession that a reason for the Cabinet subcommittee 21 decision to prefer the ENR included the concern about 22 the lack of the guarantee. 23 But, in any event, the position is put beyond doubt 24 by what else happened on that very same day. 25 A ministerial statement prepared for the defendant to 195 1 read in Parliament -- that is at 6/25/315 -- does not 2 mention the absence of the guarantee. 3 However, the claimant can point to non-parliamentary 4 materials, namely the speaking note and Ms Low's 5 admissions in her statement, to prove that the reasons 6 that the defendant gave Parliament for his decision in 7 his ministerial statement are not the complete reasons 8 that underpinned his decision. 9 When answering questions in Parliament away from the 10 scripted statement, the defendant gives reasons for his 11 decision and these reasons are consistent with the 12 subcommittee discussion as disclosed in Ms Low's witness 13 statement and, indeed, with his speaking note. He 14 confirms unequivocally that HAL's failure to provide the 15 guarantee is one of two prime reasons, or strong 16 reasons, why he made the preference decision that he 17 did. What he told Parliament is entirely consistent 18 with what he told the subcommittee. 19 The context for the defendant's answers in 20 Parliament is what he had been saying since 17 August. 21 It was not, with respect, an off the cuff remark taken 22 out of context from the cut and thrust of parliamentary 23 debate. It was wholly consistent with why the defendant 24 had sought the guarantee in August 2016, what he told 25 the subcommittee -- that is that everything that he had 196 1 said before he made his remarks to Parliament -- and it 2 was consistent with everything he said afterwards. It 3 is also evidently what the defendant remembered as being 4 the reasons why the ENR was not selected from the 5 meeting he had attended earlier that morning. 6 In terms of the afterwards, after having a year to 7 reflect on what he said to Parliament he repeated to the 8 Select Committee the very language he had used to the 9 subcommittee: the biggest issue for not picking the ENR 10 was the lack of the guarantee. 11 A fairly fundamental problem, and no doubt that he 12 wanted nothing less than a guarantee because that is the 13 language that he used. 14 That is the reference at supplementary volume 17, 15 tab 10/2015. 16 My Lords, this was not some casual aside which is 17 being taken out of context. The defendant wrote to the 18 committee afterwards for the express purpose of making 19 sure that his evidence to the committee was unambiguous 20 and clear, and he did not take the opportunity to say 21 that what I set out just a moment ago was incorrect. 22 Supplementary bundle 17, tab 12, page 247. 23 Even post-designation when being prompted about the 24 reasons for requesting the guarantee, supplementary 25 bundle 18, tab 16 at 213, he consistently used the same 197 1 language, "the big factor", and "the biggest reason" for 2 him not reconsidering the recommendations of the 3 Airports Commission -- which of course was his duty, to 4 look again -- was the absence of the guarantee. 5 The bit in parenthesis, my Lords, you need to strike 6 out because Mr Palmer did deal with the 5 September 2018 7 note today. I make no comment on the way in which it 8 was dealt with, other than to say that the illogicality 9 is plain and there was no effective answer to it. 10 So, the defendant cannot reasonably argue that the 11 words are ambiguous, and he's driven, then, to make 12 pleas about context. 13 But the context, far from pulling the defendant out 14 of the river, drowns him. All the surrounding 15 circumstances and statements, around the statements that 16 are said to be subject to parliamentary privilege all 17 cry out to the same effect. This was undoubtedly 18 a reason the defendant used to justify his rejection of 19 the ENR. 20 We then deal with what we say is the defendant's 21 concession with regard to that point. 22 Quite apart from the facts being dead against the 23 defendant on this point, the defendant has conceded that 24 the claimant is correct that the guarantee was a reason. 25 That we say is precisely what Ms Low's first witness 198 1 statement at paragraph 599 and 600 -- and in combination 2 with her third witness statement -- say, but the matter 3 is beyond argument since we say the defendant conceded 4 the point yesterday. 5 Other points taken, the defendant prays in aid the 6 reasons in the ANPS or in the ministerial statement. 7 The argument, however, becomes both circular and 8 self-serving. The court is asked to ignore the very 9 evidence that shows that the reasons in the ANPS and the 10 ministerial statement are not the only reasons for the 11 defendant's decision. It is a naked appeal to 12 formalism, an invitation to the court to set aside that 13 which lies at the very heart of judicial review, namely 14 the court's duty to look beyond what the executive says 15 in formal documentation as to its reasons for doing 16 something and examine critically what the evidence shows 17 for its reasons for doing something. 18 In Toussaint, authorities bundle 3, at tab 50, we 19 draw your attention to paragraphs 19 to 23. I won't go 20 to it now, for obvious reasons. My Lords, I invite you 21 to read it. 22 It is an edifying recitation of circumstances that 23 have their parallel here. 24 The minister sought to hide behind the formal 25 statement he gave to Parliament. He read out in that 199 1 case the Gazette entry, but then said more about the 2 reason for the compulsory purchase. Saying the court 3 must not look at what he said when he departed from the 4 text prepared for him by his civil servants and his 5 lawyers. The court would have no truck with it. See 6 paragraph 23. We invite the court to take the same 7 approach here, where the evidence of the unlawful 8 reason, its motivation for the defendant's action and 9 which tainted the defendant's decision, is much more 10 vocal and widespread than it was in Toussaint. 11 In summary, if the question is one of fact: did he 12 have regard to the guarantee in making the preference 13 decision? The claimant submitted it has discharged the 14 evidential burden, however high the bar is set. 15 My Lords, I will come back to grounds 4 and 5 when 16 Mr O'Donoghue has made his submissions. 17 Submissions by MR O'DONOGHUE 18 LORD JUSTICE HICKINBOTTOM: Thank you very much. 19 MR O'DONOGHUE: My Lords, I feel contrary not having a note 20 to hand up, but I don't. I will be as quick as humanly 21 possible, but there is a certain amount I need to cover. 22 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 23 MR O'DONOGHUE: My Lords, in his skeleton argument the 24 defendant said that the claimant's claim was legal and 25 factual nonsense. That is paragraph 6. We note this 200 1 wasn't a claim repeated on his feet by Mr Palmer. 2 As to the facts, Mr Kingston has comprehensively set 3 out why the defendant has conceded the correctness of 4 the factual premise of the claim. The guarantee was 5 a reason. 6 As to the law, I will deal briefly with some of the 7 points covered, but in my submission one does not need 8 to be too Cartesian about this point. 9 The reason the defendant has resisted so heavily on 10 the guarantee being a reason is that he sees that if it 11 was a reason that is devastating for his legal case. It 12 is devastating because one does not need a PhD in 13 competition law or metaphysics to see that one 14 competitor being potentially able to veto another 15 competitor's bid is not competition on the merits, does 16 not involve equal opportunity, and does not involve 17 a level playing field. 18 It tilts the field in favour of the person who was 19 asked to give the guarantee. 20 We do emphasise the point -- which hasn't been 21 challenged -- that the guarantee as communicated by the 22 defendant was expressed in entirely open-ended and 23 unqualified terms, and it therefore left open the 24 possibility for an infinite series of reasons or excuses 25 to be advanced for not giving the guarantee. 201 1 Mr Humphries, for example, this morning took your 2 Lordships to planning objections to Hub's scheme. In 3 our submission, these are clearly improper reasons. The 4 role of the public body, the decision-maker, the safety 5 authorities and the planning authorities, is to assess 6 these public considerations. If those considerations, 7 during the competition, are placed by way of co-decision 8 or consultation in the hands of a competitor, there is 9 an obvious and clear conflict of interest. 10 Indeed, we say the correctness of that point has 11 also been conceded by Mr Palmer. I will give your 12 Lordships the reference. It is Day 2, page 58, lines 1 13 to 18. Mr Justice Marcus Smith said: 14 "Suppose before all of that you have reached the 15 conclusion that on a pure planning business Hub's scheme 16 is better. Now, you raise the question of 17 deliverability and ask the Hub to engage with HAL. 18 Surely what is going to happen is HAL is going to say: 19 'We are not going to engage', because that's a way of 20 bringing their scheme back into play." 21 Mr Palmer: 22 "That is possible, my Lord." 23 So, we do reiterate the simple -- and we say 24 unanswerable -- point that if such a conflict of 25 interest arises during the competition, it cannot be 202 1 competition on the merits to give one of the bidders 2 a possibility to resist a guarantee and we say, 3 whichever way one looks at this, it would be nothing 4 short of extraordinary if that state of affairs did not 5 give rise to a remedy under competition law. 6 It is the antithesis of competition on the merits. 7 The scheme can be resisted or vetoed for reasons that 8 have nothing to do with its merits as a planning scheme. 9 So, that is the essence of our case and we say that 10 on the facts it has been conceded, and the legal premise 11 as to its correctness has effectively been conceded. 12 So, on that basis, I don't need to say much by way 13 of technical legal detail. I will pick up on a handful 14 of points as briskly as I can, and obviously if your 15 Lordships have questions, I am here to assist insofar as 16 I can. 17 Turning very quickly to the three conditions, on the 18 state measure we are frankly surprised that Mr Palmer 19 has sought to resist this condition because it was never 20 pleaded at any stage that this was not a state measure. 21 But, the essential response is that Mr Palmer is 22 confusing the simple question as to whether something is 23 a measure which is referable to or emanates from the 24 state from the subsequent question of whether there is 25 a distortion of competition. 203 1 The first condition is actually a very simple one. 2 Is this something which is referable to the state and 3 given that the guarantee has at its source the 4 defendant, that is plainly satisfied. 5 Indeed, we can now go further because, by virtue of 6 the subcommittee meeting and paragraph 599 and 600 of 7 Low 1 and paragraph 3 of Low 3, we now understand that 8 the lack of guarantee was a part of the preferencing 9 decision. So, it is beyond question there is a state 10 measure at the outset and in terms of the preferencing 11 decision. 12 On privileging I can take this very quickly, first 13 of all, on state monopoly. The defendant with respect, 14 and HAL, have missed the essential point here. 15 Our essential point is that where the network, or in 16 this case the airport, has been built up over many, many 17 decades with taxpayer funds, that is an enduring 18 privilege today. The fact that there has been a hiatus 19 with privatisation doesn't airbrush those enormous 20 privileges. 21 To computise that point, all of the runways and 22 terminals 1 to 4 were built prior to privatisation using 23 taxpayers' money, and they remain an enduring benefit 24 today, and they are therefore a privilege. 25 On the licensing, three points. First to clarify 204 1 a point I should have made in response to 2 my Lord Mr Justice Marcus Smith: the statutory criteria 3 for the CAA do include, in section 1BA, the criterion of 4 the financability of the airport. So, to be very, very 5 clear, our case is not a pejorative one that HAL has 6 been permitted to finance the airport in a way that is 7 anti-competitive. We make a more neutral point, which 8 is the discretion exercised under the licensing regime 9 is one which confers a privilege. 10 The privilege has been recognised, in our 11 submission, beyond question in two public documents. 12 I showed your Lordships the CAA's own document 13 accompanying the 2014 licence, where they said, and 14 I quote: 15 "The RAB regime is an unusually benign climate for 16 investment and, secondly, and critically, that such 17 a benign climate would not pertain under conditions of 18 effective competition." 19 I do reiterate the point that a privilege not 20 obtainable under conditions of normal competition is 21 ipso facto a privilege for the purpose of 106. 22 The second document -- which is pejorative, but 23 which is not my document -- is the Competition 24 Commission. They have gone on public record to say that 25 the RAB gives rise to "perverse incentives to 205 1 overcapitalise and overspend at this airport." 2 Their words not mine. 3 So, for those reasons, we do say there are 4 privileges. 5 On the distortion of competition, with respect, my 6 learned friends have been tilting at windmills for the 7 entirety of the day. They wish to argue this case on 8 the basis that it would be a standalone violation of 9 Article 102. We are not in that territory. We are 10 dealing with primarily a state measure that has an 11 impact on equality of competition. 12 Essentially, all of the case law you were shown in 13 terms of appreciable effects and so on, that has to do 14 with stand-alone violations of Article 102. 15 As I showed your Lordships in some detail 16 yesterday -- or the day before rather -- there is a very 17 separate and clear stream of case law under 18 Article 106(1), which makes two critical points. 19 First of all, the risk of an abuse of dominance is 20 sufficient. The reason one does not need to show 21 appreciable effects is that there is a preventative 22 aspect to 106(1). 23 The second, a point which remains unanswered, in my 24 submission. I took your Lordships to half a dozen cases 25 which set out the clear and strict conflict of interest 206 1 principle under Article 1 106(1) exclusively. Those 2 cases have not been responded to. 3 The cases in my submission set out something which 4 is akin to an object infringement. If a conflict of 5 interest arises, as it does in this case, that in itself 6 is a structural defect in the equality of opportunity on 7 the market. That is a sufficient risk of abuse and that 8 is a sufficient basis for a distortion. 9 That is the essential case we make. 10 Now, one of the new points that has emerged is an 11 alleged lack of a dominant position. With respect, this 12 is a hopeless point. There is a public document in the 13 form of the NPT, which in 2014 designated HAL as 14 a monopoly operator. That decision remains extant. Its 15 duration was prospective. It lasts on the basis of 16 a five year duration. So, it was extant at the point of 17 the distortion of competition and it remains extant 18 today. 19 That is the evidence we rely on. 20 I am going to show your Lordships very quickly one 21 or two references to that. 22 But the striking omission in Mr Facenna's 23 submissions is he alluded to this being not entirely 24 current, but he is unable to say what has changed since 25 the NPT designation was made. It is current and he 207 1 couldn't refer to a single thing which had changed to 2 query in any way why the monopoly position identified no 3 longer arises. 4 We can look very quickly at this. It is in 5 bundle 14/11. I will just quickly give your Lordships 6 the references, and then I can quickly conclude. 7 The first point is your Lordship was shown the 8 statutory criteria for the NPT designation, and they are 9 replete with references to competition law, competition 10 guidance and competition principles. That is the 11 statutory framework. 12 If we then pick this up at page 212, paragraphs 2.1, 13 2.2, again, it's a reference to guidance issued by the 14 European Commission on competition law. From the very 15 outset of this document, it is based fairly and squarely 16 on competition law principles. 17 Then, over the page, footnote 7, reference to 18 Bellamy & Child, a competition law textbook; Coca-Cola, 19 competition law case. 20 At page 223, 4.3, again, a repeated reference to 21 competition law guidance. 22 4.4, the basic definition of the market is exactly 23 the same as the one used in competition law. Reference 24 to the guidelines. 25 4.11, as defined in both European Commission OFT 208 1 guidance, all competition law. Geographic market. 2 Paragraph 29, again, exclusively competition law. 3 Then a few pages on, 5(2) 5. This is the meat of 4 the decision. They say: 5 "HAL has 100 per cent of the market." 6 So, not only are they dominant. They are a total 7 monopolist in this market. You see the conditions. It 8 is all the usual competition law stuff. Switching 9 costs, second bullet. Significant switching costs. 10 Some costs. So, all the barriers to entry one would see 11 in a typical competition law decision. 12 Over the page, the top of 244, strategic importance 13 of London Heathrow. Significant network effects of the 14 airport. So, again, classic barriers to entry and 15 competition effects. 16 Last reference, my Lords, over the page, 245, in the 17 middle: 18 "As a relatively expensive airport, does not offer 19 any discounts to its prices, and there have been some 20 significant price increases over the last ten years." 21 Further down: 22 "The indicators of market power, particularly HAL's 23 approach to price and to engagement and commercial 24 negotiations suggests that HAL ..." 25 It essentially it says it has market power. 209 1 So, there you have it, all the hallmarks of 2 dominance and competition law terms, including pricing 3 behaviour on an abusive scale, are laid out in gory 4 detail. 5 With great respect to Mr Facenna, to use this as 6 a springboard to say that there is a realistic chance of 7 suggesting that HAL is not dominant, for which he 8 doesn't give a single reason, it is an impossible 9 submission. 10 My Lords, three final points if I may. First, 11 my Lord, Mr Justice Smith, asked a question about de 12 minimis infringements under Article 102. This came up 13 this morning and I, over the lunchtime, have found the 14 most recent judgment on the point. If I can hand that 15 up. It is a case called MEO. 16 (Handed) 17 My Lords, paragraph 29. The Court of 18 Justice judgment from last summer. To the extent it 19 matters, but it post-dates Streetmap: 20 "It must be pointed out that fixing appreciability 21 and de minimis threshold for purposes of determining 22 whether there is an abuse of dominant position is not 23 justified." 24 This is not a new point, there is a cross-reference 25 to post-Denmark 1, which established that principle some 210 1 years earlier. 2 My Lords, in a sense I don't need this because 3 again, my case is based on Article 106(1) in conjunction 4 with 102, and I do reiterate the point for the avoidance 5 of doubt that under that rubric it is sufficient for my 6 purposes that there is a conflict of interest that risks 7 an abuse of a dominant position. I do say that is 8 essentially a strict rule of liability, and de minimis 9 does not come into it. The state measure simply should 10 not be in place, full stop. 11 A second legal point, if I can ask your Lordships to 12 turn up the MOTOE case, the Advocate General's opinion, 13 authorities 7/154. It is paragraphs 97 and 98. 14 Sorry, 163, my Lords. It is the Advocate General's 15 opinion. Starting at paragraph 97. 16 Your Lordships were taken through this at a rather 17 breakneck speed, and the critical point was lost over. 18 As I confirmed to my Lord, Mr Justice Smith on 19 Wednesday, my case is not, obviously, that any 20 consultation is a conflict of interest. That would be 21 silly. 22 What I do say is that a conflict of interest while 23 the competition is pending, where the person who is 24 asked to give the guarantee has an economic 25 self-interest in its success in the competition, that is 211 1 a conflict of interest falling within 106(1). 2 If we can go to 98 -- so its talks about a decision, 3 authorisation: 4 "ELPA thus not only has the legal means ... to 5 effectively prevent other service providers from 6 entering the Greek market, but also an economic interest 7 in limiting access to the market by its competitors to 8 its own advantage." 9 So, the gravamen is the economic self-interest. It 10 is not merely the circumstance of consultation. 11 You see 99. So, the consent, this makes it 12 particularly easy for ELPA to refuse to give consent to 13 other independent service providers." 14 So, it is a particular and clear form of conflict of 15 interest. 16 My Lords, a final point, if I may, on relief in 17 response to questions raised to Mr Palmer by 18 my Lord Mr Justice Smith. 19 We do say that one has to bear in mind in respect to 20 ground 1 that there is a principle of effectiveness. If 21 it is the case the guarantee infringes 106(1), then we 22 say it would not be an effective remedy simply to 23 declare that to be so. A state measure, on that 24 analysis, would have distorted competition on the 25 market, and the integrity of competition on the market 212 1 and the guarantee of equality of opportunity has to be 2 secured through effective relief. 3 In my submission, that can only be the quashing of 4 the infected decision. 5 A final point under section 3 of the Senior Courts 6 Act. There is, of course, the exceptional public 7 interest criterion in any event, which would be a reason 8 for granting the relief we seek, even if the other 9 conditions were not satisfied. 10 We do emphasise the point: this is the largest 11 privately financed project in world history. There has 12 been an intervention by the defendant of an 13 anti-competitive nature, which has distorted competition 14 on this immensely valuable market, and the fact of that 15 distortion and effective relief in relation to it has to 16 be recorded as a matter of public interest. 17 My Lords, those are my submissions in reply. 18 LORD JUSTICE HICKINBOTTOM: Thank you very much. 19 Submissions by MR KINGSTON 20 MR KINGSTON: Last lap. 21 With regard to the references, I referred to today's 22 transcript, pages 25 to 27, they relate to what's at 23 paragraphs 2.6 and 2.7 of the speaking note. I am told 24 that the way to ensure that you are in the right place 25 is to do a search for "segregated", because the issue is 213 1 whether or not the guarantee was entirely segregated 2 from the planning merits. If there is any question of 3 the right reference, then of course with the final 4 transcript we could provide them if there is any 5 difficulty, but that I hope will help with that regard. 6 I now have left grounds 4 and 5, and three short 7 points on what were relevant from Mr Humphries' 8 submissions, on behalf of HAL, to deal with from my 9 point of view. 10 So, ground 4, I am on the speaking note, page 19, 11 paragraph 6. Capacity. 12 Two procedural or forensic points. As the defendant 13 accepts, the claimant's points about both schemes having 14 the same capacity is not a new point. It made this very 15 point in its submissions through Helios. 16 I said I wouldn't take your Lordships to more 17 documents, but it is important that you should look at 18 the reference. 15/18/266, and at 275, 276. That is the 19 Helios report. 20 It says, importantly, it explains why the claimants 21 use the figure of 700,000 as the capacity of their 22 scheme. In short, what your Lordships will read is that 23 they use that figure because that's the figure that 24 emerged from the Airports Commission's document, and the 25 claimants assume that was the figure that they were in 214 1 effect targeting. All that's set out in the Helios 2 report. 3 Then at the end of the Helios report, in the last 4 paragraph, the claimants make the very simple point that 5 they make now; that since the schemes had the same 6 format, in terms of mixed mode or segregated mode 7 runways, they would have the same capacity as a starting 8 point. 9 So, 612, although the claimant thereafter 10 concentrated submissions on showing why the ENR could 11 also accommodate 740,000 ATMs, this was not to make 12 a different point, but to follow through on the logic of 13 the first point. 14 The defendant in his response here took the court to 15 a number of references, but there is little point in 16 looking at the Oakdene Hollins or the York Aviation 17 report because the defendant has accepted they did not 18 revisit the question of how the 740,000 ATMs had been 19 arrived at for the NWR. 20 The key document, therefore, is Jacobs. This 21 clearly committed the error of which we complain: the 22 assumption that the NWR would operate three independent 23 mixed mode runways. 24 We were not taken to any document thereafter that 25 corrected the error and worked through the implications 215 1 of what the NWR could achieve by way of air traffic 2 movements. 3 Once regard is had to the fact that HAL would not 4 and could not operate three independent mixed mode 5 runways, the figures for HAL inevitably come down, yet 6 regard was never had to this. 7 Even in Ms Low's evidence, the emphasis continues to 8 be on what the NWR could theoretically achieve. The 9 conclusion section of the Jacobs's report, at 15/11/200, 10 comes to the figure of 700 to 740,000 for NWR, and that 11 number is impossible to get to without assuming three 12 independent mixed mode runways. 13 My Lords, ground 5, safety. It will be recalled 14 that the claimant's case is that the defendant's 15 conclusion concerns about site safety arising from the 16 novelty of the ENR resulted in greater uncertainty about 17 what measures safety considerations may require and what 18 impact these may have on capacity was not only without 19 evidential foundation, but contrary to the evidence that 20 was before him. 21 The defendant, through my learned friend, took up 22 the challenge of pointing the court to evidence and 23 ambitiously submitted that the CAA had always and 24 consistently raised this concern regarding the ENR, but 25 the evidence it points to simply cannot support that 216 1 submission. 2 The document relied on was the CAA preliminary 3 safety review. In supplementary bundle 14, at tab 16. 4 Paragraph 1.9 contains a generalised and preliminary 5 observation. It is not a finding that supports the 6 proposition that the CAA, as the regulator, found there 7 was greater uncertainty about the safety measures that 8 would be needed for ENR and their impacts. 9 Paragraphs 2.27 to 2.42, to which attention was 10 drawn, cannot be read in isolation. They need to be 11 compared and contrasted with the uncertainties and 12 challenges that were being raised in respect of the NWR. 13 The key question is one of differentiation. Did 14 this document support the assertion that there was an 15 evidential foundation for alleging greater uncertainty 16 against the ENR? 17 In summary, at page 407, and the summary table at 18 408, shows that the CAA drew no distinction between 19 them. Paragraphs 247 and 248, say virtually the same 20 thing about both schemes. 21 Further, the 2014 report from the CAA cannot be read 22 as the last word on the matter. It is clear that the 23 supplementary comments in supplementary volume 15, at 24 tab 8 and 153, were sought from the CAA for the specific 25 purpose of determining whether there was anything to 217 1 choose between the two schemes in terms of safety and 2 the impact of safety considerations on all other 3 relevant factors. 4 That report could not be clearer in confirming that 5 there was no difference. Had there been a difference, 6 the Airports Commission would have picked up on the 7 difference and given this as an additional reason for 8 preferring NWR or given an explanation for why it 9 disagreed with the regulator. 10 The defendant has to show what he saw in 11 the March 2015 report, that the CAA did not and he has 12 failed to do so. 13 I just add to that, if I may, those two sections of 14 the Airports Commission's report -- 11, dealing with the 15 deliverability considerations; 12, with the safety 16 considerations -- do not support the defendant's 17 approach with regard to this matter. 18 It is perfectly clear that the Commission sought an 19 additional report from the CAA, the March 2015 report, 20 because it wanted to understand whether there was a real 21 difference in safety terms. That's why section 4 of the 22 report is important. It is headed: 23 "Comparison." 24 The comparison draws no relevant distinction between 25 the schemes. It was, therefore, on the evidence, 218 1 entirely illegitimate, both from Airports Commission 2 conclusions, the CAA work, to attempt to suggest that 3 there was anything in the safety considerations which 4 could drive any concern about impacts on capacity, and 5 therefore any benefits that might arise. There simply 6 was no evidence to support that as a conclusion. 7 My Lords, then, I have three short points to make 8 with regard to my learned friend's, Mr Humphries' 9 submissions in relation to HAL. 10 He makes, from my point of view, three submissions 11 which we respond to. 12 First of all, he effectively complains about the 13 lack of engagement with HAL from the claimants. Your 14 Lordships by now will not need reminding that in that 15 period between July 2015 and August 2016, everyone -- 16 that is the Department for Transport, the defendant, the 17 claimant, and HAL -- understood that no one was going to 18 want to engage with another competitor. 19 I took your Lordships through the references on 20 Wednesday. You have them in my speaking note. No one 21 suggested it. 22 It is therefore singularly inappropriate to 23 complain, effectively, that the claimants were not 24 battering HAL's door down in that competing period to 25 seek an agreement with them. 219 1 The second point, in terms of the merits. 2 Mr Humphries was at pains to take you through a series 3 of documents prepared by HAL, demonstrating everything 4 they thought was wrong with the ENR. You remember pages 5 of: it is a terrible scheme. 6 I remind your Lordships that after some years of 7 work, the Airports Commission arrived at a conclusion 8 that there were "three credible schemes" that could be 9 taken forward for further consideration. One of them 10 was the ENR. 11 When they completed their work in the final report, 12 they reached the conclusion that scheme -- and your 13 Lordships have it. Probably the executive summary of 14 the report is the easiest place, frankly, to read it -- 15 was, ENR, deliverable, financeable, that is capable of 16 being constructed by going into the marketplace to get 17 the money; safe, that is capable of being operated in 18 a way that would meet an aspiration for an increase in 19 airport safety, and capable of meeting the objective of 20 delivering a new runway by 2030. 21 I don't, of course, and I am not so realistic as to 22 expect that Mr Humphries' clients would say: whoopee! 23 This is a wonderful scheme. Isn't it good? 24 They would not do so. 25 But it is vacuous for him to complain, on the back 220 1 of documents submitted by his clients as a competitor, 2 that the ENR was not going to work satisfactorily. The 3 Airports Commission is there to tell your Lordships: 4 this was a scheme which would deliver the objective and 5 do it safely. 6 Yes, the Airports Commission had reasons for 7 preferring one over the other, but to borrow from what 8 the defendant said in the course of one of his 9 parliamentary submissions, this wasn't a 5-0 victory. 10 It was a balanced decision. So, those complaints about 11 the merits go nowhere. 12 The third and final point is with regard to timing. 13 Mr Humphries complains: we didn't have time. You come 14 to us at the end of August asking -- in relation to 15 a decision which we all know is approximate -- us to 16 sign off on something which was a big commitment. 17 That, if anything, underlies the manifest unfairness 18 of the defendant's conduct in coming, after four years' 19 work, to the claimants, in August 2017, out of the blue, 20 with no evidence, no briefing, no scintilla of 21 a suggestion that it was reasonable to do so, to ask for 22 a guarantee, and to ask for a guarantee in terms which 23 as your Lordships know, then fed into -- in his mind, if 24 not in those advising -- as to a fundamental or biggest 25 issue. 221 1 So, the timing issue, my Lords, simply underlines 2 the unfairness of the conduct that left these 3 claimants -- having spent in excess of £10 million and 4 having devoted a great deal of time and money -- high 5 and dry. 6 My Lords, unless I can assist you further. 7 LORD JUSTICE HICKINBOTTOM: Thank you very much, 8 Mr Kingston. 9 MR KINGSTON: Thank you, my Lord. 10 If it is not too oleaginous to say, we have all 11 benefited from what have been epic efforts to make sure 12 that we are able to follow the proceedings with 13 a wonderfully prepared transcript, and we have all been 14 very grateful for that, and I am extremely sorry to have 15 kept you and others so late on a Friday. We are all, 16 I'm sure, very grateful to your Lordships for your 17 attention and a lot of pre-reading. 18 LORD JUSTICE HICKINBOTTOM: We thank both the transcribers, 19 whose efforts at times have been frankly heroic, and 20 also those who have linked this court to next door court 21 in a way which I think has been entirely glitch free, 22 which has enabled more people to attend the hearing than 23 would otherwise have been the case. 24 We also thank everybody for the preparation, and 25 both the written and the oral submissions, and also for 222 1 ensuring that we have finished today, just about. 2 We'll obviously reserve our judgment in the usual 3 way. We will almost certainly hand it down at the same 4 time as the judgment in the other four judicial reviews. 5 In the usual way, we'll circulate drafts to everyone for 6 typographical corrections, and then formally hand the 7 judgment down after we have received any corrections and 8 made them. 9 No attendance is required at the formal hand down. 10 We'll ask the parties to agree an order, or at least 11 initially make written submissions in relation to 12 anything that can't be agreed. But it is unlikely that 13 at the formal hand down itself anything will happen 14 other than our handing down the judgment. 15 MR KINGSTON: My Lords, just one slightly techy matter, 16 would your Lordships like any of the speaking notes in 17 Word format? 18 LORD JUSTICE HICKINBOTTOM: Yes, please. I mean, any that 19 can be sent in, in Word format may help. Thank you. 20 MR KINGSTON: Of course. 21 MR JUSTICE HOLGATE: On really the same note, one of the 22 documents we have benefited from has been the composite 23 bundle index, because in Word form we are able to search 24 it and locate matters. 25 Obviously, there have been additions inserted into 223 1 the bundles and I think my clerk requested an updated 2 composite index. What we were given, I think, was an 3 index to the additional authorities and some other 4 documents at the end of the bundles, but it doesn't 5 really deal with the insertions, which have gone into 6 the body of the bundles. 7 So, I am not sure whether Harrison Grant have been 8 dealing with this, but if we could have for the 9 beginning of next week an updated composite index that 10 would be most -- 11 MR KINGSTON: I am sure somebody will be able to do that. 12 MR JUSTICE HOLGATE: That would be most helpful. 13 LORD JUSTICE HICKINBOTTOM: Thank you all very much. 14 (5.05 pm) 15 (The hearing concluded) 16 17 18 19 20 21 22 23 24 25 224 1 INDEX 2 Submissions by MR HUMPHRIES .........................74 3 Submissions by MR BANNER ...........................162 4 Submissions by MR KINGSTON .........................177 5 Submissions by MR O'DONOGHUE .......................200 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 225