Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION
	[2013] CSOH 203
P666/13	OPINION OF LORD BURNS in the cause CLOBURN QUARRY COMPANY LIMITED Petitioner; For Judicial Review of a decision of HM Revenue and Customs ________________

Petitioner: Wolffe QC; Lindsays

Respondents: Stewart QC, Maciver; Office of the Advocate General

27 December 2013

Background

[1] This petition called before me for interim orders on 3 and 4 December 2013. The petitioners, who are engaged in the commercial extraction and exploitation of aggregates, were represented by Mr Wolffe QC and the respondent by Mr Stewart QC and Mr Maciver, advocate. The respondent is the Advocate General representing Her Majesty's Revenue and Customs (HMRC) who are responsible for the collection inter alia of the Aggregates Levy (AGL) which is a tax introduced by the Finance Act 2001 (the 2001 Act) on the commercial exploitation of certain aggregates.

[2] Mr Wolffe moved the court to grant the order sought in paragraph 3(e) of the petition, namely suspension and interdict against HMRC from applying to Lanark Sheriff Court for a summary warrant and for interim interdict.

[3] AGL has a somewhat turbulent history. It was brought into force on 1 April 2002 by the Finance Act 2001 (the 2001 Act) and is payable on some aggregates. Certain types of aggregate are exempt. Those exemptions are set out in sections 17 and 18 of the 2001 Act. In September 2001 the European Commission (the Commission) received a formal complaint from two undertakings contending that certain of the exemptions constituted state aid contrary to articles 107 and 108 of the Treaty for the Furtherance of European Union (TFEU). In February 2002 the British Aggregates Association (BAA) brought an action for judicial review before the Queen's Bench Division in England against certain of those exemptions. That action was dismissed by Mr Justice Moses on 19 April of 2002 who decided that the AGL was not state aid. Leave to appeal to the Court of Appeal was granted.

[4] Meanwhile, on 24 April 2002, the Commission decided not to uphold the complaint against the AGL on the basis that it did not comprise any elements of state aid and was justified by the logic and nature of the tax system. On 12 July 2002 the BAA lodged an application before the European Court for annulment of that decision. On 7 March 2012, the General Court confirmed the Commission's decision. That judgement was itself appealed to the Court of Justice which, on 22 December 2008, set aside the decision of the General Court and referred the matter back for reconsideration. On 7 March 20012 the General Court annulled the decision of the Commission. In essence, the General Court found that the Commission had erred in its assessment of the AGL and the disputed exemptions thereto and had misconstrued the concept of state aid within the meaning of the TFEU.

[5] As a result of that decision, the Commission issued a letter dated 31 July 2013 to the Secretary of State for Foreign Affairs intimating that, following the judgment of the General Court, there were:

"objective reasons for the Commission to have doubts as to whether certain tax exemptions are in line with the logic and nature of the Aggregates Levy. The reasoning followed by the General Court also shows that those doubts exist for certain exemptions but not for all of them and do not put into question the Aggregates Levy in its entirety."

[6] Prior to the decision of the General Court the petitioners had paid AGL but under protest. Since that decision, the petitioners have filed the required statutory returns but withheld payment on the basis that it contends that the AGL itself, and not simply the exemptions thereto, constitute state aid contrary to the above provisions of TFEU. They have, however, offered to place the disputed sums on joint deposit.

[7] In terms of section 128(6) of the Finance Act 2008, HMRC are empowered to seek a summary warrant from the sheriff in order to obtain payment of AGL. HMRC duly proceeded to seek a summary warrant from the sheriff at Lanark and, because the sheriff has no discretion under the Act, that warrant was duly granted on 25 June 2013 in respect of AGL due in respect of three periods in 2012. The petitioners were not afforded any right to make representations to the sheriff at that stage. Further thereto, on 4 July 2013 a charge for payment of the sum of £749,350.13 was served upon the petitioners by sheriff officers constituting sums due in respect of AGL for three periods in 2012. The petitioners proceeded to lodge a note of objections under the Debtors (Scotland) Act 1987 and the sheriff was subsequently invited by HMRC to sist those proceedings pending the hearing by the Court of Appeal in England against the decision dismissing the petitioner for judicial review referred to above which had been stayed pending the legal proceeding in Europe. The sum of £749,350.13 is now being held in a neutral account.

[8] In July 2013 the petitioners presented the current petition in this court seeking, inter alia, declarator that HMRC's decisions and actings in seeking the summary warrant were unlawful as a matter of European Union law, by reason of incompatibility with the petitioner's rights under the European Convention on Human Rights and at common law. They seek an order reducing that summary warrant and the charge. At a hearing on 17 July 2013, the petition called before Lord Boyd of Duncansby for interim orders in the Vacation Court. Having heard argument for both the petitioners and the respondent, Lord Boyd refused interim orders and granted leave to reclaim.

[9] Thereafter, as narrated above, on 31 July 2013 the Commission announced its decision in the light of the General Court's judgment of 7 March 2012. That decision initiated the procedure laid down in article 108(2) of the TFEU which was referred to as a "phase two investigation" in relation to certain of the exemptions, exclusions and tax reliefs from the AGL. As a consequence of that step, it is agreed that HMRC require to suspend the application of those elements of the AGL which form the subject matter of the investigation. That follows from the terms of article 108(3) of TFEU. Her Majesty's government has made a formal announcement to the effect that it proposes to take steps by primary legislation to suspend the application of those exemptions which form the subject matter of the phase two investigation. It accepts that it is obliged to do so under article 108(3) of TFEU. This obligation was referred to as "the standstill obligation". Her Majesty's government intends to make those disputed exemptions taxable from 1 April 2014. Accordingly, while HMRC accept that the disputed exemptions should be suspended pending the results of the phase two investigation, they take the view that the standstill obligation does not affect the levy as a whole and points out that the investigation relates only to certain of the exemptions to the AGL.

[10] Since the application by HMRC for a summary warrant in respect of the levy which is said to be due and payable for certain of the periods in 2012, they have taken further steps in respect of the levy due for further periods. HMRC has intimated its intention to seek recovery by summary warrant of the sum of £388,078.10 being for the periods ended March and June 2013 (the new summary warrant). It is the procedure in respect of this sum which was the focus of the debate before me.

The petitioners' submissions

[11] The debate before me was confined to a motion in terms of paragraph 3(e) of the petition to suspend and interdict HMRC from applying to the sheriff court for the new summary warrant. Mr Wolffe pointed out that his motion was focussed in that way because the proceedings under the Debtors (Scotland) Act 1987 for the previous sums allegedly due had been sisted. His motion was directed only at the procedure available to HMRC in Scotland (but not in England) by summary warrant. HMRC would remain entitled to raise proceedings by ordinary action for recovery of the disputed sum of £388,078.10 in the sheriff court.

[12] Mr Wolffe submitted that a material change of circumstances had taken place since the decision of Lord Boyd of Duncansby to refuse interim measures. The Commission had announced on 31 July 2013 its decision to instigate the phase two investigation into the various disputed exemptions. That had the effect of triggering the standstill obligation which HMRC accepted required Parliament to suspend the application of the disputed exemptions pending the result of the investigation.

[13] The reclaiming motion against decision of Lord Boyd had called before the Inner House by order on 5 November 2013. I was informed that the court allowed the reclaiming motion to the extent that it recalled the award of expenses made by Lord Boyd. The court, however, accepted that the decision of the Commission intimated on 31 July 2013 to open a phase two investigation constituted a material change of circumstances since Lord Boyd's decision. That much was agreed by Mr Stewart.

[14] Mr Wolffe presented his argument under three main heads which are set out in the petition itself. At the forefront of those submissions was the proposition that, while the decision of the Commission to open the phase two investigation related only to certain of the exemptions to AGL, the levy itself constituted state aid and, as a consequence, steps to recover the AGL by summary warrant were unlawful pending the results of the phase two investigation. That was because the government was in breach of the standstill obligation. The disputed exemptions would not be removed until at least April 2014 when the necessary legislation was to be brought into force. Accordingly, during the time that those disputed exemptions are still being allowed, the AGL itself constituted state aid for reasons which Mr Wolffe subsequently developed. The interim remedies sought were confined to prohibiting HMRC from applying to the sheriff for a summary warrant in terms of section 128(6) of the Finance Act 2008. He emphasised that would not prohibit the HMRC from attempting to recover the levy by ordinary action before the sheriff court.

[15] In summary, Mr Wolffe argued that the AGL was, first, unlawful in terms of European law. Secondly, it constituted an interference with the petitioners' rights under article 1 of the first protocol of the European Convention of Human Rights (ECHR). Thirdly, it was argued that the enforcement of the levy by way of summary warrant was unlawful at common law being oppressive and an abuse of power.

The argument under European Law

[16] In respect of the first argument under European law, Mr Wolffe submitted that there was at least a prima facie case that the levy itself was unlawful on the basis that it constituted state aid contrary to article 107(1) of TFEU. In the light of the phase two investigation, the court had to accept that the disputed exemptions were not justified by the general scheme of the AGL and constituted state aid. Further, while those exemptions remained in force in breach of the standstill obligation, the tax itself was illegal by application of principles which Mr Wolffe derived from the recent case of Laboratories Boiron SA v URSSAF 2006 3 CMLR 50 (Boiron).

[17] Article 107 of TFEU provides as follows:

"Save as otherwise provided in the Treaties, any aid granted by a member state or through state resources in any form whatsoever which distorts of threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between member states, be incompatible with the internal market."

[18] This court had to proceed upon the basis that the Commission's decision of July 2013 meant that, at least until the investigation had been completed, the disputed exemptions constituted state aid. It could be seen from various sources that the principal objective underpinning the AGL was the protection of the environment. It did that by attempting to "shift the demand" from what were termed primary aggregates, (that is aggregates worked from the earth) to secondary aggregates which were by‑products or waste of other processes. (See the decision of the General Court dated 7 March 2012 paragraph 62, 64 and 85). The skeleton argument on behalf of HM Treasury in the Court of Appeal proceedings in England at paragraph 9 states:

"The essence of the scheme is to make distinctions between materials quarried for use as aggregate and waste capable of being used as aggregate, so as to shift the demand from one to the other, while not discouraging the production of non‑aggregate material."

[19] However, the General Court had found that the exemption of certain products from the AGL amounted to tax differentiation which could give rise to selective advantages to those undertakings involved in their production. It also found that certain of the exemptions did not further the environmental objectives of the tax but, on the contrary, might risk creating even greater demand in the construction industry for the type of aggregates which the tax differentiations were designed to reduce.

[20] Accordingly, this court, under European law, is obliged to enforce the standstill obligation as it affects not only the beneficiaries of the exemptions which remain in force contrary to the standstill obligation but also in respect of competitors of the beneficiaries adversely affected by those exemptions such as the petitioners.

[21] Mr Wolffe referred me to the Commission notice on the Enforcement of State Aid law by National Courts (C 85/01) at section 2.2. It is emphasised that the role of national courts to offer means of redress for competitors and other parties affected by unlawful state aid is an important one and that interim measures ought to be deployed to safeguard the rights of such persons. At paragraph 61 it is stated:

"Where, based on the case law of the community courts and the practice of the Commission, the national judge has reached a reasonable prima facie conviction that the measure at stake involves unlawful state aid, the most expedient remedy will, in the Commission's view and subject to the national procedural law, be to order the unlawful aid and the illegality interest (sic) to be put on a blocked account until the substance of the matter is resolved"

In paragraph 62 it is stated:

"Interim recovery can also be a very effective instrument in cases where national court proceedings run parallel to a commission investigation. An ongoing commission investigation does not release the national court from its obligation to protect individual rights under (section 8(3) of the treaty)."

[22] Mr Wolffe referred to R v Secretary of State for Transport ex parte Factortame Ltd and others 1991 1 AC 603 at page 644 for the proposition at that this court should set aside any national legislative provisions which might prevent, even temporarily, European community rules having full force and affect. If, therefore, the tax itself is unlawful state aid, the petitioners would be entitled to repayment of any tax paid and, as an interim measure, the suspension and prohibition of the summary warrant procedure ought to be granted.

[32] Mr Wolffe accepted that there was a general rule that persons liable to pay an obligatory contribution such as AGL cannot rely on the argument that, because an exemption may constitute state aid, payment of the contribution itself can be avoided (see JH Banks & Co Ltd 2001 3 CMLR 51 and Air Liquide Industries Belgium A 2006 ECR I‑5293 at paragraph 48). However, he argued that in the circumstances of this case that rule suffered an exception. The position was summarised in Bacon on State Aid paragraph 2010 page 541. As is stated there under the heading "Unlawfulness of selective tax or charge", article 107(1) of the TFEU prohibits selective aids not a selective imposition of charges. Thus exemptions to tax might be viewed as unlawful and selective state aid but the charge itself would not. However, if the charge or tax itself is used to finance state aid, then the tax or charge itself might be held to be unlawful state aid. There is therefore an exception to the general rule if there is what is termed "deliberate asymmetric taxation" where a state chooses to tax one group of undertakings while not imposing the tax on a competing group with the objective of distorting competition in favour of the non-taxed groups. In that situation the asymmetric imposition of tax is not the result of the aid but the means by which the aid is granted. The basis for this exception stemmed from the decision of the European court in Boiron (cited above).

[33] Accordingly, Mr Wolffe argued that in this case, the AGL was the means by which the aid was granted to the non-taxed group and meant that the tax itself constituted unlawful state aid. The petitioners had a prima facie case that the tax itself was unlawful state aid and therefore a prima facie case that interim relief, in the form of the limited interdict sought, should be granted at this stage.

The respondents' submissions

[34] Mr Stewart argued that no court had found that the tax itself was or might constitute unlawful state aid. Reference was made to the first paragraph of the letter of the Commission dated 31 July 2013 quoted above to the affect that doubts have been raised in relation to certain but not all of the exemptions to the AGL but the levy itself in its entirety has not been put into question either by the General Court of the European Union or the Commission. That view was reflected in the Revenue and Customs brief of 31/13 (7/5 of process). Further, Mr Stewart argued that the court is bound by the view of the Commission to that effect. He referred to Deutsche Lufthansa AG v Flughafen Frankfurt-Hahn GmbH (Case C-284/12) a decision of the Court of Justice of the European Union of 21 November 2013 at para 41 where it is stated:

"It is also important to note that the application of the European Union rules on state aid is based on an obligation of sincere cooperation between the national courts, on the one hand, and the Commission and the courts of the European Union on the other, in the context of which each acts on the basis of the role assigned to it by the Treaty. In the context of that cooperation, national courts must take all the necessary measures whether general or specific to ensure fulfilment of the obligations under European Union law and refrain from those which may jeopardise the attainment of the objectives of the treaty, as follows from article 4(3) of the TEU. Therefore, national courts must, in particular, refrain from taking decisions which conflict with a decision of the Commission, even if it is provisional."

[35] Mr Stewart argued that a decision of this court to the effect that the AGL itself was unlawful state aid would directly conflict with the Commission's decision as set out in the letter of 31 July 2013.

[36] If I were to hold that the petitioner's application did not involve conflict with the decision of the Commission then Mr Stewart further argued that the present case did not fall within any exception to the general rule outlined above and, accordingly, the petitioners were not entitled to withhold or avoid payment of the tax or to obtain reimbursement of it. Mr Stewart argued that this was not a case which fell within the exception articulated in the case of Boiron. In summary, the AGL was not the means by which aid was granted to the nontaxed or exempt groups and was not used to finance the giving of what should be considered, pending the results of the phase two investigation, as unlawful state aid.

Discussion and decision on the European Union law case

[37] Although no argument was directed at the test which I should apply in considering whether the petitioners have a prima facie case, I have had regard to the terms of the decision of Lord Boyd of Duncansby of 17 July 2013 and his discussion of the appropriate test for a prima facie case at paragraph 26. I agree, under reference to WAC Limited v Whillock 1989 SC 397 at page 410, that the petitioners require to demonstrate that there are reasonable prospects of success in obtaining the interim relief sought. I can reach no concluded decision on the matter and it would be wrong for me to do so. I have to take a prima facie view on the pleadings and arguments as they stand. I am conscious of the fact that the pleadings are still in a state of evolution and that the respondents were reacting to argument of which they had had little notice. I do not mean in any way to criticise the petitioners or their advisors in that respect. But, as a measure of the fluid nature of the pleadings, I received two updated versions of the petition during the course of argument before me. I can only reach preliminary view at this stage.

[38] I accept, as Mr Wolffe contended, that the UK government is currently in breach of the standstill obligation and will remain in breach thereof until such time as the disputed exemptions are suspended by Act of Parliament. The fact is that HMRC is still granting exemptions to certain operators in circumstances where a phase two investigation has been opened. I must proceed upon the basis, until such time as the matter is resolved, that those exemptions constitute unlawful state aid.

[39] I also accept, in terms of the guidance given by the Commission in relation to the enforcement of state aid by national courts at paragraph 60, that this court should use all interim measures available to it to "at least terminate the anticompetitive effects of the aid on a provisional basis". Such measures could include the temporary prohibition on applications for summary warrant in order to recover AGL. That would, of course, depend upon there being reasonable prospects that the petitioners would succeed at the end of the day in persuading a court that the levy itself constituted unlawful state aid, at least until the exemptions are suspended.

[40] The first question raised by the respondent is whether I am bound by the scope of the European Commission's investigation which is solely into the potential unlawfulness of the exemptions to AGL and not in relation to the AGL itself. Having considered the terms of the European courts judgment in the Lufthansa case and to the last sentence of paragraph 41 in particular, I have come to the view that for this court to conclude that the AGL itself is unlawful state aid would not conflict with the decision of the Commission. I do not read that part of the judgment as precluding this court in granting interim measures to the petitioners. The Commission's letter flowed directly from the decision of the General Court. That court was examining the status of the AGL and whether the disputed exemptions had been properly assessed by the previous decision of the Commission. The General Court was not examining the status of the AGL itself in the period during which the disputed exemptions were being granted and the petitioners were paying AGL. This period, before the exemptions are suspended in accordance with the standstill obligation, which I will term "the interim period", is the focus of the current dispute. The General Court examined the disputed exemptions and found that they should be investigated upon the basis that the Commission had erred in its assessment. If those exemptions are unlawful state aid, that situation can be rectified by their removal so that the levy is then paid by an expanded range of producers of aggregates. On that basis the levy itself could not be impugned.

[41] However the focus of this application is on the interim period before the disputed exemptions are suspended. This court is being asked to consider whether, on the assumption that the disputed exemptions are unlawful state aid and continue to be granted, the levy itself constitutes unlawful state aid on the basis of principles derived from Boiron. That is a situation about which the general court was not concerned and which, therefore, the Commission's decision did not deal. Of course, this court could not reach any conclusion that, once the exemptions are removed, the levy constitutes unlawful state aid. But in my view, it is at least open to the petitioners to argue that during the interim period the levy does constitute unlawful state aid in the context of considering entitlement to interim measures. The court in doing so would not act in conflict with any decision of the Commission.

[42] The second question is whether the petitioners have advanced a prima facie case that, in the interim period, the tax itself is unlawful state aid and, accordingly, the petitioners are entitled to interim relief of the limited scope they seek. That question depends on whether the petitioners are correct in their contention that the levy, in the interim period, can be said to fall within the exception to the general rule set out above.

[43] Having considered the information given to me and having examined the European case law (including the opinions of the Advocate General) and the textbook to which I was referred, I have reached the view that the petitioners have not made out a prima facie case. This is essentially because I am not satisfied that during the interim period the AGL itself is unlawful state aid or is the means by which such aid is granted and thus comes within the principles to be derived from Boiron. As such, I am not satisfied that it falls within the exceptions to the general rule stated above that persons liable to pay a charge cannot avoid that liability by arguing that an exemption to it constitutes state aid.

[44] It can be readily appreciated that, in terms of the general rule, a person is not entitled to withhold a tax or a levy on the basis simply that others are exempted from paying it and those exemptions are, or may be, unlawful and represent state aid. As Mr Stewart argued, that general rule is a powerful one and is not easily displaced. However, it is clear that there are exceptions to it. The exception said to exist here was identified in the opinion of the Advocate General in Air Liquide Industries Belgium SA v Ville de Serang and another (Case C-393/04 and C-41/05) at paragraph AG 70 at note 29 as follows:

"The answer would have been different had the imposition of the tax itself been unlawful, insofar as it was designed to create an unlawful situation benefiting certain persons, as in Boiron in which I today delivered my opinion (and to which I refer for further details on that point). That case concerns a tax established in the form of an asymmetric charge, since it is designed solely to apply to certain economic operators and not to others in a competitive relationship with the former, and is introduced specifically and only to create a situation that favours the undertakings which are not subject to it. There is thus a close link between the tax and the aid, like two sides of the same coin, because the advantage given to the undertakings which are not subject to the tax exactly corresponds to the disadvantage imposed on the undertakings liable to it. In a situation of that kind, therefore, it is the actual imposition of the tax which may be deemed to be unlawful in the light of the community rules on aid."

[45] In his opinion for the court in Boiron, the Advocate General defined an asymmetric charge at paragraph AG 38 as meaning a charge imposed only upon some economic operators but not on others who are in competition with the former in order to offset costs alleged to be borne by the latter. The court itself dealt with the question as to whether the charge in question itself constituted unlawful state aid at paragraph 27 to 48. It was dealing with a situation where there were only two sets of operators in the commercial field in question. The first were wholesale pharmaceutical distributors on whom the state had imposed certain public obligations relating to the distribution and storage of medicines. The second were the pharmaceutical laboratories who also sold the same medicinal products. The charge was levied upon laboratories but not upon the wholesale distributors and it was argued by the laboratories that the wholesale distributors were overcompensated by the exemption from paying the charge which was paid by the laboratories and to that extent were in receipt of unlawful state aid. However, the court found that the charge represented unlawful state aid because the other category of operator with which the other was in direct competition was not liable for the charge and the absence of that liability was the principal or at least a deliberate objective of the charge itself. Accordingly, the measure alleged to constitute the aid was the tax itself and not some exemption which was separable from that tax or charge.

[46] Having considered the structure of the AGL and the exemptions to it, it is notable that there are a large number of exemptions, only some which are in dispute and the subject of the phase two investigation. It is also clear that there are a number of operators within the aggregate sector which exploit the different aggregates concerned. I accept that the levy is designed to promote the use of certain aggregates and thereby shift demand from other aggregates perceived to have adverse environmental affect in the production or processing thereof. However, that aim or objective is not, in itself, objectionable and would not render the levy itself to be unlawful state aid. Neither the General Court or the Commission have found that all exemptions are potentially unlawful as state aid. HMRC is therefore entitled to promote certain aggregates above others provided that the legitimate aim of environmental protection is achieved thereby. As I understand it, it is because the disputed exemptions may not actually fulfil legitimate environmental objectives that they are questioned and therefore may distort the market and amount to unlawful state aid.

[47] If the petitioners can show that their particular position in the aggregates market which they occupy places them in direct competition with those undertakings which are currently benefitting from the disputed exemptions then it might be said that the tax they pay could constitute unlawful state aid because there is a direct or exact correlation between the payment by them of the levy and the disputed exemption. However, the pleadings and the arguments canvassed at debate has not satisfied me that there exists a sufficiently direct and exact correlation between the payment by the petitioners of the AGL and the disputed exemptions.

[48] I accept that the AGL applies to certain operators in the aggregates sector and not to others. It may also be that some of those operators who are liable for the levy are in direct competition with those that are exempted from it. But there are too many facets of the aggregates sector and too many examples of undisputed exemptions to satisfy me that there are reasonable prospects of the petitioners showing, in the formulation of the Advocate General in Air Liquide Industries Belgium, that the advantage given to the undertakings which are not subject to the levy "exactly corresponds" to the disadvantage imposed on the undertakings liable to it thus allowing me to conclude that it is the imposition of the charge itself which can been deemed or might be deemed to be unlawful state.

[49] In Boiron it was readily ascertainable that there were only two groups of relevant operators who were in direct competition with one another only one of which was liable to the charge which was itself specifically designed to compensate the other group for the obligations which the state had imposed upon it. The present situation is plainly more complex and multifaceted than the court was examining in Boiron and without information that this asymmetric levy gives an advantage to those exempted from it which corresponds exactly to the disadvantage imposed on the petitioners in paying it, I am unable to affirm that the levy itself may be deemed unlawful.

[50] Further, this levy is not imposed "specifically and only" to create a situation that favours certain undertakings which are not subject to it. The primary aim of the levy is to reduce the perceived environmental damage which certain of the processes of production of aggregate create.

[51] It may be that the petitioners can demonstrate a sufficiently close correspondence between the disadvantage to which they are put and the advantage which the exempted undertakings obtain in terms of their respective positions in the aggregates market place. But I do not consider that that is demonstrated upon the information available to me at this stage.

[52] Further, I consider that there are a number of important differences between the AGL and the sort of charge being considered in Boiron which indicates that it is not within the exceptional category of situations. I do so for a number of reasons.

[53] First, it is important to note the specific circumstances in Boiron. It involved taxes which are paid by one of two groups of operators for the sole and specific purpose of neutralising a selective disadvantage caused to the other group by the public service obligations imposed by the government itself. The AGL was not imposed with the primary purpose of correcting a disadvantage or to provide a means by which one group of competitors could be compensated but to advance environmental aims.

[54] Secondly, the court in Boiron concluded that the charge for which the applicants were liable was not "a tax of general application" in which the exemptions amounted to the aid measure because of the unequal liability for that charge (see paras 32-34). There were only two groups of operators, one of which was liable for the charge and the other was not and it is readily understandable that the charge could not be considered a tax of "general application". Mr Stewart informed me that the value of the disputed exemptions is £15 million and represented a small proportion of the aggregates market. The annual revenue from the AGL is £250 million. But I am not in a position to come to any view as to the extent to which the levy is paid throughout the industry as a whole so as to allow me to gauge whether the AGL could be said to be a general taxation scheme as opposed to a charge for which only one of two categories of operators is liable (see para 33).

[55] Third, Mr Wolffe argued that the AGL was an asymmetric charge which distorted competition in favour of those operators which qualified for the levy. As I understand the concept of an asymmetric charge, it is one imposed only on some operators but not on others who are in competition in order to offset costs borne by the latter (see the Advocate General's opinion in Boiron para AG38). Thus the specific and sole purpose of the charge was to correct a disadvantage and the charge itself was the means by which that is achieved. That does not appear to be the case here. While the AGL is only imposed on certain operators and not on others, its principal objective is the protection of the environment (see the General Court's opinion in Boiron of 7 March 2013 paras 63 and 64). The means by which that objective is achieved is by "shifting demand" from aggregates the production of which is considered to involve environmental damage to those which do not. So while the AGL may "distort" competition, that is not its aim but the way in which its aim is achieved. The AGL is thus fundamentally different from the charge considered in Boiron which was only imposed in order to achieve a correction in the market created by government and to compensate one group of operators. It was in those circumstances that the court was able to conclude at para 39 that the measure alleged to constitute an aid was the tax itself and not some exemption which is separable from that tax.

[56] I keep in view the fact that what I am dealing with in the context of the application for interim orders is the interim period during which the disputed exemptions are deemed to be made in breach of the standstill obligation. But if the AGL itself is not state aid then the fact that unlawful exemptions to it continue to be made does not change the character of the AGL itself.

[57] For these reasons, I cannot conclude that a prima facie case has been made out justifying the making of the interim order sought.

The argument under the Convention

[58] Mr Wolffe submitted that the levy breached the petitioners' rights under article 1 of the First Protocol of the Convention which was not justified by any legitimate aim and was disproportionate since the petitioners are offered to consign the disputed sum in court or lodge it on joint deposit. Further, the respondents were able to seek to recover the sum by ordinary action. However, as I understood his argument, it depended heavily upon my being satisfied prima facie that the AGL was unlawful state aid. If it were not, the AGL could not be said to be unjustified having regard to the terms of the second paragraph of article 1. There was before me no challenge to the legality of the summary warrant procedure which had been examined for compatibility with the Convention in a number of cases (see ANM & Company v UK 1995 Application No. 25602/94 and Smith v UK 1995 Application No 25373/94 both First Chamber decisions on admissibility). However, Mr Wolffe did argue that even if I was not satisfied of a prima facie case under European law, I should still hold there to be a prima facie case under the Convention on the basis that the use of a summary warrant was disproportionate. That was because there was a serious dispute about the legality of the AGL and HMRC could still proceed by way of ordinary action to recover the unpaid tax. In the summary procedure, the sheriff had no discretion and required to grant the warrant upon application being made. That was the equivalent of a decree in favour of HMRC and diligence was immediately available as if decree had passed against the petitioners. On the other hand and having regard to the financial position of the petitioners set out at page 41 of the petition (which was not disputed) the test for the granting of diligence in such an ordinary action would not be met. In addition, the petitioners had offered to place the disputed sums in a joint account or to consign it in court. He also pointed out that the procedure by way of summary warrant was a Scottish one, unavailable in England and that accordingly the petitioners were labouring under an additional disadvantage when compared to their English competitors.

[59] In those circumstances, HMRC could not achieve any material benefit by proceeding with the summary warrant and the choice to proceed thereby was disproportionate.

[60] Mr Stewart submitted that the recovery of taxation is a legitimate aim and Parliament had specifically given HMRC the power to recover the AGL by summary warrant as a quick and cost effective method of doing so. Since no court has found the AGL to be unlawful, HMRC was entitled to use the powers granted to it by Parliament. It was not HMRC policy to agree to disputed sums to be paid into a joint account or consigned into court. That was not considered to be a good use of taxpayers' money.

Discussion and decision

[61] Having found that no prima facie case has been advanced as to the unlawful nature of the AGL itself, I am not prepared to hold that the petitioners have reasonable prospects of success in persuading the court that to exercise its statutory powers in obtaining summary warrant would be disproportionate. While there is a serious dispute about the AGL advanced by the petitioners, Parliament has given HMRC the specific power to recover it by summary warrant and I consider that in the interim period they should be able to continue to do so. The petitioners remain liable to pay this tax while the question of the exemptions to it are under investigation. The sheriff has no discretion and must grant the warrant upon application but thereafter the petitioners can lodge a note of objections to the arrestments under section 73M of the Debtors (Scotland) Act 1987. Although the grounds for such objection are limited, Mr Wolffe very properly did not contend that the petitioners would be precluded from advancing arguments directed to the lawfulness of the AGL before the Sheriff at that stage.

The common law argument

[62] Mr Wolffe argued that to use the summary warrant procedure in the circumstances of this case would also be unlawful at common law since it would be oppressive and amount to an abuse of power. He referred to Lord Templeman's speech in R v IRC ex parte Preston 1985 1 AC 835 at 865 where he quotes Lord Denning's opinion in HTV Ltd v Price Commission 1976 ICR 170 at page 185 to the effect that public bodies abuse power where they act unfairly or unjustly towards citizens when there is no overriding public interest to warrant it. Here HMRC had chosen to proceed by way of summary warrant where they could proceed by way of ordinary action and where their own guidance stated that before considering taking steps such as enforcement or insolvency the debt must not be the subject of dispute or appeal (see HMRC Guidance Manual 7/9 of process). There was a dispute here about the legality of the AGL and there was no overriding interest to apply for summary warrant and proceed to arrest the funds where the petitioners have offered to consign the disputed sum or to lodge it on joint deposit. This procedure was all the more unfair since it was only available in Scotland. It was unfair and oppressive to make use of the summary warrant procedure in these circumstances.

[63] Mr Stewart argued that the guidance relied on by the petitioners does not apply where there is an underlying dispute challenging the tax itself. It applied where there is for example a serious dispute about the amount of tax due. There was here an overriding public interest in obtaining the payment of taxes. Almost 700 businesses registered for the AGL continue to pay it. Only 15 are refusing to pay in England and Wales and a total of five in Scotland. If the tax is not recovered from the petitioners, they will be placed in a competitive advantage compared to those who are paying. Those who are should not be discouraged from doing so by the granting of the interim order sought.

Discussion and decision

[64] I have reached the view that it would not be unfair or oppressive to allow HMRC to proceed in the interim period by summary warrant. I am not satisfied of the prima facie case on the substantive argument under European law. There is a clear public interest in the collection of tax due and it would require a very clear case of abuse of power or unfairness to justify curtailment by this court of the statutory powers given to HMRC. While a serious dispute exists about the legality of that tax, HMRC are empowered to collect it in Scotland by summary warrant. It may be that at the end of the day the petitioners' complaints will be found to be correct. In that event, they will be able to claim the tax back or to raise an action for damages in respect of financial loss during the interim period. While, as Mr Wolffe submitted, the quantification of such loss might be difficult, I am not able to come to any view of the degree of difficulty and it was not said that no remedy would be available. There is force in Mr Stewart's submission that to prevent HRMC from proceeding by way of summary warrant would place these petitioners at an advantage as against their competitors who continue to pay the AGL.

Balance of Convenience

[65] Had I found that the petitioners' case was made out on a prima facie basis, I would have granted the interim order sought. If there were reasonable prospects of demonstrating that the AGL itself was unlawful, the balance would have come down in favour of preventing recovery thereof by summary warrant since HMRC would not be prevented from seeking recovery by ordinary action. However, I am not persuaded of the prima facie case and I consider that HMRC are entitled to proceed to collect the AGL until such time as the court is able to decide this matter after the pleadings are settled and full argument upon them has been advanced. The fact that the petitioners have offered consignation or joint deposit does not alter my view. Having made such an offer, they are conceding that the disputed sums will not be at their disposal in any event. HMRC are entitled to payment of the AGL in the interim period not merely to have such sums placed in a neutral account beyond the reach of either party.

[66] I will therefore refuse the petitioners' motion. I will reserve meantime all questions of expenses.