On 28 January 2025, Lord Clark issued his opinion in Biffa Waste Services Limited v Scottish Ministers. Biffa contends that the Scottish Government owed it (and failed to uphold) a duty of care in respect of its position as a logistics provider for the Deposit Return Scheme, which has now been delayed until October 2027, and argues that it relied on alleged assurances from the Scottish Government that amounted to negligent misrepresentation. Biffa is seeking approximately £166 million in damages. The Scottish Government sought to have the action dismissed on the basis of legal arguments that no such duty of care could exist and that the arguments about negligent misrepresentation were irrelevant. Lord Clark refused to dismiss the action and remitted the matter to proof.
The action is important because it is the first time in which the United Kingdom Internal Market Act 2020 is the subject of private (or indeed public) litigation to move beyond the early stages of court proceedings. Against the backdrop of possible reforms to the UK's post-Brexit internal market rules, this development signals that Biffa v Scottish Ministers is likely to result in judicial comment on how public-private commercial relationships function in circumstances where the supplier's obligations are contingent on the application of the internal market rules. That is likely to have important practical consequences. In this article, we consider the case and its implications.
Background: UK Internal Market Act 2020
The rules governing the trade among the constituent parts of the UK are set out in the United Kingdom Internal Market Act 2020 (UKIMA or the Act). UKIMA was an important part of the raft of legislation passed during the UK's withdrawal from the EU, when powers formerly exercised by EU institutions were repatriated and the UK would no longer be bound by the EU's internal market rules.
UKIMA contains two 'market access principles'. In contrast to the EU's internal market rules that preceded the Act, each market access principle is intricately defined and contains a framework of tests and qualifications that will affect which rules apply to a particular product, and in what circumstances internal regulatory divergence might be justifiable.
The first market access principle is the 'mutual recognition' principle, which provides that goods that have been produced in, or imported into, one part of the UK (the "originating part"), and which can be sold in their originating part without contravening any "relevant requirements" applying to their sale, may be sold in another part of the UK free from any "relevant requirements" that would otherwise apply to the sale in that other part of the UK. Generally, "relevant requirements" covered by the mutual recognition principle are obligations and conditions that need to be satisfied in order for goods to be placed on the market in one part of the UK.
The principle in action would mean that if there are different requirements about (for example) product labelling, the party placing the good on the market would only need to comply with the product labelling requirements of one part of the UK to be able to place the good on the market throughout the UK, regardless of the different rules.
The second market access principle is that of 'non-discrimination'. The non-discrimination principle is that the sale of goods in one part of the UK should not be affected by "relevant requirements" that directly or indirectly discriminate against incoming goods with a "relevant connection" to an "originating part" and sold in the "destination part". A "relevant requirement" that is capable of being caught by the non-discrimination principle is different to those that may be caught by the mutual recognition principle. For example, 'manner of sale' requirements (which regulate where, when, by whom, or whom or the price or other terms on which goods may be sold) are caught exclusively by the non-discrimination principle through the operation of the Act. A "relevant requirement" is of no effect in the destination part if (and to the extent that) it directly or indirectly discriminates against the incoming goods from the other part of the UK.
The Act's complex provisions about the application of the mutual recognition or non-discrimination principle are generally beyond the scope of this article but suffice to say that the application of the post-Brexit internal market rules should be given careful consideration when they apply.
On its introduction, UKIMA is controversial in part because of how the market access principles interact with varying regulatory requirements, introduced by the devolved legislatures acting within their statutory competence. The UK Government can, however, grant an exemption meaning that a particular set of rules will not be subject to the market access principles.
The Scottish Government's Deposit Return Scheme
In March 2020, the Scottish Government announced its intention to establish a Deposit Return Scheme (DRS), which would require drinks producers, importers, marketers, or anyone else offering goods for sale to pay a 20p deposit to place drinks containers made of metal, glass, or plastic on the market with the aim of encouraging recycling among the general public. Notionally, the deposit would be passed on to consumers at the point of purchase, who could recover the 20p when the container is returned for recycling. The other nations of the UK have also announced their intention to introduce Deposit Return Schemes of their own, but those intended schemes would not apply to glass drinks containers as the Scottish Government's does.
In UKIMA terms, the DRS would impose "relevant requirements" in terms of the market access principles. It would prohibit the marketing or sale of those goods if the producer is not registered with the Scottish Environmental Protection Agency, which applies to brand owners (if the product is branded in the UK), and importers (if it is branded elsewhere). That amounts to a "manner of sale" requirement which is caught by the non-discrimination principle, meaning that the implementing regulations would be of "no effect" if they are directly or indirectly discriminatory of goods that are produced in or pass through the rest of the UK to reach Scotland.
That leaves the DRS in a position where it would require an exemption from the scope of the market access principles to avoid the risk that it is of "no effect". A temporary exclusion was granted by the UK Government on the application of the Scottish Government. The exemption was restricted in that it did not grant an exemption to the DRS from the scope of the market access principles as it relates to the sale and return of glass products, along with being conditional on commitments to ensure maximum interoperability of the UK's Deposit Return Schemes and harmonising regulatory standards. Following the temporary exclusion, the Scottish Government has now postponed the implementation of the DRS to 1 October 2027.
Biffa Waste Services Limited v Scottish Ministers
The private litigation brought by Biffa against the Scottish Government concerns the manner in which the Scottish Government sought to implement the DRS.
The Scottish Government appointed Circularity Scotland Limited (CSL) as a scheme administrator in respect of the DRS. CSL is now in administration. In July 2022, Biffa entered into a contract with CSL in terms of which they became a "logistics provider" for the DRS, responsible for collecting, counting, transporting, and recycling material. Biffa and the Scottish Government are then said to have engaged in correspondence in which the Scottish Government made assurances that the DRS would be implemented. Biffa contends that it relied on assurances about the deliverability of the DRS and incurred significant upfront costs in preparation for the scheme amounting to £51.4 million.
Biffa are now seeking an award of damages from the Scottish Government arising from the decision to delay the implementation of the DRS comprised of their upfront costs and lost profits of £114.8 million.
Biffa's action is based on two alternative grounds
First, Biffa argues that the Scottish Government owed a duty of care to Biffa because they assumed responsibility for the intergovernmental relations necessary to the implementation of the DRS (i.e., seeking an exclusion for the DRS from the internal market principles) and failed to discharge their duty of care in that respect.
Second, and alternatively, Biffa argues that it relied on a letter from Lorna Slater MSP (Minister for Green Skills, Circular Economy, and Biodiversity, on behalf of the Scottish Ministers) in which assurances were said to be given about the DRS. Biffa contends that the statements in the letter amounted to negligent misrepresentation.
The Scottish Government sought to have the action dismissed, arguing that they were under no duty of care and in any case challenging the relevance of the action.
In a written opinion, Lord Clark refused to dismiss the action, and has ordered that the case will proceed to proof to establish whether the Scottish Government was under a duty of care, whether any such duty would have been breached, and whether the terms of correspondence to Biffa about the DRS amounted to negligent misrepresentation.
Comment
Through its market access principles, one of the effects of the Act is arguably to make the operation of the internal market a matter for intergovernmental relations. That has not been the subject of extensive litigation to date and very few cases to date have referred to the UKIMA at all. The most substantial case ended in 2021, in which the General Counsel for Wales sought judicial declarations on the Act's interaction with devolved legislative competence through judicial review proceedings. The action was unsuccessful on the basis that it was brought prematurely, and the court declined to consider the consistency of UKIMA with devolved legislative competence on a hypothetical basis. No intergovernmental dispute has materialised in court since then.
Within that context, the Biffa case is significant because it is the first time that the scheme of the UKIMA has been subject to judicial scrutiny in private litigation. The discrete legal questions that will decide the dispute (namely the alleged existence and breach of a duty of care and alleged misrepresentation) are highly fact-specific and governed by the law of delict (tort), which is not limited to cases involving UKIMA. However, Biffa v Scottish Ministers is likely to be important in determining the role of UKIMA at the public-private sector interface, where the services under contract fall within the scope of the market access principles, or their successful provision relies on an exemption being secured. If the court finds that a duty of care existed in this case, its decision on the nature of that duty will have practical consequences for how governmental bodies and suppliers' contract and protect their respective positions.
On 23 January, the Department for Business and Trade launched a consultation as part of its review of the UKIMA. An area under consultation is the balance between the desired outcomes of free movement of goods within the UK and devolved legislative competence. Once the UK Government has completed its review (expected to be by summer 2025), it is possible that it will introduce changes to the operation of the UKIMA. In the meantime, Biffa v Scottish Ministers will be closely monitored by those interested in how the internal market rules will influence public-private contractual relationships moving forward.
