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BAA defeats UK Government in EU court

THE British Aggregates Association (BAA) has won its case in the European Union General Court against the exemption or derogation from the Aggregates Levy in Northern Ireland. At present quarries in the province pay 40p per tonne under the Levy exemption, whereas UK mainland producers have to pay £2.00 per tonne. 

The Court heard how the Aggregates Levy derogation for Northern Ireland involved state aid which, according to the EU Commission, was justified by reference to the ‘Environmental Guidelines’ that were in force at the time of the decision to allow the exemption.

However, the Court agreed with the BAA that the EU Commission had not conducted a diligent investigation of the Northern Ireland exemption or of the BAA’s complaint, and as such the Commission could not, therefore, lawfully decide that the derogation was compatible with EU law.

The Court’s finding – that the EU Commission was wrong – effectively annuls its decision and means the Commission must now reconsider whether the exemption is legally acceptable.

According to the BAA, there now appear to be four possible outcomes.

  1. The Commission could decide on different grounds that the exemption is justified, but this is thought to be very unlikely for legal reasons.
  2. The Commission could decide that the exemption was not justified and that any aid granted to date by virtue of its application is illegal. The Commission would then order the UK to recover illegally granted aid, plus interest. In the case of the Northern Ireland exemption, this would require companies that had benefited from the exemption to make retroactive payments of the full amount of the Levy.
  3. The UK Government could withdraw its state aid notification, eliminating the need for the Commission to take a further decision. In practice, if it were to do this, the UK Government would almost certainly have to suspend the exemption and the Levy would be applied in Northern Ireland at the full rate, which might avoid the need for operators who have benefited from the exemption to make retrospective payments.
  4. The UK Government might seek to amend the exemption, in order to formulate it in a manner that would allow the Commission to approve it, although in the interim, the same issues would arise with respect to aid granted to date as in scenario 3.

Commenting on the General Court’s finding, BAA director Robert Durward said: ‘We are delighted that the Court agreed with us that the proper process was not followed with the Northern Ireland derogation and that it will have to be revised. The previous UK Government proposed to devolve the Levy and this judgment now represents an excellent argument for it to be scrapped altogether.’

According to the BAA, now that the argument on discriminatory taxation has been won, quarries in the Republic of Ireland that have paid the full level of tax on aggregate imported to Northern Ireland may be able to claim for repayment. Likewise, the BAA says quarries in other parts of the UK may also be able to make a claim for repayment if they have supplied aggregates to the province.

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