(This post originally appeared on the UK Supreme Court blog.)
On 25 February 2015, the Supreme Court handed down its judgments in R (Rotherham Metropolitan BC and Ors) v Secretary of State for Business, Innovation and Skills  UKSC 6. The subject-matter was the allocation of European Structural Funds. Hardly a topic to get the pulse racing, you might think, but the judgments in fact contain important dicta, and differences of view, as to the role of the courts in reviewing decisions concerning one of the core functions of the State, namely the (re-)distribution of money.
The “money” in question was funds allocated by the European Commission to the UK that were to be distributed to the regions with the aim of “reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions”, to quote from Article 174 TFEU. The facts were complex; to summarise them would lengthen this post considerably. Lord Sumption, giving the leading judgment for the majority, explained that the appeal arose
“out of the complaint of a number of local authorities in Merseyside and South Yorkshire about the way in which it is proposed to distribute funds allocated to the United Kingdom for the years 2014 to 2020. The appellants say that they should receive more and other regions correspondingly less” (para 1).
It might be said that the last sentence rather mischaracterises the local authorities’ case: they argued that the regions of which they were part had been discriminated against vis-à-vis (1) a Scottish region, the Highlands and Islands (which, they claimed, was in a similar position but was given much more money), and (2) several English regions (which, they claimed, were differently situated but treated in the same way as the claimants, to the claimants’ detriment.
The appeal thus gave rise to arguments about equal treatment under EU law. Interestingly, however, justices on both sides of the actual result (the Court was split 4:3) appeared to accept that the general EU principle of equal treatment mirrored the common law position under the irrationality head of judicial review. Lord Sumption, referring to Lord Hoffmann’s speech in Matadeen v Pointu  1 AC 98 and that of Baroness Hale in Ghaidan v Godin-Mendoza  2 AC 557, stated that the principle of equality was “not a principle special to the jurisprudence of the European Union. It is fundamental to any rational system of law” (para 26). The same point is implicit in the dissenting judgment of Lord Mance at para 162. In this way, as Mark Elliot has pointed out, the judgments are consistent with other recent judgments emphasising the common law as a source of fundamental rights and values.
Another point on which there was agreement was the role (and limits) of the proportionality principle, which like equality is a general principle of EU law (and now, seemingly, a (common law) head of judicial review in its own right: see Pham  UKSC 19, commented on here). The appellants had argued that the decision had imposed a disproportionate burden on them, but Lord Sumption (para 47) and Lord Mance (para 141) agreed that, in this case, proportionality did not add anything to the case based on discrimination. As Lord Sumption said:
“The problem about [the appellants’] submission is that it fails to answer the question: disproportionate to what? Proportionality is a test for assessing the lawfulness of a decision-maker’s choice between some legal norm and a competing public interest. Baldly stated, the principle is that where the act of a public authority derogates from some legal standard in pursuit of a recognised but inconsistent public interest, the question arises whether the derogation is worth it. In this case the only legal standard by which the treatment of Merseyside and South Yorkshire can be regarded as disproportionately onerous to them is provided by the terms of the 2013 Regulation and the principle of equality. The two regions have no entitlement to support from the Structural Funds except what they can derive from these two sources. If the Secretary of State’s decisions are consistent with both, as I consider them to have been, their treatment cannot be regarded as disproportionate.” (para 47)
The major issue of principle on which the Court was divided, however, concerned the role of the Court in reviewing the decision at issue.
Lord Sumption’s approach was one of considerable deference. In his “preliminary observations”, at paras 22-24, he opined that:
(1) the Secretary of State’s (“SoS”) allocation of funding was “a discretionary decision of a kind which the courts have traditionally been reluctant to disturb”. There was no right answer prescribed by EU law as to how funds should be distributed within a Member State nor indeed any clear principle on which it was to be done. The SoS “was required to make a complex evaluation of a wide range of overlapping criteria, all of which involved difficult and sometimes technical judgments about matters of social and economic policy”. His Lordship referred with approval to similar analysis contained in a lecture by Lord Hoffmann, “Separation of Powers” 7 JR 137 (2002).
(2) Moreover, “it was a judgment of a particularly delicate kind, involving the distribution of finite resources, including domestic taxpayers’ funds as well as EU funds, between the four countries and the distinctive regions of the United Kingdom. In such cases, the Secretary of State is in reality arbitrating between different public interests affecting different parts of our community. It is an exercise in which the legitimacy of the decision-making process depends to a high degree on the fact that ministers are answerable politically to Parliament.”
(3) Here, the allocations at issue were not a matter solely for the decision of the UK or SoS as its representative. Under the EU scheme, the UK made proposals, which were then embodied in a partnership agreement with the Commission, which in turn was implemented by way of a Commission decision. The Commission’s involvement did not take the SoS’s decision beyond the realms of judicial review, but it was “the main mechanism of compliance envisaged in the 2013 Regulation. The Commission is an expert administrative body at arms’ length from the Secretary of State, with considerable experience of the economic and social issues involved. It is able to review the economic merits of the Secretary of State’s judgments and if necessary substitute its own evaluation in a way that is beyond the institutional competence of any court, let alone a national court. The Commission is evidently satisfied that the Partnership Agreement complies with the 2013 Regulation. That does not rule out the possibility that it may be equally satisfied with some alternative proposal. But a national court should be extremely cautious before accepting that a proposal is inconsistent with the 2013 Regulation which the Commission charged with applying it has found to be consistent with it.”
In a concurring judgment, Lord Neuberger was prepared to endorse deference on institutional grounds (para 62) but was more wary about endorsing it on democratic grounds. At para 64 he said:
“I agree with the thrust of what Lord Sumption says on this aspect in his paras 22-23, but, although there is obvious force in the passage which he quotes from Lord Hoffmann’s speech, I think the issue is susceptible to somewhat more subtle and discriminating analysis than might be inferred from reading that passage. To say that the “allocation of public expenditure … is very much a matter for democratic decision” takes matters very little further at least in connection with a decision made by the executive. The fact that the legislature assigns such a decision to the executive does not alter the fact that it is the executive’s decision and not that of the legislature. In any event, the legislature will obviously have intended the rule of law to apply, so that such a decision, as with any executive decision, must be susceptible to judicial oversight.”
He went on to say, however, at para 65:
“Nonetheless, a court should be very slow about interfering with a high level decision as to how to distribute a large sum of money between regions of the UK. But the degree of restraint which a court should show must depend on the purpose of the allocation, the legal framework pursuant to which the resources are allocated, and the grounds put forward to justify the allocation. The line between judicial over-activism and judicial timidity is sometimes a little hard to tread with confidence, but it is worth remembering that, while judicial bravery and independence are essential, the rule of law is not served by judges failing to accord appropriate respect to the primary policy-making and decision-making powers of the executive.”
Lord Mance’s judgment (with which Lady Hale agreed) reveals a quite different approach. Whilst he accepted the general proposition stated at para 70 of the Court of Appeal’s judgment that “the more complex and more judgment-based the decision, the greater the margin of discretion [that] should be afforded to the decision-maker”, such ‘light’ review “does not apply to, or exclude closer review of, a decision which is based on irrelevant considerations or fails to treat like cases alike” (para 142). Lord Mance also noted the lack of prior consultation with the appellants (or the regions of which they formed part) and the informality of the process by which the SoS made his decisions, which features took the case “outside the most extreme category of cases in which the courts have expressed reluctance judicially to review public funding decisions”. This latter point was echoed by Lord Carnwath in his own dissenting judgment at para 167.
This difference of approach in principle may, it is suggested, have influenced the justices’ respective analyses of the equal treatment arguments. This post does not delve into the detail of the arguments and respective analyses. It limits itself to just one possible illustration, namely Lord Mance’s sharply disagreement with Lord Sumption’s view of the SoS’s reasons for dividing the UK’s Structural Fund allocation between the 4 territories comprising the UK, which lay behind the more generous allocation to the Highlands and Islands.
The reasons were stated to be (i) transparency; (ii) simplicity; and (iii) a recognition of the status of the devolved administrations under the UK’s constitutional settlement. Lord Sumption considered this approach to be one that the SoS was entitled to adopt: among other things, he said that EU law was “not insensitive to the relationship between Member States and their internal federal or regional units of government and will not necessarily treat regional variations arising from the distribution of constitutional responsibility within a Member State as discriminatory” (para 32). However, for Lord Mance these were not reasons that related directly to the fund-specific mission of strengthening economic and social cohesion and reducing development disparities between regions:
“[o]n the contrary, they involve an initial four-way division, essentially for political reasons, which operates irrespective of the position in individual regions, and potentially and actually to the detriment of one or more English reasons…[r]egional disparities and consideration of the mission and goal identified in article 89 of Regulation 1303/2013 were displaced by territorial and political considerations deriving from the United Kingdom’s devolution settlements.” (para 154)
Interesting as this point may be, however, it is principally for the general dicta that this judgment will be consulted and relied upon in future public law cases.