Case for judicial review on scheme administrators for deposit return scheme put out by order

In Abdul Majid and Son Ltd, Petitioner, the operator of a small retail enterprise petitioned for judicial review of a decision of a private limited company, formed to act as a scheme administrator of the deposit and return scheme (DRS) for the return of single use drinks containers sold within Scotland, determining the reasonable handling fee (RHF) payable under the DRS in terms of the Deposit and Return Scheme for Scotland Regulations SSI 2020/154.

The Deposit and Return Scheme for Scotland Regulations SSI 2020/154 provides a registered producer must:

• collect scheme packaging first made available by that producer to be marketed, offered for sale, or sold for the purposes of its retail sale in Scotland from a return point operator;
• pay to a person from whom the producer has collected scheme packaging, a sum equal to the deposit for each item of scheme packaging collected;
• pay to the person from whom the producer has collected scheme packaging, a reasonable handling fee charged by that person for each item of scheme packaging collected.

A "reasonable handling fee" is a fee charged by a return point operator in relation to scheme packaging returned by a consumer to that return point that takes into account the following:

• the cost of purchase, lease, maintenance, and upkeep of any reverse vending machine associated with the collection and storage of scheme packaging;
• the cost of materials used in respect of the collection and storage of scheme packaging;
• the rental value of any floor space utilised solely for the collection and storage of scheme packaging; and
• staff time dedicated solely to the collection and storage of scheme packaging.

Under the scheme, most retailers of scheme packaging would be obliged to be a return point operator (RPO). A membership agreement between the respondent and its founding members regulated the respondent's operation and its relationship with its members. The founding members included a number of the most significant producers of single use drinks containers in the Scottish market as well as certain trade associations. Other producers and RPOs might request to become members of the respondent but were not obliged to do so.

The respondent's briefing note explained that the level of the RHF had been calculated by an independent RHF consultant. In relation to the methodology used, it explained "the RHF consultant developed a detailed cost model aligned to the requirements of the regulations. Data to populate the model was sourced from the broad range of RPOs that will operate in Scotland, and augmented with and validated by input from other operating schemes around the world, and major independent reference points and indices. The model is designed to reflect the variation in costs across different types and sizes of RPOs and materials".

The petition submitted that the:

• 2020 regulations did not give the respondent power to determine the RHF and, even if the respondent had such a power, the RHF had to be based on the costs of the individual RPO as opposed to costs incurred across all retailers operating return points;
• respondents approach was contrary to general principles of EU law and, in particular the principles of proportionality, equal treatment and unrestricted competition;
• RHF set by the respondent was unfair to small enterprises and would amount to a distortion of competition between small and large retail enterprises.

At the substantive hearing, the respondent accepted that it:

• had no statutory power to determine the RHF;
• made no contention that the petitioner was required by any contractual obligation by virtue of the membership agreement to accept the RHF;
• accepted that it could not impose the RHF upon the petitioner; and
• submitted that in relation to the interpretation of the RHF definition, the factors referred to general costs experienced by retailers in Scotland as a whole as opposed to individual costs of the specific retailer's return point.

As the respondent accepted, it had no statutory power to set the RHF for any RPO, and the petitioner was not contractually bound to accept the RHF announced by it. The factors in the Deposit and Return Scheme for Scotland Regulations SSI 2020/154 which had to be taken into account in setting the RHF were by reference to the specific costs of that return point. The fee was charged by the RPO and it made sense for the RPO to fix that fee by reference to its own cost base which it would be familiar with.

The regulations also provided that the fee charged was in relation to packaging returned to "that return point" which indicated that the same RPO operating a number of return points might charge a different RHF depending on the costs incurred in operating a different return point. The factors were linked to the manner in which an individual RPO would collect and process the scheme packaging at "that return point".

The parties' submissions in relation to EU principles were not of any great assistance in construing the Deposit and Return Scheme for Scotland Regulations SSI 2020/154. The court was not willing to accept on the basis of the limited documentary evidence available at the substantive hearing that the respondent's approach which included a tiered system was inherently unfair to small retailers as a group when compared with larger retailers as a group. If there was a competition law issue linked to the level of the RHF, the competition appeal tribunal was the more appropriate forum for the resolution thereof.

It was easy to understand the respondent's concern where a scheme administrator was faced with individual RPOs setting their own RHF by reference to their individual costs. However, the respondent had to operate within the terms of the regulations as enacted. If the implementation of the regulations was thought to be impractical or excessively costly, the solution for the respondent was to ask the Scottish Government to reconsider the terms thereof. The respondent had sought to adopt an approach which ignored the clear working of the Deposit and Return Scheme for Scotland Regulations SSI 2020/154.

"As suggested by parties, I shall have the case put out by order to discuss the disposal of pleas-in-law and the terms of any declarator. The issue of expenses is reserved meantime".

Case for judicial review put out by order.