knowledge 16 March 2022 |

What Test Should the Court Apply When Deciding Whether to Grant a Stay of a Regulatory Decision?

In the case of Eircom Ltd v ComReg,¹ Eircom appealed ComReg’s decision setting new lower maximum prices that Eircom could charge for its broadband products in two regulated wholesale markets. Two operators in the wholesale market who would benefit from the decision setting lower maximum prices were notice parties to the appeal.

The relevant regulations² expressly provide that the lodging of the appeal with the High Court does not of itself affect the operation or implementation of the decision. Instead, the regulations permit appellants to apply to the court for a stay of the regulator’s decision pending a ruling on the appeal. In relation to the granting of a stay, the Regulations provide that the High Court:

“…may make such order staying or otherwise affecting the operation or implementation of the decision of the Regulator, or a part of that decision, as… [it]…considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the appeal.”

After the proceedings were entered into the Commercial List, Eircom applied for a stay. The matter was considered urgent in light of the fact that the decision was due to take effect on 1 March 2022.

The question for the court was the test to be applied by it when deciding whether to grant a stay. The matter was heard in late February and a judgment on the stay was delivered on 4 March 2022.

Applicable law

McDonald J said that the court had a discretion whether to grant the stay but that there was no Irish authority directly on point which identified the test to be applied in the context of the specific regulations in issue.

However, he noted that the Irish regulations gave effect to Directive 2002/21/EC,³ as amended and that national courts were obliged, in interpreting national implementing provisions, to do so in light of the wording and purpose of the relevant Directive in order to achieve the objectives pursued by that Directive.⁴

One of the Directive’s aims was to standardise the substantive approach to be taken on stay applications in the Member States, which should in turn be in line with the case law of the Court of Justice. It also stipulated that:

 “Interim measures suspending the effect of the decision of a national regulator authority should be granted only in urgent cases in order to prevent serious and irreparable damage to the party applying for those measures and if the balance of interests so requires.”⁵

McDonald J said that he was obliged to take these principles into account and also to apply the test set out by the CJEU in Zuckerfabrik.⁶ In summary, it was held there that:

“…suspension of enforcement of a national measure adopted in implementation of a Community regulation may be granted by a national court only:

1. if that court entertains serious doubts as to the validity of the Community measure... 
2. if there is urgency and a threat of serious and irreparable damage to the applicant;
3. and if the national court takes due account of the Community's interests.”

He said that while Zuckerfabrik did not refer to a balancing of interests save in respect to the need to take EU interests into account, it was clear both from the European legislation before him and from subsequent CJEU case law that a balancing of interests was an inherent part of the test.

Analysis of Zuckerfabrik

Looking at three elements of the Zuckerfabrik test in turn, McDonald J noted that as the parties here had made certain concessions for the purpose of the stay application, he did not need to decide whether a “serious doubts” had been raised “as to the validity of the Community measure”. However, having reviewed relevant case law, he did say that the test here might be less onerous than the language of “serious doubt” might imply and might not be different in substance to the arguable grounds test applied in a domestic context.

Moving on to the second requirement, he said that the applicant must show that a stay was required as a matter of urgency in the sense that it was necessary to avoid serious and irreversible damage to that party pending a decision on the merits. This was not dissimilar to national law.⁷ An applicant could not surmount this hurdle purely on the basis of hypothetical damage based on the occurrence of future uncertain events.⁸ In contrast with the position under domestic law,⁹ this element of the test should be established before any balancing of interests was considered.

Finally, in relation to that balancing of interests, he said that the relevant European legislation did not expressly identify what interests were to be taken into account. However, it seemed self-evident that the applicant’s interests should be weighed against the interests of all those who would be adversely affected by a stay. 

Here, this would extend to Eircom’s wholesale customers in the relevant markets, and also the ultimate retail customers.  The interests of the community at large and, in particular, the public interest in the orderly implementation of the regulatory regime should also be considered. 

The last of these also followed from the way in which the relevant legislation and case law contemplated that the jurisdiction to grant a stay would only be engaged where an applicant could show that, without it, it would be exposed to serious and irreparable harm.  The imposition of such an onerous threshold implied that there was an interest in allowing the immediate implementation of the regulatory decision, and this was also reflected in the default position; that pending the outcome of the appeal, the decision of the regulator should stand unless a stay was granted.  On that basis, he said that the approach here was not dissimilar to that taken in a domestic context under the Okunade principles.¹⁰  However, that was not the only public interest in play. The effectiveness of the appeal mechanism was also an important element. If the refusal of a stay rendered an appeal ineffective, that was a factor that might very well weigh heavily in the balance.¹¹

Finally, it was also clear from the Zuckerfabrik decision that as a condition of the grant of a stay, the court could require the applicant to provide a guarantee or undertaking.  This was very similar to domestic law. Accordingly, the existence or not of such an undertaking would be a very relevant factor in any balancing of interests. 

Application to the facts

McDonald J was satisfied that at least one threat of “serious and irreparable damage” had been established by Eircom to satisfy the Zuckerfabrik test. Turning to the balancing of interests, McDonald J considered the irrecoverable financial losses that Eircom would suffer if a stay was not granted and its related interest in securing the effectiveness of the appeal. These interests were equally balanced with the interests of its wholesale customers in avoiding any stay which would cause them irrecoverable loss. 

There were three other interests in play. First, Eircom's irrecoverable administrative costs linked to the implementation and possible later reversal of ComReg’s decision; second, the interests of the ultimate consumer; and third, the public interest in the enforcement of regulatory decisions of a competent regulator.

While ordinarily the consumer interests would be a very important factor, McDonald J largely discounted them here given uncertainty as to whether consumers would benefit from any price reduction pending the finalisation of the appeal.

On the two remaining factors, McDonald J said that if they were the only considerations then the balance would plainly tilt in favour of the public interest in upholding the regulatory regime. 

However, undertakings had been given to the court both by Eircom and their two largest wholesale customers. These notice parties opposed the stay. Both sides essentially undertook to compensate the other side for the most or all of the financial consequences arising from the grant or refusal of the stay, as the case might be.

Having considered the relevant financial implications for those involved; the fact that Eircom’s appeal would not be rendered ineffective by a stay given the undertakings proffered; the prospect of an early trial date; and the public interest, McDonald J declined to grant the stay.

Comment

This decision provides clarity for both regulators and regulated entities on the factors that the court will take into account when deciding to grant a stay of a regulatory decision which is made against the backdrop of European policy and law. Comments made by McDonald J in his judgment also give importance guidance as to the evidence that the applicant will need to present to the court and the rigour that the court will apply to the assessment of this evidence.

A key takeaway from the judgment is the emphasis placed on the public interest in the enforcement of regulatory decisions which will be welcome news to regulatory bodies. Equally, the guidance given on the applicable test and on the evidence required to secure a stay will be of interest to parties appealing regulatory decisions and seeking a stay pending the determination of the appeal.