Deposit return scheme blocked after issue became ‘politicised’, court told

The Scottish Government’s deposit return scheme was blocked after the matter became “politicised”, a court has heard.

Waste management firm Biffa is suing the Scottish Government for £51.4 million, following the decision to delay the proposed deposit return scheme (DRS).

The DRS, which was intended to come into force on August 16 2023, would have seen shoppers charged a deposit when buying drinks in cans and bottles, which would be repaid to them when empty containers were returned.

The Scottish Government changed its plans for the scheme when UK ministers used the Internal Market Act (IMA) to rule glass bottles could not be included.

The IMA governs rules on trade around the UK and was introduced post-Brexit.

Circularity Scotland (CSL), which was set up to administer the Scottish DRS, fell into administration in June 2023 and Biffa’s contract was terminated.

At the heart of Biffa’s case is a letter of “comfort” sent to the firm by then Scottish circular economy minister Lorna Slater in May 2022, which the firm alleges negligently misrepresented the true level of risk facing the project as it failed to mention the IMA.

In submissions to the Court of Session in Edinburgh on Thursday, the Scottish Government’s lawyer Gerry Moynihan KC cited evidence from former CSL chief executive David Harris that progress towards implementing DRS had been going well until early 2023.

He went on: “Harris confirms that until some stage in the first quarter of 2023, things were moving along smoothly.

“It then became politicised”.

He said the “winds changed” around the time former Scottish secretary Lord Alister Jack gave a statement about the scheme in the House of Commons, and the KC called judge Lord Sandison to disregard Lord Jack’s evidence that his opposition to the scheme had not been politically motivated.

Mr Moynihan also disputed the suggestion that the Scottish Government owed Biffa a duty of care, and said there was “no obligation” on it to ensure Biffa was aware of the risks around securing an IMA exclusion.

He explained that in 2022 the need for a DRS exclusion was not a “secret”, and it had been a matter of “open debate” in the business community.

“(Ministers) did not know whether Biffa knew it or not, but it was known to be a matter of debate,” he said.

“In my respectful submission, there was no duty of care on Scottish ministers at that point to raise the issue.”

He added that Biffa had not asked about the need for an IMA exclusion, and had the firm done so that information would have been shared with it.

He also pointed out that an IMA exclusion was a matter of “general law” and that Biffa, which he described as a “sophisticated commercial operation”, should have taken their own legal advice on the matter.

Earlier on Thursday, Biffa’s lawyer Roddy Dunlop KC said the letter from Ms Slater had “actively concealed” the risk the scheme would be undermined if the UK Government failed to grant an IMA exclusion.

He explained: “It’s being written to try and persuade Biffa to get past the mental roadblock they have got of not wanting to expose (themselves) to a risk of cancellation and delay.

“Looked at in context, a letter that says ‘we are unwaveringly committed to Aug 2023, nothing bad is going to happen to CSL, CSL have demonstrated an ability to endure for five years, this scheme will be the first in the UK’.

“All that without putting in the caveat – which could have been done in parenthesis, in half a sentence – ‘as long as we get an IMA exclusion’, is misrepresentation by omission.”

He added of the letter’s role in Biffa’s decision-making: “It was important. It was foundational.”

Judge Lord Sandison pointed out Ms Slater had only been asked by CSL to reassure Biffa on the Government’s commitment to the scheme, and the fact CSL was not going to be replaced, and she had done exactly that.

The judge also said that at the time the letter was sent, it was “true” Ms Slater genuinely believed securing an IMA exclusion would be possible.

Mr Dunlop responded that her degree of confidence had been “negligent” as it was without a “proper basis” and ignored “readily-available information”.

Lord Sandison’s decision is expected in early 2026.