Hounslow lock-out agreement not in breach of European law, High Court says

Mr Justice Coulson said that Hounslow Council's decision to enter into a lock-out agreement with Blenheim Centre owner Legal and General Assurance Society Ltd (LG) for redevelopment of a site next to the shopping centre was not in breach of the Treaty on the Functioning of the European Union (TFEU) as the matter was internal to the UK. The TFEU prohibits restrictions of services between EU member states.

The challenge was brought by AG Quidnet Hounslow LLP, which owns another shopping centre in Hounslow Town Centre. Quidnet claimed that the proposed agreement between LG and the Council was a public works agreement and was in breach of procurement rules. It further claimed that if the agreement was not a public works agreement, then it would still be in breach of the TFEU. The first claim was stayed in June to allow an expedited trial of the TFEU claim.

“L&G are a UK company. The council is a UK authority. Quidnet are a UK company. The land in question is in the UK. There is no evidence that any undertaking in any other member state is interested in the development of Key Site 1, Phase 2, in Hounslow town centre. In those circumstances, I conclude that this is an internal matter,” said Coulson J.

The Council had made the decision to enter into the lock-out agreement with LG for the purpose of negotiating a development agreement for the site. The agreement had reached its final draft, but had not yet been entered into. However, the agreement's heads of terms had no references to any express obligation on the part of LG to carry out any development. It was therefore not a contract for the provision of services as defined in the TFEU, the judge said.

“The essence of what is envisaged is an agreement for a long lease, with the council as the landlord and L&G as the tenant," the judge said.

A masterplan for the scheme was approved in February this year. The masterplan envisages the site as a “high quality and vibrant shopping, leisure and living area to connect the Blenheim Centre to the High Street”. The Council owns the freehold of around 60% of the site, L&G own about 20%, and the remaining 20% is owned by third parties. The development is therefore likely to require the exercise of the council’s compulsory purchase order powers. 

Following the High Court judgment, the case can now return to court to continue the stayed proceedings dealing with Quidnet's claim that the proposed agreement is in breach of procurement rules.