Government faces £170m court case over recycling scheme collapse

A waste firm’s bid to sue the Scottish government over the collapse of its bottle return scheme is to be heard at the Court of Session.

Biffa is seeking more than £166m in damages over the decision to delay the recycling plans in 2023.

The company argues that the government was negligent when it claimed the scheme was viable.

But Scottish ministers say that the waste firm was aware of the risks involved.

A bid by the government to have the case thrown out was rejected by the court earlier this year.

A judge ruled that the case should move to a full hearing, which begins on Tuesday and is expected to last for eight days.

Having already been delayed due to concerns from businesses, the deposit return scheme was supposed to start in August 2023. However, the plan was shelved weeks before the launch date.

That followed a dispute with the UK government, which refused to grant the scheme the go-ahead unless it conformed to a UK-wide approach excluding glass.

The firm that was due to manage the scheme, Circularity Scotland, collapsed. A non-profit company funded by the drinks industry, it folded with debts and liabilities of more than £86m.

One of its main creditors, Biffa Waste Services, is now suing the Scottish government.

The firm – which was appointed to collect recycled containers – is seeking up to £166.2m of reparations. This includes about £115m in projected profits over a 10-year contract with Circularity Scotland.

The rest of the total is made up of about £50m Biffa said it spent in preparation for the scheme – including buying vehicles and specialist equipment, leasing vehicle depots, processing sites and taking on extra staff.

In court summons, Biffa argued it was given “clear assurances” from former Green minister Lorna Slater – who left government after the collapse of the SNP-Green power-sharing agreement – that the scheme would go ahead.

The firm cited a letter sent by Slater in May 2022 reinforcing the government’s commitment to the plans.

Biffa said it signed its contract with Circularity Scotland as a “direct” result of the letter, and in the belief that ministers had “taken all necessary steps” to ensure that it would be deliverable.

However, the government said the assurances in the letter were neither “new nor unique”.

Its lawyers said Biffa was taking a commercial risk – and should have been aware of the legal challenges involved.

In January, the Court of Session dismissed an attempt by the government to have the case thrown out.

Lord Clark said that to win damages Biffa would have to convince the court the government had a duty of care to the firm, that it was breached and that it caused financial losses.

Biffa would have to prove that the firm relied on a written assurance given by Slater about the scheme’s viability, and that this led to financial losses.

He said “questions remain” about the costs incurred by the waste company and the amount of future profits it lost out on.

Following a freedom of information request, the Scottish government revealed in January that it had spent £168,000 on legal fees related to the case.

Deposit return schemes are used in many countries to encourage people to recycle drinks containers such as bottles and cans.

Under the Scottish government’s plans, a 20p deposit would be added to all single-use drinks containers made of PET plastic, metal or glass.

Consumers could reclaim the deposit by returning the container to retailers and hospitality premises that sell such single-use products to take away, or to specially-designed reverse vending machines.

Scotland is not expected to have a deposit return scheme until October 2027 at the earliest, when the UK government aims to launch its own version of the initiative.

Holyrood ministers are expected to align their scheme to match Westminster’s, though Wales has pulled out of a UK-wide approach because it wants to include glass.

Slater said she had no choice but to delay the deposit return scheme, accusing Conservative ministers at Westminster of sabotage.

A Scottish government review from March 2023 reported its plans were fraught with problems months before the UK government raised objections.

It has also emerged that the publicly-owned Scottish Investment Bank made an £8m loss on Circularity Scotland.

In 2024, SNP Westminster leader Stephen Flynn cited the row over the scheme among “self-inflicted wounds” suffered by his party ahead of a heavy general election defeat.

He told reporters that while Scots struggled with the cost of living crisis the SNP was “having an argument with the UK government about a bottle bank”.