Why is SNP government facing £170m court case over recycling scheme?

The Scottish government's bottle return scheme was postponed last year

The political fallout from the Scottish government's beleaguered bottle return scheme has been considerable, but the legal fallout could be equally as significant.

A waste management firm is suing the Scottish government for almost £170m over the collapse of the plans.

The Court of Session in Edinburgh has been told Scottish ministers were negligent when they claimed the scheme was viable.

Lawyers for the government say the company was aware of the risks involved and argue the claim should be dismissed.

Who is suing the government?

Having already been delayed due to concerns from businesses, the deposit return scheme was supposed to launch in August 2023.

But a matter of weeks before then it was pushed back to at least October 2025.

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.

What are the arguments?

In court summons, Biffa argued it was given "clear assurances" from former Green minister Lorna Slater - who has since left government after the end 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, and in the belief that ministers had "taken all necessary steps" to ensure it would be deliverable.

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

Former Green minister Lorna Slater claimed the UK government had sabotaged the scheme

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

The two-day Court of Session debate was held in November.

In January, Lord Clark 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.

The case is set to proceed to a full hearing.

If Biffa is successful, that could leave a sizeable hole in the government’s finances.

Alternately, a victory for the government in the courts could leave a major employer out of pocket.

What is a deposit return scheme?

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.

Political fallout

Lorna 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.

SNP Westminster leader Stephen Flynn has cited the row over the scheme among “self-inflicted wounds” suffered by his party in July's general election campaign.

He told reporters at the SNP conference: “While the Scottish people were in the midst of a cost of living crisis, we were having an argument with the UK government about a bottle bank."