It would have been "economic madness" to refuse authority for the Sellafield MOX plant knowing it would deprive Britain and BNFL of substantial economic benefit, the Court of Appeal heard yesterday.
On the final day of a legal challenge by Friends of the Earth and Greenpeace to overturn a High Court ruling that the British government was justified in approving the plant, Mr David Pannick, QC, for BNFL, argued ministers adopted "basic economic principles" when assessing the economic benefits of MOX.
That meant sunk costs of £470 million (sterling) - to build and prepare the plant for production before the case for MOX was considered by the British government - should be ignored because they could not be recovered even if the plant did not go ahead.
In addressing the economic benefits of MOX, Mr Pannick said, the Environment Secretary and the Health Secretary were entitled to conclude that the assessment should be carried out in accordance with well-established principles of economic rationality. "To take account of costs already expended would be to have regard to an economically irrelevant factor. One of the fundamental principles of economic rationality is that sunk costs are sunk - that bygones are bygones and have no part to play in assessing the economic advantages of a course of action," Mr Pannick said.
The challenge by the environmentalists, Mr Pannick said, was about the "proper construction" of Article 6 of an EU Basic Safety Standards Directive. It says member states must justify any practice resulting in exposure to ionizing radiation "by their economic, social or other benefits in relation to the health detriment they may cause." Mr Pannick said there was nothing in the Directive or International Commission on Radiological Protection recommendations requiring "a reversal of the laws of economics".
Greenpeace and Friends of the Earth argued earlier that in disregarding the £470 million sterling costs, the British government erred in law and the case for MOX was economically unjustified.
For the environmentalists, Lord Lester QC said capital costs were the costs of the new practice resulting in exposure to ionizing radiation and as such were relevant in an economic assessment of MOX that must produce a net positive economic benefit.
The capital costs, Lord Lester argued, "do not cease to be relevant because they have already been incurred" since the proper construction of Article 6 and the ICRP recommendations was concerned with all costs and benefits relating to a new practice.
Lord Justice Simon Brown, sitting with Lord Justice Waller and Lord Justice Dyson, reserved judgement.
The British government effectively began the break up of British Nuclear Fuels yesterday by removing its responsibility for nuclear waste management.
A new Liabilities Management Authority will assume control of the estimated £40 billion (sterling) of civil nuclear liabilities for waste management carried out by BNFL and the UK Atomic Energy Authority.
"The planned sell-off of the whole company is now abandoned," Mr Mark Johnston of Greenpeace said.