Liberty Insurance Ltd and Anor v EirGrid Plc

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Michael Quinn
• Judgment Date: 02 April 2026
• Neutral Citation: [2026] IEHC 210
• Docket Number: RECORD NO. 2017/7333P

Between

Liberty Insurance Limited

and

Snugborough Windfarm (Roi) Limited (In Liquidation)

Plaintiffs

and

Eirgrid Plc

Defendant

[2026] IEHC 210

RECORD NO. 2017/7333P

THE HIGH COURT

COMMERICAL

Penalty – Discrimination – Preliminary objections – Plaintiffs claiming that the contractual requirement for a bond and the amount of the bond amounted to a penalty which was unenforceable – Whether the defendant discriminated against the plaintiffs

Facts: The second plaintiff, Snugborough Windfarm (ROI) Ltd, on 29 October 2009, entered a Connection Agreement with the defendant, EirGrid plc, committing that it would construct an electricity generating facility at Ballakelly, County Louth, which would connect to the national grid. As security for that commitment, it procured that Quinn Insurance Ltd, the predecessor of the first plaintiff, Liberty Insurance Ltd, issue a bond in favour of the defendant. When the second plaintiff failed to construct the facility and connect to the grid, the defendant drew down the bond in its full amount of €4.45m, which the first plaintiff paid. The plaintiffs claimed that the contractual requirement for the bond and the amount of the bond amounted to a penalty which was unenforceable. They also claimed that in drawing down the bond the defendant discriminated against them in breach of the Electricity Regulation Act 1999 and the European Communities (Internal Market in Electricity) Regulations 2000. They claimed for recoupment of the bond amount paid over. The defendant denied that the law relating to penalties applied to the requirement for the bond, and denied that it discriminated unlawfully against the plaintiffs. It advanced a number of preliminary objections to the proceedings, including the Statute of Limitations, laches, estoppel, and claimed that if the bond requirement and its quantum were to be challenged the proper procedure was judicial review of relevant decisions and directions of its regulator, then the Commission for Energy Regulation and that the proceedings were a collateral attack to those decisions and distinctions.

Held by the High Court (Quinn J) that none of the preliminary objections were a bar to the two substantive claims pursued at the trial. He held that the purpose of the bond was to deter hoarding of capacity on the grid; it was not to deter breaches of individual connection agreements, and was not an unenforceable penalty. He held that the quantum of the bond was determined by a formula set by the Commission for Regulation of Utilities, whose decisions and directions to the defendant were not challenged, and could not be challenged in the proceedings. He held that the quantum of the bond was not, and was not required to be, set by reference to the components of Deep Reinforcement Works undertaken on the project, but was a function of the contracted capacity; it was not disproportionate or extravagant and when paid, it was not a ‘windfall’ in the hands of the defendant. He held that the allegation of unlawful discrimination was not made out. He held that the remedy sought in relation to discrimination namely a declaration that the demand on the bond was discriminatory and ultra vires must be refused; similarly this could not constitute a ground for any of the other declarations sought such as a declaration of unjust enrichment, a declaration that the sum of €4.45 million is held in trust for the benefit of the plaintiffs or that the plaintiffs are entitled to “an equitable charge over the assets of the defendant to the value of €4.45 million”.

Quinn J dismissed the action.

Action dismissed.

JUDGMENT of Mr. Justice Michael Quinn delivered on the 2 ^nd day of April 2026

Table of Contents

PART ONE: INTRODUCTION	3
Background	4
PART TWO: THE BALLAKELLY FACILITY	5
Termination of Connection Agreement and draw down of the bond	7
PART THREE: THESE PROCEEDINGS	9
PART FOUR: THE ACT, REGULATIONS, AND LICENCE OF THE DEFENDANT	14
Electricity Regulation Act 1999	14
European Communities (Internal Market in Electricity) Regulations, 2000	15
Memorandum of Association of the defendant	16
29 June 2006: Eirgrid Transmission System Operator Licence	17
PART FIVE: COMMISSION DECISIONS	18
19 December 2003 CER/03/298: Regulator Consultation on Structure of Tariffs	18
25 August 2009 CER/09/138, Decision Paper on Electricity Network Connection Policy	19
12 October 2016: CER/16/284: Connection Policy Transitional Arrangements (“the Amnesty”)	22
PART SIX: CHRONOLOGY	23
17 July 2008 Offer Letter	23
29 October 2009, Transmission Connection Agreement	27
July 2013: General Conditions	29
9 September 2008: The MEC bond	34
Events after the Connection Agreement	35
Termination of the Connection Agreement	38
Demand on the bond	39
PART SEVEN: THE PRELIMINARY OBJECTIONS	40
First Objection: Locus Standi	40
Subrogation	40
Assignment dated 10 August 2016	44
Second Objection: Statute of Limitations 1957	46
Third Objection: Laches	47
Fourth Objection: Connection Agreement validly terminated: Clause 3.2	50
Fifth Objection: Estoppel by Deed	52
Sixth Objection: Alternative Dispute Resolution	54
Seventh Objection: Collateral Attack/Abuse of Process	56
PART EIGHT: THE PENALTY CLAIM	61
Discussion	63
Nature of the Bond	65
Penalty Clauses Generally	69
The bond as a deterrent	73
The Purpose of the Bond	76
The Secondary Purpose	78
CER/09/138 25 August 2009: Decision on Electricity Network Connection Policy	83
Evidence of Mr. Mullan	85
Evidence of Mr. Thompson	87
Deep Reinforcement Works	90
Energy supply	94
Conclusion on the Penalty Claim	98
PART NINE: THE DISCRIMINATION CLAIM	98
12 October 2016: The Amnesty CER/16/284	100
Cuilleen and Suir	106
Ballakelly	108
The first plaintiff	113
Conclusion as regards discrimination	115
PART TEN: CONCLUSION	116

PART ONE: INTRODUCTION

1 . The Electricity Supply Board (ESB) is the owner of the electricity transmission and distribution network in the State. The grid infrastructure of the network is operated by the defendant, which is known as the transmission systems operator (“TSO”). The defendant is owned by the State and is responsible for the operation and development of the grid. It is regulated pursuant to the Electricity Regulation Act 1999 (“the Act”) as amended, and by the European Communities (Internal Market in Electricity) Regulations 2000 ( SI 445/2000) as amended, the “Regulations”.

2 . On 29 October 2009, the second named plaintiff entered a Connection Agreement with the defendant, committing that it would construct an electricity generating facility at Ballakelly, County Louth, which would connect to the national grid. As security for this commitment, it procured that the predecessor of the first plaintiff, Quinn Insurance Limited, issue a bond in favour of the defendant. When the second plaintiff failed to construct the facility and connect to the grid, the defendant drew down the bond in its full amount of €4.45m, which the first plaintiff paid. In these proceedings the plaintiffs claim that the contractual requirement for the bond and the amount of the bond amounted to a penalty which is unenforceable. They also claim that in drawing down the bond the defendant discriminated against them in breach of the Electricity Regulation Act 1999 and the European Communities (Internal Market in Electricity) Regulations 2000 ( SI 445/2000). They claim for recoupment of the bond amount paid over.

3 . The defendant denies that the law relating to penalties applies to the requirement for the bond, and denies that it discriminated unlawfully against the plaintiffs. It advances a number of preliminary objections to the proceedings, including the Statute of Limitations, laches, estoppel, and claim that if the bond requirement and its quantum were to be challenged the proper procedure was judicial review of relevant decisions and directions of its regulator, then the Commission for Energy Regulation and that these proceedings are a collateral attack to those decisions and distinctions.

Background

4 . The defendant is licensed by the Commission for Regulation of Utilities, formerly the Commission for Energy Regulation, to which I refer as the Commission. The Commission issues directions, decisions and authorisations to the defendant pursuant to the Act and the Regulations.

5 . A key function of the defendant is to manage the network of connections to the national grid, both from generators of power and from users and distributors. A central feature of this function is to receive applications for connections, to offer connection terms, and where offers are made and accepted, to enter into agreements, known as Connection Agreements for parties to connect to and use the transmission system. Connection Agreements govern the terms and conditions, including pricing, on which generators and others may connect.

6 . Each connection absorbs transmission capacity in the grid which is limited. Therefore, in determining the allocation of connections and the conditions of connections one of the important policies is to ensure that capacity in the network is not utilised or committed to parties whose applications are speculative or who ultimately are unable or fail to complete their projects and fail to deliver energy through their committed connection, thereby “hoarding” capacity that could have been availed of by other generators. To discourage such hoarding of network capacity one of the typical preconditions of Connection Agreements is that the applicant provide security for its commitment to proceed. The typical form of such security is the provision of a bond referred to as a Maximum Export Capacity Bond, an...