Regulatory appeals are moving from the CMA to the CAT: what it means for regulated sectors

I have sat on the CMA panel for nine energy licence modification appeals and five water redeterminations. The government's new consultation would end that version of the process. The legal test barely changes in most sectors. What changes is the prize. Win an appeal today and a company can walk away with a different number. Win under the proposed regime and you get sent back to the regulator to start over. For water, energy and aviation companies, that difference matters more than any change to the legal test itself.

On 17 July 2026, the Department for Business and Trade published a consultation proposing to transfer these regulatory appeals from the Competition and Markets Authority (CMA) to the Competition Appeal Tribunal (CAT). The proposal covers price control and licence modification appeals in water (Ofwat), energy (Ofgem and NIAUR), aviation (CAA) and postal services and telecoms price controls (Ofcom), with responses due by 25 September 2026. Part of the rationale is one of institutional fit. The CMA's primary role is a competition one - investigating markets, reviewing mergers and enforcing competition law - and hearing appeals against sector regulators is a distinct, adjudicative function that sits somewhat apart from that core remit. It also draws on capacity the CMA might otherwise devote to its competition work.

Only 15% of businesses surveyed in 2024 found the current appeals process easy and transparent. The 2021 Penrose report described the existing landscape as a "complicated thicket of different legal routes and rules". Moving appeals to the CAT, a specialist tribunal already handling competition and telecoms disputes, promises a more consistent, better resourced forum and frees CMA capacity for its core competition remit. What follows is less about whether that trade-off is right in principle and more about what changes in practice, sector by sector, for water, energy and aviation.

The standard of review varies a good deal by sector today. Water redeterminations let the CMA form its own view on disputed points, including substituting a different figure, without needing to find a specific error. Energy licence modification appeals already run on a narrower, grounds-limited test: rather than reopening the question for fresh judgment, the appellant must identify a specific error in the regulator's decision, of fact, law or the exercise of discretion, and the CMA rules only on whether that error is made out. Aviation sits in between: the standard is grounds-limited, but the CMA currently retains the power to substitute its own decision for the CAA's, similar to water.

Government had previously signalled it wanted the remaining sectors to align toward the narrower energy and aviation test. What is now proposed instead is that every sector, water included, moves to grounds-based CAT review with no power to substitute a figure - the most deferential standard of the group, and the one telecoms already comes closest to. For telecoms the change is slight: it keeps its forum and simply loses its power to refer price-control questions to the CMA. For water it is the largest jump of all, from full-merits redetermination to a test on which it can no longer win a different number outright.

So far this is about the legal test and what a company wins if it succeeds. But the reform changes something else too: who hears the appeal, and how it is run. A CMA panel works with a dedicated inquiry team of case officers, economists and lawyers who spend months building up the factual and analytical record alongside the panel itself. The process is thorough and largely inquisitorial: the panel and its team probe the evidence directly rather than relying solely on what the parties put in front of them. The CMA employs a headcount in four figures on a budget above £130 million, while the CAT operates with a team of roughly two dozen people on a budget nearer £6 million, currently covering more than eighty active cases across all of its jurisdictions. This gap in resources is not just a matter of scale; it shapes how each body approaches a case.

The CAT works differently, in a more adversarial format, with the regulator and appellants' counsel and experts each building and testing a case and the tribunal deciding between the positions put to it rather than developing its own independent evidential base to the same degree. Each body is set up for what it does. But the shift will change how appeals are prepared and run, not just who hears them, with more emphasis on cross-examination, on the framing of expert evidence and on parties building the record themselves rather than a panel team doing much of it for them.

A harmonised appeal standard

The CAT would apply judicial review principles, starting from the legality and reasonableness of the regulator's process, while also giving due regard to the merits, which lets it look past process to the substance of the decision rather than stopping at a pure legality check. The resulting threshold is whether the regulator's decision was materially wrong. Appellants would have to specify upfront whether they are alleging an error of fact, law or discretion. New evidence could be admitted where just and proportionate and cross-examination would be available under CAT rules. Given the sector variation above, this is a meaningful shift for water in particular, and a smaller one everywhere else. It also puts a premium on how expert evidence is framed and tested from the outset of an appeal.

Telecoms is the test case for what this can mean in practice: since the standard there changed from a full merits review to the current judicial review approach in 2017, only two cases have gone to a full hearing, against more than 40 in the years before the change. If the same mechanisms play out elsewhere, a similar fall in appeal numbers across water, energy and aviation looks like a reasonable prediction. The open question is what that fall would represent. In telecoms, it may simply reflect fewer marginal claims being filed under a stricter test. But price control disputes are different: they turn on high-value, technical questions such as WACC, where reasonable experts routinely disagree. There, a similar drop is just as likely to mean that real errors are going uncorrected - not that regulators are making fewer of them.

Remedies

This brings the argument back to where it started: the prize. The change of forum and standard matters, but the sharpest practical difference lies in what a company can actually win. Even where a company succeeds, the CAT's power would be limited to quashing the regulator's decision and remitting it back for reconsideration; it could not substitute its own figure or its own decision. That is a change for water and aviation, both of which currently allow the CMA to substitute its own view. A successful appeal would restart the dispute at the regulator rather than end it, with whatever further appeal rights follow from that fresh decision. Companies should factor that into how long a dispute is likely to run and what it is worth pursuing.

Harmonised eligibility

The consultation proposes a common test for who can bring or intervene in an appeal: licence holders, anyone materially affected by a decision and representative bodies (including consumer groups) would be entitled to do so, subject to CAT permission. This widens standing in some sectors, energy in particular, where appeals are effectively company-only today and narrows it in others, such as telecoms, where the current test simply asks whether a person is "affected by" a decision and does not require CAT permission to appeal. It will shape who brings appeals and who intervenes across the board.

Process and costs

The CMA's bespoke, sector-specific appeal rules give way to a single set of CAT procedures and the more adversarial, cross-examination-led approach described above will shape how appeals are prepared in every sector, not only where the legal test changes. Costs are not addressed directly in the current consultation, but when a similar transfer was debated in 2013, industry pushed back hard on a CAT cost regime that left appellants and interveners bearing the great majority of costs and objected to proposals tilting cost awards further toward regulators. If costs allocation follows a similar pattern this time, it changes the calculation of whether an appeal is worth bringing at all, which makes it as contentious an issue as the standard of review.

Water

Water price control redeterminations work differently today than "redetermination" suggests: the CMA does not have time to rerun Ofwat's price control process from scratch and does not repeat the years-long consultation that produced the original determination. Within the areas a company has put in dispute, the CMA forms its own view rather than simply asking whether Ofwat erred. On WACC, for example, the CMA can and does reach a different figure without needing to identify a demonstrable mistake in Ofwat's approach; it is entitled to its own judgment on the disputed points, not just a check on Ofwat's reasoning. An appeal standard confines the CAT to correcting a specific, evidenced error, closing off an avenue that has, in recent PR24 redeterminations, delivered material uplifts without a demonstrable regulatory error. Getting the submission right first-time round, in the original engagement with Ofwat, becomes far more important than it has been and water companies will need to identify and evidence a limited number of material errors precisely, rather than putting a disputed issue up for fresh judgment.

Energy

Energy licence modification appeals already run on a grounds-limited standard, so the core legal test barely moves. A High Court judgment early this year in a case brought by Wales & West Utilities confirmed the current bar: the CMA must assess whether an appellant's alternative approach is "materially better" and offers "something more" than the regulator's, a formulation the reform risks unsettling just as it has become established through case law. For energy, the reform is much more about the process, standing and costs changes above than about the legal test itself.

Aviation

Aviation is easy to overlook in a water-and-energy framing, but it may see one of the sharper practical changes. The standard of review is already grounds-limited, similar to energy, but unlike energy, the CMA currently retains the power to substitute its own decision for the CAA's where an appeal succeeds. Losing that power moves aviation onto the same remit-only footing as water, even though its underlying legal test looks more like energy's. It shouldn't be assumed to simply follow the energy pattern.

Where this leaves regulated companies

The sharpest dividing line across all three may in fact be less about sector and more about the type of decision. Price control appeals of any kind, in water, in energy and in aviation's air traffic charge control, demand corporate finance, econometric and engineering expertise that a three-person tribunal without a supporting inquiry team will struggle to replicate. Simpler, non-price-control disputes are a more comfortable fit for a judicial-style forum wherever they arise.

The picture is patchier still once you look at what falls outside the reform altogether. This reform does not apply to all sectors. PSR appeals, for example, are excluded, reflecting HM Treasury's parallel plan to fold the PSR into the FCA and rail licence modifications are carved out pending the Railways Bill. Water and energy in the devolved nations follow a separate track, so transitional arrangements will matter as much as the end state.

This consultation was published on 17 July, days before a change of Prime Minister and it was drafted under the previous administration's priorities. A change of government does not usually derail a consultation of this kind and the underlying case for reform, resourcing, consistency and efficiency, is likely to outlast any single administration. But it would be wrong to assume the path from here to legislation is quite as settled as the consultation itself suggests.

Put together, the impact of this reform will vary more by sector and by type of dispute than a single narrative of "appeals move to the CAT" suggests. Water stands to lose the most on the standard of review itself; aviation stands to lose the most on remedy, since it is the sector combining a grounds-limited test with a substitution power it is about to give up; energy is affected more by process, standing and costs than by any change to its legal test; and telecoms, the model being exported to everyone else, offers the clearest evidence yet of what a narrower standard can do to how many appeals actually get brought. None of that settles whether the reform is the right answer. But it does mean regulated companies should not assume their own sector is a bystander simply because its headline standard of review looks unchanged. Firms have until 25 September to make that case and the areas most worth spending that time on, costs and eligibility, are exactly the ones the consultation has left thinnest.

David Thomas is a founding partner of DT Economics LLP, a former panel member at the CMA and advises on regulatory appeals and price control disputes across water, energy, aviation and telecoms.