R (Federation of Tour Operators and Others) v HM Treasury and Others
| Jurisdiction | England & Wales |
| Judgment Date | 04 September 2007 |
| Neutral Citation | [2007] EWHC 2062 (Admin) |
| Docket Number | Case No: CO/1505/2007 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 04 September 2007 |
[2007] EWHC 2062 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Mr Justice Stanley Burnton
Case No: CO/1505/2007
Charles Haddon-Cave QC and Tim Ward (instructed by Herbert Smith ) for the Claimants
David Anderson QC and Sarah Lee (instructed by the General Counsel and Solicitor to Her Majesty's Revenue and Customs acting as agent for HM Treasury ) for the Defendant
Clive Lewis QC and Ben Hooper (instructed by the Treasury Solicitor ) for HM Attorney General, intervening on behalf of the Speaker of the House of Commons
Her Majesty's Revenue and Customs did not appear and were not represented.
Hearing dates: 17, 18, 19 and 20 July 2007
Judgement
Stanley Burnton J :
Introduction
On 6 December 2006, the Chancellor of the Exchequer announced, in his Pre-Budget Report (referred to as the "PBR"), the doubling of Air Passenger Duty ("APD" or "the Duty") with effect from 1 February 2007, only 7 weeks later. Unlike airlines, tour operators, who sell package holidays, were largely precluded, by the Package Travel, Package Holidays and Package Tours Regulations 1992 ("the Package Travel Regulations"), from passing the increase on to those of their travelling customers who had already booked their holidays. The tour operators immediately brought this to the attention of the Government. The Government however refused to postpone or to modify the introduction of the increase in the Duty. The increase has been given effect by the Finance Act 2007, which received the Royal Assent on 19 July 2007.
In these proceedings, the Claimants, the Federation of Tour Operators ("the FTO"), the trade association that represents the major UK tour operators, and two representative tour operators, contend that the increase in APD was unlawful, and that the Duty itself has always been unlawful. They contend:
(a) that the imposition of the Duty is in breach of Article 15 of the 1944 Chicago Convention on International Civil Aviation (known as the Chicago Convention), which has been incorporated into our municipal law by the EU legislation on the creation of a Single European Sky;
(b) that the increase in the Duty, imposed in the manner in which it was, infringed their rights under Article 1 of the First Protocol ("A1P1") to the European Convention on Human Rights;
(c) that the imposition of APD or its increase is and was contrary to Article 49 of the European Treaty.
The Treasury contends that none of these grounds of challenge is well founded. It contends that Article 15 of the Chicago Convention has no application to APD; that in any event the European legislation relied upon by the Claimants does not apply to APD; that the increase in APD did not infringe the Claimants' Convention right under A1P1; and its imposition and increase did not and do not infringe Article 49 of the EC Treaty.
Her Majesty's Revenue and Customs is responsible for the collection of the Duty. It was joined as an Interested Party, but has not taken a separate part in these proceedings on the basis that its case is adequately represented by the Treasury.
The Speaker of the House of Commons intervened because of the Claimants' reliance in these proceedings on evidence given to Committees of the House and on a report of the Treasury Select Committee. It was submitted on his behalf that their reliance on these matters in these proceedings involved a breach of Article 9 of the Bill of Rights and the wider principle of Parliamentary privilege.
Although the decision to impose APD dates from 1994, no point has been taken by the Treasury on the Claimants' delay in bringing proceedings to challenge its original imposition. Of course, no proceedings could then have been brought in this Court challenging the tax under the European Convention on Human Rights, since the Human Rights Act 1998 did not come into force until October 2000. Similarly, the challenge based on Article 15 of the Chicago Convention could not have been brought until its alleged incorporation into our municipal law by Article 14 of the Service Provision Regulation (EC) No. 550/2004, which came into force on 20 April 2004. Proceedings could, however, have been brought challenging the Duty under Article 49 of the European Treaty.
This was a rolled-up hearing, i.e. a hearing of the Claimants' application for permission to apply for judicial review, with the substantive hearing to follow immediately if permission was granted. The parties adduced comprehensively the evidence on which they relied (the evidence to which the Speaker objected being considered de bene esse ) and made their submissions on all the issues in the case. It is evident that the Claimants' claim is arguable, and permission to apply for judicial review will therefore be granted. I consider below whether their case for judicial review is made out.
APD and the Package Travel Regulations
APD was introduced by section 28 of the Finance Act 1994. It provided:
Air passenger duty
28(1) A duty to be known as air passenger duty shall be charged in accordance with this Chapter on the carriage on a chargeable aircraft of any chargeable passenger.
(2) Subject to the provisions of this Chapter about accounting and payment, the duty in respect of any carriage on an aircraft of a chargeable passenger –
(a) becomes due when the aircraft first takes off on the passenger's flight, and
(b) shall be paid by the operator of the aircraft.
(3) Subject to section 29 below, every aircraft designed or adapted to carry persons in addition to the flight crew is a chargeable aircraft for the purposes of this Chapter.
(4) Subject to sections 31 and 32 below, every passenger on an aircraft is a chargeable passenger for the purposes of this Chapter if his flight begins at an airport in the United Kingdom.
(5) In this Chapter, "flight", in relation to any person, means his carriage on an aircraft; and for the purposes of this Chapter, a person's flight is to be treated as beginning when he first boards the aircraft and ending when he finally disembarks from the aircraft.
Although the Duty is payable by the operator of the aircraft, where the flight ticket has been purchased otherwise than as part of a package airlines' standard terms normally permit the operator to recover the duty, and any increase in it, from the passenger, and in practice it normally does so.
Where in the case of a scheduled flight the ticket has been purchased by a tour operator as part of a package holiday, the contract between the operator of the aircraft and the tour operator will normally provide for the cost of the duty to be passed on to the tour operator. Similarly, in the case of a charter flight arranged by a tour operator, the charter contract will normally require the tour operator to bear the cost of the APD payable in respect of the passengers. If the tour operator is itself the flight operator, it will necessarily bear the liability for payment of the Duty.
However, unlike a flight operator, the ability of a tour operator to pass on the cost of APD or any increase in APD is constrained by regulation 11 of the Package Travel Regulations 1992:
Price revision
11.—(1) Any term in a contract to the effect that the prices laid down in the contract may be revised shall be void and of no effect unless the contract provides for the possibility of upward or downward revision and satisfies the conditions laid down in paragraph (2) below.
(2) The conditions mentioned in paragraph (1) are that—
(a) the contract states precisely how the revised price is to be calculated;
(b) the contract provides that price revisions are to be made solely to allow for variations in:—
(i) transportation costs, including the cost of fuel,
(ii) dues, taxes or fees chargeable for services such as landing taxes or embarkation or disembarkation fees at ports and airports, or
(iii) the exchange rates applied to the particular package; and
(3) Notwithstanding any terms of a contract,
(i) no price increase may be made in a specified period which may not be less than 30 days before the departure date stipulated; and
(ii) as against an individual consumer liable under the contract, no price increase may be made in respect of variations which would produce an increase of less than 2%, or such greater percentage as the contract may specify, ("non-eligible variations") and that the non-eligible variations shall be left out of account in the calculation.
Some tour operators include a "no surcharge guarantee" in their conditions of contract. They of course could not pass on to their customers any increase in APD taking effect after the date of their contract. But even where their conditions of contract permitted a tour operator to pass on to its customers any increase in APD taking effect after the date of their contract, they could not do so in respect of customers whose holidays began less than 30 days after the announcement of the increase. In addition, in respect of other customers who have entered into a contract, the tour operator has to bear the first 2 per cent of the increase in costs. In many cases the increase that is the subject of these proceedings would have been less than 2 per cent, or insignificantly more than 2 per cent, and in those cases too the practical effect of the Regulations was to impose the financial burden of the...
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