R v Secretary of State for Transport, ex parte Factortame Ltd (No. 5)

JurisdictionUK Non-devolved
Judgment Date28 October 1999
Judgment citation (vLex)[1999] UKHL J1028-3
CourtHouse of Lords
Secretary of State for Transport
Ex Parte Factortame Limited

And Others


Lord Slynn of Hadley

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord hope of Craighead

Lord Clyde



My Lords,


In this important case your Lordships have had the advantage, in addition to formal written cases, of most able and admirably concise oral arguments from Counsel on behalf of all parties. Those parties are, as Appellant, the Secretary of State for Transport, in effect representing the United Kingdom, and, as the Respondents, companies (or shareholders or directors of companies) and individuals who owned or managed vessels which were part of the British fishing fleet until they lost their registration on 31 March 1989 as a result of legislation, including delegated legislation, adopted in the United Kingdom. That legislation has been held by the European Court of Justice to constitute a breach of Community Law by the United Kingdom and the question on this appeal is whether the Appellant's breaches of Community Law were sufficiently serious to give rise under Community Law to a right to compensatory damages to those who can show that the breach caused them damage. Any question of causation has been left over pending a determination as to the seriousness of the breach for the purpose of Community Law.


The Divisional Court and the Court of Appeal unanimously held that the breaches were sufficiently serious for that purpose. A claim for exemplary damages, though originally made, has not been pursued before the Court of Appeal or before your Lordships' House. It is not suggested that there is any need to make a reference to the European Court under Article 177 of the Treaty, the assessment of seriousness being for the national court ( Brasserie du Pecheur SA v. Federal Republic of Germanyand Reg. v. Secretary of State for Transport, Ex parte Factortame Ltd. (No. 4) (Cases C-46 and 48/93) [1996] Q.B. 404, 500, para. 58 ("Factortame III").


The main facts


The case has a long history both on the facts and in relation to the judicial proceedings before courts in the United Kingdom and before the European Court of Justice. Those facts and proceedings are recited in detail in the judgment of the Divisional Court ( [1997] Eu.L.R. 475) to which I refer. Since with one exception the findings of fact were accepted before the Court of Appeal and before your Lordships' House it is neither necessary nor useful to set them all out again. I therefore confine myself to indicating the important stages of the saga.


From 1970 the European Community established, as part of the Common Agricultural Policy, a Fisheries Policy, pursuant to Article 38 of the E.E.C. Treaty. This arose partly out of concern for the over-fishing of stocks in the North Sea and Atlantic Ocean but also out of a desire to ensure equality for the vessels of member states in access to fishing grounds and to exclude the fishermen of non-member states from those grounds other than on terms agreed by the Community. Such an agreement was made by the Community with Spain in 1980 (i.e. before Spain's accession to the Community) giving Spanish vessels the right to fish for particular species in identified waters of the member states.


The adoption of this policy meant that domestic rules as to fisheries had to comply with the rules of the Common Fisheries Policy and the United Kingdom on accession in 1973 became subject to those rules.


The common fisheries policy in fact developed more slowly than the common agricultural policy but in 1980 by Council Declaration of 8 May 1980 on the Common Fisheries Policy ( O.J. 1980 C 158/2) the Council set out guidelines on which the Policy was to be based. These emphasise the importance of having regard to the needs of regions where the local population was dependent on fishing, to traditional fishing activities in those regions and to the fair distribution of catches.


By Council Regulation E.E.C. No. 170/83 (O.J. 1983 L24/1) of 25 January 1983 the Community set up a system of national quotas for "total allowable catch[es]" based in part on catches for the years 1973-1978 and it issued multi-annual guidance programmes dealing with fishing capacity and fleets.


From 1976 Spain had conferred advantages (e.g. as to landing rights) on Spanish fishing companies which were entered on the register of another State so as to be able to fish in that State's waters, in order that those companies retained their economic links with Spain (Royal Decree 2517./1976). The United Kingdom took the view that Spanish vessels were registered on the British register so as to obtain access to United Kingdom fishing grounds in a way which went beyond what had been agreed between the Community and Spain in 1980 and that to all intents and purposes these were Spanish vessels using up the British quota. The owners of these fishing vessels (and the directors of and shareholders of companies owning vessels) were Spanish; many of the fishermen were Spanish; the catches went to Spain. Local British fishing communities accordingly derived no benefit from these activities which even when carried out on British registered vessels were essentially Spanish.


It is hardly surprising that the British Government wished to do something to protect these British fishing communities and those vessels which were intrinsically, as opposed to merely legally, British and also to protect the British national quotas. There is no doubt that in international law and under domestic law steps could have been taken to control registration on the British register and to regulate the fishing of particular stocks. What could be done was, however, subject to Community Law and the British Government sought unsuccessfully to persuade the Commission to take steps to prevent what the United Kingdom was complaining about and which came to be referred to as "quota hopping".


In order to deal with the substantial number of Spanish vessels which had been re-registered on the British register and of British registered boats acquired by Spanish companies and individuals, the United Kingdom enacted in March 1983 the British Fishing Boats Act 1983 and it made the British Fishing Boats Order 1983 ( S.I. 1983 No. 482) which required vessels registered on the British register to have a crew of at least 75 per cent E.E.C. nationals before they could fish lawfully in British fishing grounds. That excluded the Spanish fishermen. But when Spain acceded to the Community with effect from 1 January 1986 (and thereby became subject to Community rules) the 1983 legislation ceased to achieve its objective. Pursuant to the Sea Fish (Conservation) Act 1967 new licensing conditions were therefore introduced on 1 January 1986 which required that 75 per cent of the crew must be nationals of E.E.C. States and reside ashore in the United Kingdom. All the crew had to pay United Kingdom Social Security contributions and the vessels had to show that they operated from British ports either by at least visiting the ports four times a year or by landing and selling 50 per cent by weight of landed fish in the United Kingdom. These conditions as to nationality, residence and social security contributions were held on 14 December 1989 to be contrary to Community Law (though the operating condition was held not to be unlawful) by the European Court in Reg. v. Ministry of Agriculture, Fisheries and Food, Ex parte Agegate Ltd. (C ase C-3/87) [1990] 2 Q.B. 151. A challenge to the operating condition was made in Reg. v. Ministry of Agriculture, Fisheries and Food, Ex parte Jaderow Ltd ( Case C-216/87) [1990] 2 Q.B. 193 the Spanish owned vessels agreed to comply with the operating condition and the United Kingdom agreed not to enforce the crew residence and national insurance contribution conditions.


Even before the judgments in Agegate and Jaderow the Government took the view that the position was getting worse since Spanish controlled vessels were increasing their take from British quotas; British fishing communities accordingly were further disadvantaged. The way to tackle the problem was seen to be to change the rules on registration rather than on licensing. As a result the Merchant Shipping Act 1988 was enacted with effect from 1 December 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations 1988 (S.I. 1988 No. 1926) also came into force on the same date.


By section 14 of the Act a vessel could only be entered on the register as a British fishing vessel if it was British owned. To qualify as such the legal owners and not less than 75 per cent of the beneficial owners had to be qualified persons or companies. In addition the charterer, manager or operator of the fishing vessel had to be a qualified person. The vessel to qualify had to be managed and its operation be directed and controlled from within the United Kingdom. A "qualified person," so far as relevant, meant

"(a) a person who is a British citizen resident and domiciled in the United Kingdom"


A "qualified company" was defined as

"A company which satisfies the following conditions namely -

(a) it is incorporated in the United Kingdom and has its principal place of business there;

(b) at least the relevant percentage of its shares (taken as a whole) and of each class of its shares, is legally and beneficially owned by one or more qualified persons or companies; and

(c) at least the relevant percentage of its directors are qualified persons."


Section 14 further provided in sub-section 4 that where, in the case of any fishing vessel, the Secretary of State was satisfied that the vessel could not be registered as a British fishing vessel because the individuals were not British citizens, but that it would be...

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