R v Secretary of State for Transport, ex parte Factortame Ltd (No 2)

JurisdictionUK Non-devolved
JudgeLord Bridge of Harwich,Lord Brandon of Oakbrook,Lord Oliver of Aylmerton,Lord Goff of Chieveley,Lord Jauncey of Tullichettle
Judgment Date11 October 1990
Judgment citation (vLex)[1990] UKHL J0726-2
Date11 October 1990
CourtHouse of Lords
Secretary of State for Transport
Ex Parte Factortame Limited and Others

[1990] UKHL J0726-2

Lord Bridge of Harwich

Lord Brandon of Oakbrook

Lord Oliver of Aylmerton

Lord Goff of Chieveley

Lord Jauncey of Tullichettle

House of Lords

Lord Bridge of Harwich

My Lords,


The appellants are a number of companies incorporated under the laws of the United Kingdom and also the directors and shareholders of those companies, most of whom are Spanish nationals. The appellant companies between them own or manage 95 deep sea fishing vessels, which were until 31 March 1989 registered as British fishing vessels under the Merchant Shipping Act 1894. Of these vessels 53 were originally registered in Spain and flew the Spanish flag. These 53 vessels were registered under the Act of 1894 at various dates from 1980 onwards. The remaining 42 vessels had always been British fishing vessels. These vessels were purchased by the appellants at various dates mainly since 1983.


The statutory regime governing the registration of British fishing vessels was radically altered by Part II of the Merchant Shipping Act 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations 1988 (S.I. 1988 No. 1926) both of which came into force on 1 December 1988. The following are the critical provisions of the Act which affect the appellants:

"14(1) Subject to subsections (3) and (4), a fishing vessel shall only be eligible to be registered as a British fishing vessel if — ( a) the vessel is British-owned; ( b) the vessel is managed, and its operations are directed and controlled, from within the United Kingdom; and ( c) any charterer, manager or operator of the vessel is a qualified person or company. (2) For the purposes of subsection (1)( a) a fishing vessel is British-owned if — ( a) the legal title to the vessel is vested wholly in one or more qualified persons or companies; and ( b) the vessel is beneficially owned — (i) as to not less than the relevant percentage of the property in the vessel, by one or more qualified persons, or (ii) wholly by a qualified company or companies, or (iii) by one or more qualified companies and, as to not less than the relevant percentage of the remainder of the property in the vessel, by one or more qualified persons. … (7) In this section — "qualified company" means 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; "qualified person" means — ( a) a person who is a British citizen resident and domiciled in the United Kingdom, or ( b) a local authority in the United Kingdom; and "the relevant percentage" means 75 per cent. or such greater percentage (which may be 100 per cent.) as may for the time being be prescribed."


Fishing vessels previously registered as British under the Act of 1894 require to be re-registered under the Act of 1988, subject to a transitional period prescribed by the Regulations of 1988 which permitted their previous registration to continue in force until 31 March 1989.


At the time of the institution of the proceedings in which this appeal arises, the 95 fishing vessels in question failed to satisfy one or more of the conditions for registration under section 14(1) of the Act of 1988, and thus failed to qualify for registration, by reason of being managed and controlled from Spain or by Spanish nationals or by reason of the proportion of the beneficial ownership of the shares in the appellant companies in Spanish hands. The appellants sought by application for judicial review to challenge the legality of the relevant 1988 legislation on the ground that it contravened the provisions of the Treaty of Rome and other rules of law given effect thereunder by the European Communities Act 1972 by depriving the appellants of rights of the kind referred to in section 2(1) of the Act of 1972 as "enforceable Community right[s]." It will be convenient to use the expression "Community law" as embracing the Treaty of Rome, subordinate legislation of institutions of the European Economic Community ("the E.E.C.") and the jurisprudence developed by the Court of Justice of the E.E.C. ("the E.C.J.") and to use the expression "directly enforceable Community right[s]." as referring to those rights in Community law which have direct effect in the national law of member states of the E.E.C.. The defence of the Secretary of State to the appellants' challenge was and is, first, that Community law does not in any way restrict a member state's right to decide who is entitled to be a national of that state or what vessels are entitled to fly its flag and, secondly, that, in any event, the new legislation is in conformity with Community law and, indeed, is designed to achieve the Community purposes enshrined in the Common Fisheries Policy.


The appellants' application for judicial review was heard by the Divisional Court (Neill L.J. and Hodgson J.) who, in judgments delivered on 10 March 1989, decided to request a preliminary ruling from the E.C.J. in accordance with Article 177 of the Treaty of Rome on the substantive questions of Community law which they considered necessary to enable them finally to determine the application. The precise terms of the questions proposed to be referred by the Divisional Court have not yet been settled. The Divisional Court went on to consider an application by the appellants for interim relief and made an order for the interim protection of the directly enforceable Community rights claimed by the appellants in the following terms:

"It is ordered that: (1) pending final judgment or further order herein the operation of Part II of the Merchant Shipping Act 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations 1988 be disapplied and the Secretary of State be restrained from enforcing the same in respect of any of the applicants and any vessel now owned (in whole or in part) managed operated or chartered by any of them so as to enable registration of any such vessel under the Merchant Shipping Act 1894 and/or the Sea Fishing Boats (Scotland) Act 1886 to continue in being . …"


An appeal against this order was heard by the Court of Appeal (Lord Donaldson of Lymington M.R., Bingham and Mann L.JJ.) who on 16 March 1989 allowed the appeal, set aside the order for interim relief and granted leave to appeal to your Lordships' House, giving their reasons for their decision on 22 march.


Since the only issue before your Lordships on the appeal relates to the grant of interim relief, your Lordships have not been called on to examine in any detail the rival arguments of the parties on the substantive issues of Community law which will determine the final outcome of the application for judicial review, nor to consider the voluminous affidavit evidence which was fully examined by the Divisional Court. In these circumstances I shall gratefully adopt so much of the admirably lucid judgment of Neill L.J. in the Divisional Court as is necessary to appreciate the nature of these arguments and the factual and historical background against which the substantive issues fall to be determined.


Having set out the terms of the principal Articles of the Treaty of Rome relied on by the appellants, Neill L.J. continued:

"On the basis of these Articles it was argued on behalf of the applicants that they had a number of relevant rights under Community law, including the following: (a) the right not to be discriminated against on the grounds of nationality (Article 7); (b) the right in the case of the individuals to establish a business anywhere in the E.E.C. (Article 52) (including the right to carry on fishing at sea) and, in the case of the companies, (Article 58); and (c) the right in the case of the individual applicants to participate in the capital of the applicant companies (Article 221). It was further argued that these provisions of Community law were provisions which had direct effect and that the applicants' rights would be infringed by the application to them of the Act of 1988 and the Regulations of 1988. It was submitted that these rights were fundamental rights which could not be swept away or submerged by the Common Fisheries Policy and that all provisions of the Common Fisheries Policy had to be read subject to these fundamental provisions. On behalf of the Secretary of State, on the other hand, it was argued that the provisions of the Treaty were of no direct relevance in this case because each member state has a sovereign right to decide questions of nationality: that is, who are permitted to be nationals and who are permitted to fly the national flag. In the alternative, it was argued, the whole matter was governed by the Common Fisheries Policy, which was established to cope with the special problems in the fishing industry and which recognised the importance, and the need for protection, of national fishing fleets and national fishing communities, and that the legislation merely gave effect to the Common Fisheries Policy and was therefore wholly consistent with the Community law."


The judgment then traces the history of the Common Fisheries Policy from its origins before the accession of the United Kingdom to the Common Market through various Community regulations up to the establishment of the system laid down for the conservation of stocks of certain fish and the allocation of quotas to member states in 1983 which is embodied in the relevant Council regulations now applicable. The judgment continues:

"The system adopted by the Council to ensure fair...

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