R v Secretary of State for Transport, ex parte Factortame Ltd (No. 5)
| Jurisdiction | England & Wales |
| Judgment Date | 08 April 1998 |
| Date | 08 April 1998 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Woolf, Master of the Rolls, Lord Justice Schiemann and Lord Justice Robert Walker
Damages - breaches of EC law by legislature - whether breaches sufficiently serious
Breaches of Community law committed by the United Kingdom when the Merchant Shipping Act 1988 imposed conditions of nationality, domicile and residence on those wishing to register to fish in UK waters were sufficiently serious to give rise to liability for any damage caused to trawler owners and managers refused registration.
The Court of Appeal so held in a reserved judgment when dismissing an appeal by the Secretary of State for Transport against the decision of the Queen's Bench Divisional Court (Lord Justice Hobhouse, Mr Justice Collins and Mr Justice Moses) (The Times September 11, 1997) to declare:
1 The Secretary of State for Transport's breaches of Community law, including the breach in complying with the President's order of October 10, 1989, (Case 246/89R Commission of the European Communities v United Kingdom([1989] ECR 3125) were sufficiently serious to give rise to liability for any damage that might subsequently be shown to have been caused to the applicants.
2 The applicants were not entitled to exemplary damages.
The applicants were Spanish trawler owners and managers, a company with a Spanish director and other companies owned by foreign nationals. They had succeeded in establishing before the UK courts and the European Court of Justice that the 1988 Act, which precluded those who did not meet its criteria from registering to fish, was illegal and that the UK had breached Community law: see R v Secretary of State for Transport, Ex parte Factortame LtdELR [1990] 2 AC 85); Case C-213/89 R v Secretary of State for Transport, Ex parte Factortame Ltd (No 2)ELR ([1991] 1 AC 603); Case C-221/89 R v Secretary of State for Transport, Ex parte Factortame Ltd (No 3)ELR([1992] QB 680).
In Joined Cases C-46/93 and C-48/93 Brasserie du Pecheur SA v Federal Republic of Germany; R v Secretary of State for Transport, Ex parte Factortame Ltd (No 4)TLRELR (The Times March 7, 1996; [1996] QB 404) the European Court of Justice held that the applicants could pursue a claim for damages which should be recoverable provided that the relevant rules of Community law were intended: (i) to confer rights on individuals, (ii) that the breaches were sufficiently serious and (iii) that there was a direct causal link between the breaches and the damage complained of.
Lord Falconer of Thoroton, QC, Solicitor-General, Mr Christopher Vajda, QC, Miss Eleanor Sharpston, Ms Eleanor Grey and Mr Philip Sales for the secretary of state; Mr David Vaughan, QC, Mr David Anderson and Miss Lucy Frazer for the first to eighty-third applicants; Mr Nicholas Forwood, QC, for the eighty-fourth applicant; Mr Gerald Barling, QC, Mr Nicholas Green and Mr Fergus Randolph for the eighty-fifth to ninety-seventh applicants.
THE MASTER OF THE ROLLS, giving the judgment of the court, said that various provisions contained in the Merchant Shipping Act 1988 discriminated against citizens of other member states of the European Community.
The discrimination was found in provisions broadly to the effect that registration of vessels entitled to fly the British flag would only be possible if 75 per cent of the ownership was in the hands of those who fulfilled three conditions: (a) they were citizens of the UK, (b) they had to be domiciled and (c) they were resident in the UK.
The first of the conditions amounted to direct discrimination; the second and third to indirect discrimination.
The government had considered that that discrimination was compatible with membership of the Community and the European Communities Act 1972. That was not the case. The government accepted that as to the nationality condition from late 1989: that condition was of no effect after November 2, 1989.
However, the government had continued to enforce the domicile and residence conditions until the House of Lords in July 1990 granted interim relief against the government.
It was now common ground that the discrimination inherent in the imposition of each of the three conditions was in breach of the obligations which the UK undertook upon becoming a member of the Community and was thus unlawful.
It was not necessary to consider whether the breach infringed any rights of the applicants since that was conceded. Nor was it necessary to enter upon questions of causation since they were to be resolved after the result of the present appeal was known. The issue was whether the breach in question was sufficiently serious to entitle the injured individual to damages.
In Factortame (No 4) the European Court of Justice gave guidance as to the circumstances which should be taken into account in arriving at a decision on the question whether to fix the state with liability for the damage caused by its unlawful acts.
First, it made clear that the fact that the breaches of Community law were attributable to the national legislature of a member state did not invariably exempt that state from any liability which it would otherwise incur by virtue of the principle that member states were obliged to make good damages caused to individuals by breaches of Community law attributable to the state.
Second, it made clear that the conditions under which that liability gave rise to a right to damages depended on the nature of the breach of Community law giving rise to the loss and damage in question.
The European Court indicated that in cases where the legality of legislative measures was under consideration it would be more difficult to obtain an award of damages than in cases where there was no element of legislative discretion.
The Solicitor-General made a number of submissions as to the law and it would be convenient if the court recorded them and its response.
1 Mere breach of Community law by a national legislative act would not be enough to fix the state with liability for damage caused thereby. Something else was required.
The court agreed.
2 The liability was fault based.
That submission contained inherent ambiguities in as much as the concept of fault was too uncertain to be of any assistance. If the submission was intended to imply that no liability for compensation could be attached to the state unless the state deliberately intended by its act to do something which it knew was undoubtedly against Community law the...
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