R (Factortame Ltd) v Secretary of State for TransportBy convention, for judicial review cases the monarch appears in the title of the case as the nominal bringer of the action. In reality the action was brought by Factortame Limited against the Secretary of State. was a judicial review case taken against the United Kingdom government by a company of Spanish fishermen who claimed that the United Kingdom had breached European Union law (then Community Law) by requiring ships to have a majority of British owners if they were to be registered in the UK. The case produced a number of significant judgements on British constitutional law, and was the first time that courts held that they had power to restrain the application of an Act of Parliament pending trial and ultimately to disapply that Act when it was found to be contrary to EU law.
The litigation was lengthy, and is typically divided into five main stages: Factortame I, where the High Court and then the House of Lords (which functioned as the final court of appeal prior to 2009) both made a reference to the European Court of Justice (ECJ) on the legality of the Merchant Shipping Act 1988's ("MSA") requirement for UK fishing vessels to be 75% UK owned. After the ECJ confirmed the incompatibility of the Act with EU law, Factortame saw the House of Lords confirm the primacy of EU law over national law in the areas where the EU has competence because of the UK acceding to the EU treaties.The House of Lords judgment is referred to as R (Factortame Ltd) v Secretary of State for Transport (No 2) 1 AC 603. Factortame II, where the ECJ held that the provisions of the MSA were required to be disapplied by the UK courts if they contravened EU law. Factortame III, where the ECJ held that a member state could be liable for damages in an action by the European Commission for breach of EU law. Factortame IV, where the House of Lords ruled that damages could be awarded against a member state like the UK for losses suffered by private parties under the Francovich v Italy(1990) C-6/90 principle, that wrongs by violation of a public body generate a private law claim from anybody who has suffered a directly connected loss (also known as the doctrine of state liability). Factortame V, holding that claims after 1996 were statute-barred, since claims against a member state were like other claims in tort under the Limitation Act 1980.
Facts The EU's Common Fisheries Policy, which began in 1970, aimed at creating a common market for fisheries products by providing for free access to the waters of all member states and introducing structural funds to ensure modernisation of the sector. In 1976 it was agreed that, as from 1 January the following year, member states would extend their exclusive economic zone, which included the limit of their fishing zones, to a distance from their coastlines. In 1980 the EU concluded a fisheries agreement with Spain, which did not become a member of the EU until 1985, which gave the latter (which had the largest fishing fleet in Europe) limited rights to fish in the waters of the member states. In 1983 concerns over the effect that equality of access might have on fishing stocks led to the introduction of certain controls, notably the concept of "total allowable catches" which set maximum quotas of fish which could be caught by each member state, and the British Fishing Boats Act 1983 (BFBA). In 1985, with Spanish accession, everything changed and the BFBA no longer applied to the Spanish fishermen.
From 1980, as seen earlier, Galician fishermen began to enter the UK fishing market by taking advantage of easy fishing vessel registration requirements contained in the Merchant Shipping Act 1894. (57 & 58 Vict. c. 60) Although the 1894 act prohibited ownership of vessels by non-UK nationals, UK-domiciled companies were allowed registration as the owners. Amongst the early beneficiaries of the 1894 act was Factortame Limited, a company whose directors were Joseph J L Couceiro, John A Couceiro and Ken L Couceiro, all British nationals with Spanish ancestry resident and domiciled in the United Kingdom. The company, together with 96 others whose directors and shareholders were mostly Spanish nationals, re-registered 53 vessels which had formerly flown the Spanish flag as British fishing vessels under the 1894 Act. They also acquired 42 existing British vessels with a view to using them in the fishing zone. Most of these vessels landed their catches in Spain, but as the fish were caught in UK waters, they counted against the UK fishing quota, a practice known as "quota hopping".
In order to put an end to this practice, the British Government enacted a series of measures which proved largely ineffective. In two cases the High Court of Justice of England and Wales asked preliminary questions to ECJ; based on which both cases were lost by HMG – see Agegate (C-3/87, ) and Jaderow (C-216/87, ). In 1988 the Merchant Shipping Act 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations were introduced as a result, to replace the system of registration contained in the 1894 Act with a new system under which a vessel could only be registered if it had "a genuine and substantial connection" with the UK. For this to be the case, three conditions had to be fulfilled: (i) the vessel must be British-owned; (ii) the vessel had to be managed and its operations had to be directed and controlled from the UK; and (iii) any charterer, manager or operator had to be a qualified person or company. A "qualified person or company" was a person who was a British citizen resident and domiciled in the UK or a company which was incorporated in the UK and had its principal place of business there having at least 75% of its shares owned by, and at least 75% of its directors being, "qualified persons".
As from 31 March 1989, fishing vessel registrations under the 1894 Act would lapse and the owners would be required to re-register under the 1988 Act. None of Factortame's vessels could satisfy the new requirements and an action for judicial review was brought by its owners in a divisional court of the High Court in December 1988.
Factortame I Factortame Ltd sought, first, a preliminary injunction declaring that the offending part of the 1988 Act could not be applied to them on the grounds that such application would be contrary to directly effective rights under EU law, specifically the right not to be discriminated against on the grounds of nationality (article 7 of the Treaty of Rome), the right of individuals and companies to establish themselves in business anywhere in the EU (articles 43–48), and the right to participate in the capital of companies situated in another Member State (article 294). The claimants also demanded an order of prohibition preventing the Secretary of State from treating its registrations under the 1894 Act as having ceased.
HMG argued that the registration requirements were intended to ensure that fishing vessels flying the British flag had a genuine link with the UK. It maintained that international law entitled each State to determine the conditions under which a ship might fly its flag and that Community law had not removed that right. It was also contended that the 1988 Act was consistent with the Community policy on fisheries. In the event this assertion proved false.
High Court On 10 March 1989 the divisional court (Neill LJ and Hodgson J) referred the matter to the European Court of Justice (ECJ) for a preliminary ruling under Article 234 of the Treaty of Rome (case C-221/89). It asked whether requirements as to nationality, domicile and control imposed by a Member State as conditions for the registration of fishing vessels were compatible with Community law (now: European Union law). At the same time, the Court granted an injunction against the application of the 1988 Act pending a ruling by the ECJ. Giving his judgment, Lord Justice Neill stated that although Community law is part of English law and prevails in the event of a conflict, it was open to argument whether a conflict existed in this case; a national court would have to take a decision which preserves the status quo ante. HMG disapproved and elevated the case to the Court of Appeal.
Court of Appeal The Court of Appeal (Lord Donaldson MR, Bingham LJ and Mann LJ) reversed the divisional court's decision on 22 March 1989 on the basis that, although a national court was obliged to give effect to Community law, it was not obliged "to override national law in favour of what is no more than an alleged or putative Community right". Furthermore, it did not believe that the divisional court had "acknowledged the constitutional enormity, as the law stands, of requiring a Secretary of State to act contrary to the clearly expressed will of Parliament when the unlawfulness of that expression has yet to be established". The divisional court would not, according to the court, have jurisdiction to grant an injunction until Factortame had succeeded before the ECJ.
House of Lords The case was brought on 18 May 1989 by Factortame before the House of Lords (Lord Bridge, Lord Brandon, Lord Oliver, Lord Goff and Lord Jauncey) who upheld the decision of the Court of Appeal on the grounds that English law did not contain any rule allowing a preliminary injunction against the application of an Act of Parliament. According to Lord Bridge, two obstacles stood in the way of the granting of the injunction. Firstly, the relief sought required the court to order positive action in the shape of the disapplication of the 1988 Act and the application of the 1894 Act; were Factortame not to succeed before the ECJ, the House of Lords would have "conferred upon them rights directly contrary to Parliament's sovereign will". Secondly, the court had no jurisdiction to grant an interim injunction against the Crown.
Nevertheless, Lord Bridge did accept that each of these obstacles was subject to any contrary Community law requirement. This required the House of Lords to determine whether, regardless of the position in national law, there existed an overriding principle of Community law imposing an obligation on a national court, faced with a seriously arguable claim to rights having direct effect under Community law, to grant interim relief. Lord Bridge concluded that as there was no clear authority on this question, a decision from the ECJ was necessary to enable the House of Lords to give judgment. The House was, in any event, obliged to request a preliminary ruling under Article 234 EC (now Article 267 TFEU post-Lisbon Treaty) which obliges courts "against whose decisions there is no judicial remedy under national law" to make a reference. This request for a preliminary ruling was in addition to that already made by the divisional court on the compatibility of the 1988 Act with Community law.
European Court of Justice The action was lodged at the ECJ on 10 July 1989 (as Case C-213/89) by the House of Lords with the request that it deal with the matter quickly, which it indeed did, giving the case priority over others. The whole matter had up until then proceeded with great speed, taking only six months from its commencement before the divisional court to the House of Lords' judgment. The questions posed essentially asked whether, in the circumstances of the case, Community law overrode English law and either empowered or obliged UK courts to grant the injunction claimed by Factortame.