Case Facts
The applicants were companies incorporated under English law whose directors and shareholders were predominantly Spanish nationals. Together, they owned 95 deep-sea fishing vessels that had previously been registered as British under the Merchant Shipping Act 1894.
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, both of which came into force on 1 December 1988. The applicants' 95 vessels failed to satisfy the conditions set out in s 14(1) Merchant Shipping Act 1988 because the vessels were managed and controlled from Spain or by Spanish nationals, or because of the proportion of beneficial ownership held in Spanish hands. As a consequence, the vessels could no longer be registered as British and were effectively excluded from fishing against the United Kingdom's quota under the Common Fisheries Policy.
The applicants challenged Part II of the Merchant Shipping Act 1988 and the Regulations by way of judicial review, arguing that they contravened the EEC Treaty (Articles 7, 52, 58, and 221) and rules of Community law given effect in domestic law by s 2(1) and s 2(4) European Communities Act 1972. The Divisional Court referred the substantive Community law questions to the European Court of Justice under Article 177 of the EEC Treaty. On the applicants' motion, the Divisional Court also granted interim relief, disapplying Part II of the Merchant Shipping Act 1988 and the Regulations pending final judgment. The Court of Appeal subsequently set aside that order for interim relief.
On further appeal, the House of Lords initially held that, as a matter of English law, the courts had no jurisdiction to grant interim relief that would involve either overriding an Act of Parliament in advance of any ECJ ruling or granting an injunction against the Crown. However, the House of Lords recognised that this question of jurisdiction might itself be governed by Community law, and accordingly referred to the ECJ the question whether Community law obliged or empowered a national court to grant such interim protection of putative Community rights.
The ECJ, applying the principle established in Amministrazione delle Finanze dello Stato v Simmenthal SpA [1978], held that where a national court, seized of a dispute concerning Community law, considers that a rule of national law is the only obstacle precluding it from granting interim relief to protect putative Community law rights, that national rule must be set aside. The matter was then referred back to the House of Lords to determine whether interim relief should in fact be granted.
Held
On the reference back, the House of Lords granted interim relief in terms of the Divisional Court's original order, disapplying Part II of the Merchant Shipping Act 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations 1988 in respect of the applicants pending the ECJ's final ruling on the substantive Community law questions.
In deciding whether to grant interim relief, the House of Lords held that the court must apply a two-stage test derived from the approach in American Cyanamid Co v Ethicon Ltd [1975]. First, the court must consider whether an adequate remedy in damages would be available to either party if interim relief were refused or granted respectively. Second, if no adequate remedy in damages exists for either party, the court must weigh the balance of convenience, taking into account all the circumstances of the case, including the public interest. The House of Lords observed that where a public authority is enforcing the law, an adequate remedy in damages will not normally be available to either party.
The House of Lords further held that there is no rule requiring the party challenging legislation to demonstrate a strong prima facie case of invalidity before interim relief can be granted. However, the court should not restrain a public authority from enforcing the law unless it is satisfied that the challenge is sufficiently firmly based to justify that exceptional course. On the facts, the applicants' challenge to the residence and domicile conditions in s 14 Merchant Shipping Act 1988 was considered to be, on a prima facie basis, a strong one, having regard to existing ECJ decisions. The immediate and obvious damage to the applicants if interim relief were refused — the destruction of their businesses and livelihoods — outweighed the detriment to the public interest if the applicants ultimately failed in their challenge. Accordingly, interim relief was granted.
In a notable passage, one member of the House of Lords rejected the suggestion that the decision represented a constitutional revolution. It was Parliament itself, by enacting the European Communities Act 1972, that had voluntarily accepted the supremacy of Community law. The decision did not therefore represent an external imposition upon parliamentary sovereignty, but rather the consequence of Parliament's own legislative choice.
Ratio Decidendi
The ratio of the case operates at two levels. First, at the level of Community law, the ECJ held in Factortame (No 1) [1990] that the full effectiveness of Community law requires that a national court which is considering a case involving Community rights must have the power to grant interim relief. If a rule of national law is the only obstacle precluding a national court from granting such relief, that national rule must be set aside. This principle applied and extended the earlier ruling in Amministrazione delle Finanze dello Stato v Simmenthal SpA [1978], which had established that national courts must give full effect to Community law and disapply any conflicting provision of national law.
Second, at the level of English law on the reference back, the House of Lords established the principles applicable to the grant of interim relief in cases involving a challenge to the compatibility of an Act of Parliament with Community law. The court must assess: (1) the adequacy of a damages remedy for each party; and (2) if no adequate damages remedy exists, the overall balance of convenience, with appropriate weight given to the public interest in the enforcement of legislation. The strength of the applicant's case is a relevant, though not determinative, consideration in the balance of convenience analysis.
The practical consequence of the decision is that English courts must, where Community law so requires, have the power to suspend the application of an Act of Parliament on an interim basis pending a definitive ruling from the ECJ on the compatibility of that legislation with Community law. This was the first occasion on which an English court had disapplied an Act of Parliament in this manner, and the case is accordingly regarded as a landmark in the constitutional relationship between Community law and domestic law. It is closely connected with the broader principle of the primacy of EU law as it applied within the United Kingdom by virtue of the European Communities Act 1972, and should be read alongside Thoburn v Sunderland City Council and other appeals [2002] and Macarthys Ltd v Smith [1979].
Obiter Dicta
The observation that the decision did not constitute a constitutional revolution, because Parliament had itself chosen to accept the supremacy of Community law when it enacted the European Communities Act 1972, is properly regarded as obiter. It was not necessary to the determination of the question of interim relief, but it carries significant weight in academic and judicial discussion of the constitutional implications of EU membership for the doctrine of parliamentary sovereignty. The passage has been cited in subsequent cases, including Thoburn v Sunderland City Council and other appeals [2002] and R (Miller and another) v Secretary of State for Exiting the European Union [2017], in debates concerning the relationship between parliamentary sovereignty and the requirements of Community and, later, EU law.