Courage Ltd v Crehan [2001]

European Law

Courage Ltd v Crehan
‘In the Brewery in Munich, 1892’ by Philip de Laszlo

Under English law the courts refuse to endorse a claim for damages when the claimant was a party to a contract borne from illegal principles, while this is echoed in equity under the maxim ‘he who comes to equity must come with clean hands’, and so reminds those considering such arrangements that they do so without the aid of the judiciary.

However in this matter the claimant was a party to a publican agreement drawn up through the merger of a large brewery and owners of a number of public houses across the United Kingdom, while as part of this agreement the claimant brewery contracted to supply beer to existing tenants (publicans) under a non-negotiable tariff purportedly designed to protect the interests and profits of those purchasing, and yet after the tenant had somehow amassed a debt of around £15,000 the brewery sought recovery through the courts.

Having previously discovered that the brewery was supplying the same beers for lower prices to non-contracted third parties, it was then counter-claimed that the agreement demonstrated a breach of art.85 EC (formerly art.81 EC) therefore damages were owed and no payment for previously provided beer was due.

After the case reached the Court of Appeal it was decided that due to the conflict between national and Community law a preliminary ruling to the European Court of Justice under art.234 EC needed to confirm: 

1. Whether art.85 EC allowed a party to a prohibited agreement to claim damages?

2. Whether a party can claim when relying upon their own adherence to the agreement?

3. Whether a national law preventing recovery under prohibited agreements remained consistent with Community law?

4. Where deemed incompatible which situations allowed national law to apply?

Having evaluated the aims of national law and the claim’s validity it was agreed that while those contracting in the distortion of fair competition are themselves contributors to their own demise, there are certain scenarios demonstrating an inequality of bargaining power and thus grounds for reconsideration. 

Here the Court noted how in this instance the tenant was subjected to the terms of the agreement with little to no room for bargain, and so while it was agreed that the terms of art.85 EC precluded claims of that nature, it did so on the proviso that the claimant was proportionately liable for any market distortion, while it was also clear that where no such arrangement existed, the effects of art.85 EC (which provided for direct effect and application between individuals) were sufficient enough to allow for a claim despite  any objections raised under English law, while reminding the parties that:

“[C]ommunity law precludes a rule of national law which prevents a party subject to a clause in a contract which infringes Article 81 EC from recovering damages for the loss suffered by it on the sole ground that it is a party to that contract.”

R v Secretary of State for Transport ex parte Factortame Ltd (No.2) (1990)

English Constitutional Law

R v Secretary of State for Transport Ex parte Factortame Ltd
‘NERIED, Cannery Tender’ by Steve Mayo

Direct effect compatibility, and the obligation owed by Member States to transpose Directives and Treaties as binding upon national laws, was a ruling that would soon unearth conflicts of interest. On this occasion, the contention was brought about by aggressive amendment to statute in favour of the UK fishing industry.

Until 1988, those parties involved in domestic commercial fishing were required to register under the Merchant Shipping Act 1894; an Act that allowed overseas companies to operate outside British waters, but still have their fleets registered under UK incorporation. As a means of preventing ‘quota hopping’ (over-fishing), it was enacted by Parliament to include Part II of the Merchant Shipping Act 1988 and Merchant Shipping (Registration of Fishing Vessels) Regulations 1988, to the effect that all those trading were to re-register under new conditions.

These terms required that in order to qualify for registration, the company must have a minimum of seventy-five percent British ownership, and where ownership fell outside the United Kingdom, there needed to be a seventy-five percent share hold by British citizens. This translated that the appellants, who had been previously registered for over almost twenty years, were now unable to re-register, as the owners were Spanish and therefore exempt from the new legislation.

Having appreciated the United Kingdom’s position as a Member State, and subsequent membership to EU Community law, the firm sought proceedings under the principle that the choice taken to exclude other EU members from registration had displayed an overt refusal to comply with art.177 of the EEC Treaty. Furthermore, it was claimed that where Community rights were held to have ‘direct effect’, it was the onus of the national courts to suspend challenged legislation, with the granting of interim relief where proven necessary.

When heard in the Divisional Courts, the claim was supported and provisions made to allow the unfettered trading of the claimants, until such time that clarification was found in the challenge against the amended Act. However, when appealed by the Secretary of State, Court of Appeal Court set aside the previous finding, while granting leave of appeal to the House of Lords.

In this instance, the House agreed that should the claimants’ fail in their argument, the financial damage would be sufficient enough to cause irretrievable damage to the firm, but that without a preliminary ruling by the European Court of Justice (COJ), it was impossible to determine (i) if the courts were empowered to suspend legislative effect, and (ii) how best to determine what form the interim relief should take.

Upon deliberate consideration by the COJ, it was unanimously agreed that when the objectives of direct effect were designed, they were done so in a way that intended literal application with immediate purpose, and that unless under exceptional circumstances, it was the duty of the national courts to hold the powers of Community law above those of domestic interest, whereupon the House held that:

“[N]ational courts are required to afford complete and effective judicial protection to individuals on whom enforceable rights are conferred under a directly effective Community provision, on condition that the Community provision governs the matter in question from the moment of its entry into force…”