R v MINISTRY OF AGRICULTURE, FISHERIES AND FOOD EX PARTE HEDLEY LOMAS

The application of a Treaty article while a harmonising Directive precludes the right to endorse sanctions for Member State non-compliance, results in a loss of licence for Ireland, when exporting sheep for slaughter.

This led to a preliminary ruling to ascertain if such a Directive could reasonably deny, or even restrict, exportation to Member States failing to uphold the aims of the assigned article.

For clarity, article 43 EC and article 100 EC were designed to reduce the suffering of animals sent for slaughter through the use of stunning and killing within specific guidelines under Directive 74/577/EEC, while article 36 EC includes restrictive measures surrounding the importation and exportation of products (including livestock) when acting in the interests of public safety, security and protection of human, animal and plant life.

When Spain transposed Directive 74/577/EEC it mirrored the terms of article 1 of the Directive with the exception of sanctions for non-compliance,  and so the UK Ministry of Agriculture, Fisheries and Food prohibited sheep exportation to Spain through the denial of specific export licences, which left an Irish sheep farmer unable to export his livestock to a fully compliant Spanish slaughterhouse.

Having sought judicial review and damages in the High Court, the court requested a preliminary ruling under article 177 EC, and so asked the European Court of Justice: 

1. Did the terms of Directive 74/577/EEC prevent restrictive measures under art.36 EC? 

2. Did the effects of art.36 EC have universal effect, or were they subject to specific criteria?

3. Where ineffective, was the Member State applying the article liable for compensation where an export licence was denied?

Whereupon the Court held that:

1. Although the terms of Directive 74/577/EEC did not expressly outline the penalties for non-compliance, it did confer those measures to the Member States in order for legislative powers to ensure the observation of those terms, however the actions taken by the UK were entirely subjective as opposed to evidence-based, therefore to rely upon the effects of article 36 EC was to act without authority when denying the free movement of goods by another Member State.

2. The terms of article 36 EC did not allow one Member State to exercise restrictive powers over another, while the route taken must be one of either action, or complaint to the Commission under article 170 EC or article 186 EC, while continuing to allow the movement of goods unless or until proven correct.

3. When acting in breach of article 43 EC it is the obligation of the acting Member State to provide reparation for damage caused by the breach, as was established in Francovich and others v Italy and Van Gend en Loos v Nederlandse Administratie de Belastingen, and that when deciding the measure of compensation it must rely upon its own domestic legislation observe the principles of non-discrimination and effective remedy when discussing the matter in the courts and calculating the amount payable, while further reminding the parties that:

“A Member State cannot take unilateral action against defaults by other Member States. The Treaty of Rome created an original legal order in which the procedures necessary for establishing and penalizing a breach of its provisions are strictly regulated.”

COMMISSION v UNITED KINGDOM [EXCISE DUTIES ON WINE]

Member State obligations to observe the fairness of the European market when allowing for competition, were crystallised in this taxation matter surrounding the importation and domestic production of alcoholic drinks.

The terms of article 95 EC (in particular paragraph 1) were constructed to allow and support the freedom of competition between Member States when selling comparable products including alcoholic beverages in their various forms; however, during a period between 1973 and 1981, the United Kingdom deliberately increased the taxation rates for bottled wines over that of bottled beers, thus the margin between the two remained disproportionate for a considerable period and significantly hampered the sale of affordable imported wines in lieu of an over-proliferation of domestic low-volume beers.

When addressed by the European Commission under the inference that such disparity amounted to a breach of paragraph 2 of article 95 EC, it was suggested that while running contrary to the harmonisation of Community law, the Member State was, under article 169 EC now required to submit its own observations in defence of its failure to follow the terms prescribed.

In response, the United Kingdom contested the findings with little supporting evidence, thereby prompting the Commission to apply to the European Court of Justice on the strength of the breach, while citing that by way of reparation, the United Kingdom was to pay the costs of the action. 

Shortly afterwards, the Court also allowed Italy to intervene in support of the Commission under article 37 of the Protocol on the Statute of the Court of Justice, whereupon the Court instructed the three parties to reexamine their arguments and submit relevant chronological sales data, before reconvening for judgment.

Having established that the manufacturing processes for beer and wine were comparable, it was then revealed that due to the complex structure of the British market, it was only possible to compare prices through the taxation rates applicable to the volume (strength) of the alcohol in hand. 

It was this contradistinction that showed clear support for the suggestion that protective measures had been implemented in order to deprive the import of affordable wines from other Member Sates, despite the measures laid down under article 95 and the United Kingdom’s obligation to follow them.

Citing numerous and unsustainable arguments for the heavy taxation of wines (including manufacturing costs (as previously ruled out) and alleged ‘social’ reasons) the Court held that a serious breach of article 95 EC had been in existence not only for a considerable period, but that recent attempts to narrow the margin were indicative of reasons beyond that expected from a Member State when observing their duty to encourage and support the free movement of goods and equality of competition between states, before reminding those responsible that:

“[A] Member State may lay down differing tax arrangements even for identical products on the basis of objective criteria provided that such arrangements pursue objectives of economic policy which are themselves compatible with Community law and that they are not discriminatory or protective in nature.”