England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEENS BENCH DIVISION
Mr Justice Scott Baker

		Royal Courts of Justice Strand, London, WC2A 2LL
		16 July 2002

Lord Justice Sedley:

1. The question before us is whether Scott Baker J was right to refer to the European Court of Justice a question which arose in judicial review proceedings before him and which in his judgment was not clearly answered in the extant jurisprudence of the ECJ. Both parties accept the well-known guidance given by Sir Thomas Bingham MR in R v International Stock Exchange, ex parte Else [1993] QB 534, 545, to the effect that if the national court has any real doubt on a question of EU law, it should ordinarily refer. The issue in the present case is whether the ECJ's decision in R v Secretary of State for the Home Department, ex parte Savas [2000] 3 CMLR 729 answers the present question or leaves it in doubt. Dyson LJ having given the claimant permission to appeal, we are as well placed as Scott Baker J to decide this.
2. The question of EU law requiring a clear answer is this: is an applicant in the appellant's position entitled by virtue of article 41(1) of the Additional (1970) Protocol to the EEC-Turkey Association Agreement of 1963 to have her freedom of establishment determined by the law and rules as they stood at 1 January 1973? This is not in terms the question formulated by Scott Baker J for referral to the ECJ, (and expanded by him at the parties' request so as to relate both to persons present in the UK and to persons seeking entry: see paragraph 11 below). But the appellant says the question, however put, is answered by the ECJ's decision in Savas, which the present application was adjourned to await. The respondent says that the ECJ's decision is unclear because it is contradictory in its reasoning, and so requires a further reference.
3. The appellant is a Turkish Kurd, whose anonymity the court has agreed to protect in the interests of her family. She was born in 1966 and came to the United Kingdom in 1992 with 6 months' leave, extended by a further year, to enter as a student. In 1993 she sought both an extension of her stay and asylum, and was given permission to work meanwhile. In 1994 she set herself up in a business which is still her livelihood. Since May 1995, however, she has been an overstayer because she lacks leave to remain. In 1997 she applied for leave to remain as a businessperson but was refused. She contends, however, that she has a right of establishment and a corollary right of residence by virtue of the 1963 EEC-Turkey Association Agreement. If so, it is accepted that the Home Secretary is obliged to regularise her position.
4. The right claimed is a derivative right originating in article 41(1) of the Additional Protocol. This provides:

"The contracting parties shall refrain from introducing between themselves any new restrictions on the freedom of establishment and the freedom to provide services."

It came into force on 1 January 1973.

5. In R v Secretary of State for the Home Department, ex parte Savas [2000] 3 CMLR 729 the European Court of Justice held that article 41(1) was precise enough to be directly effective in member states. The court went on to hold as its third and fourth formal rulings:

"Article 41(1) of the Additional Protocol is not in itself capable of conferring upon a Turkish national a right of establishment and, as a corollary, a right of residence in the Member State in whose territory he has remained and carried on business activities as a self-employed person in breach of the domestic immigration law.

However, article 41(1) of the Additional Protocol prohibits the introduction of new national restrictions on the freedom of establishment and right of residence of Turkish nationals as from the date on which that Protocol entered into force in the host Member State. It is for the national court to interpret domestic law for the purposes of determining whether the rules applied to the applicant in the main proceedings are less favourable than those which were applicable at the time when the Additional Protocol entered into force."

6. The reason why the appellant has been refused leave to remain in the United Kingdom as a self-employed person is that she did not enter the United Kingdom with a valid entry clearance as a business person. Under the Immigration Rules in force by 1992 this, it is conceded, is fatal to her. But if, as she contends, the rules to be applied to her are those in force on 1 January 1973, it is accepted that the want of such entry clearance is not fatal. This is because the Immigration Rules for control on and after entry (respectively HC 509 and 510) which were made in 1972 under section 3(2) of the Immigration Act 1971 and were in force on 1 January 1973 did not require – as the Rules now require – an applicant for leave to remain as a businessperson to have entered the United Kingdom with a valid entry clearance as a businessperson. Paragraph 21 of HC 510 began: "People admitted as visitors may apply for the consent of the Secretary of State to their establishing themselves [in the United Kingdom] for the purpose of setting up in business…"
7. It is on the basis of the first sentence of the second of the two rulings which I have cited from the decision in Savas that the appellant derives her argument that she is entitled to the benefit of the 1972 Rules. On the face of it, and read as it must be with the antecedent holding, its meaning is in my view clear. As is self-evident, and as the first cited holding points out, article 41(1) is incapable by itself of creating a right of establishment for a Turkish national who is not otherwise lawfully present in a member state. But the effect of the article, according to the second cited holding, is that in determining the status of a Turkish national in the member state, the criteria to be used must not be more restrictive of their freedom of establishment and of the corollary right of residence than at 1 January 1973.
8. This ruling of the ECJ seems to me to be acte claire. What then of the Court's antecedent reasoning, which seemed to Scott Baker J to create the doubts which prompted his order for a reference? McCullough J had referred six questions to the Court. The Court recast the first three in a form which in its judgment best reflected the legal issues, and its answers made it unnecessary to respond to the remaining questions. The question as the ECJ posed it was:

"… whether article 13 of the Association Agreement and article 41 of the Additional Protocol are capable of conferring upon a Turkish national a right of establishment and, correspondingly, a right of residence in a Member State in whose territory he has remained and carried on self-employed business activities in breach of that Member State's immigration laws."

By its first ruling the ECJ concluded that article 13 was without direct effect; by its second that article 41(1) had direct effect. Its third and fourth holdings are those cited in paragraph 5 above.

9. The passage of the ECJ's reasoning which the Home Secretary contends is unclear appears at paragraphs 56 to 70 under the crosshead "The scope of Article 41(1) of the Additional Protocol":

"[56] In his written observations before the Court, Mr Savas argued essentially that Article 41(1) of the Additional Protocol is capable of conferring upon him a right of establishment and a corresponding right of residence in the Member State whose territory he has been authorised to enter, even though he has remained there and carried on business activities as a self-employed person in breach of that Member State's immigration laws.

[57] At the hearing, Mr Savas explained that he was no longer claiming to derive rights of establishment and residence in a Member State directly from Article 41(1) of the Additional Protocol: he does claim, however, that the direct effect of that provision means that the Turkish national concerned may ask a national court to determine whether the national rules, on the basis of which it was decided to deport him, are stricter in relation to freedom of establishment and the right of residence than those which applied at the date on which the Additional Protocol entered into force in the Member State in question, and were thus adopted in breach of the 'standstill' clause enacted by that provision.

[58] As regards, first, the argument put forward by Mr Savas in his written observations, the first point to be made is that this Court has consistently held that, as Community law stands at present, the provisions concerning the EEC-Turkey Association do not encroach upon the competence retained by the Member States to regulate both the entry into their territories of Turkish nationals and the conditions under which they may take up their first employment, but merely regulate the situation of Turkish workers already lawfully integrated into the labour force of Member States.

[59] Next, the Court has repeatedly held that, unlike nationals of Member States, Turkish workers are not entitled to move freely within the Community but benefit only from certain rights in the host Member State whose territory they have lawfully entered and where they have been in legal employment for a specific period.

[60] Finally, it is true that the employment rights thus conferred on Turkish workers necessarily imply the existence of a corresponding right of residence for the persons concerned, since otherwise the right to access to the labour market and the right to work as an employed person would be rendered entirely ineffective and that such persons may therefore claim an extension to their residence in the Member State concerned in order to continue lawful employment there. However, according to that same case law, the legality of a Turkish national's employment in the host Member State presupposes a stable and secure situation as a member of the labour force of that Member State and, by virtue thereof, entails an undisputed right of residence.

[61] In this context, the Court has held that periods in which a Turkish national is employed under a residence permit which was issued to him only as a result of fraudulent conduct which has led to a conviction are not based on a stable situation and such employment cannot be regarded as having been secure in view of the fact that, during the periods in question, the person concerned was not legally entitled to a residence permit.

[62] In paragraph [28] of its judgment in KOL, the Court held more particularly that employment held by a Turkish national under a residence permit obtained in fraudulent circumstances of that kind could not possibly give rise to any rights in his favour.

[63] These principles, established in the context of the interpretation of the provisions of the EEC-Turkish Association Agreement for the progressive achievement of free movement of Turkish workers in the Community, must also apply, by analogy, in the context of the provisions of that Association Agreement concerning the right of establishment.

[64] It follows, as the Commission has rightly pointed out, that the 'standstill' clause in Article 41(1) of the Additional Protocol is not in itself capable of conferring upon a Turkish national the benefit of the right of establishment and the right of residence which is its corollary.

[65] So, a Turkish national's first admission to the territory of a Member State is governed exclusively by that State's own domestic law, and the person concerned may claim certain rights under Community law in relation to holding employment or exercising self-employed activity, and, correlatively, in relation to residence, only in so far as his position in the Member State concerned is regular.

[66] In the case before the national court, according to the order for reference, after expiry of his tourist visa, the validity of which was limited to one month. Mr Savas did not obtain any further authorisation to remain in the United Kingdom and thus continued to reside there in breach of domestic law. Moreover, his visa expressly forbade him from taking employment or engaging in any form of business activity whatsoever in that Member State.

[67] In those circumstances, the fact that Mr Savas did not leave the United Kingdom after expiry of his visa and did engage in business as a self-employed person in that Member State, without authorisation, cannot confer upon him either a right of establishment or a right of residence derived directly from Community provisions.

[68] As regards, secondly, the line of argument taken by Mr Savas at the hearing before the Court, it is important to remember, first, that the direct effect to be attributed to Article 41(1) of the Additional Protocol implies that that provision confers on individuals individual rights which the national courts must safeguard.

[69] It should also be noted that the 'standstill' clause in Article 41(1) of the Additional Protocol precludes a Member State from adopting any new measure having the object or effect of making the establishment, and, as a corollary, the residence of a Turkish national in its territory subject to stricter conditions than those which applied at the time when the Additional Protocol entered into force with regard to the Member State concerned.

[70] It is therefore for the national court, which alone has jurisdiction to interpret its own domestic law, to determine whether the domestic rules applied to Mr Savas by the competent authorities have the effect of worsening his position in comparison with the rules which were applicable in the United Kingdom on the date on which the Additional Protocol entered into force in relation to that Member State."

10. The present contentions of the parties are well summarised in the schedule appended to the reference. Mr Cox for the appellant submits:

"…the Court's ruling that 'Article 41(1) of the Additional Protocol is not in itself capable of conferring upon a Turkish national a right of establishment and, as a corollary, a right of residence in the Member State in whose territory he has remained and carried on business activities as a self-employed person in breach of the domestic immigration law' and the passages at paragraphs 63-67 of the judgment did not limit the effect of the standstill clause to persons regularly present in the Member State concerned. In this ruling and these passages the Court interpreted Article 41(1) as not creating a right of establishment and a related right of residence directly derived from Community law and existing independently of the domestic immigration rules applicable at the time when the Additional Protocol entered into force. Ms A did not claim any such right of establishment or of residence derived directly from Community law. She only claimed a right to have her application for leave to remain as a business person determined in accordance with the domestic rules applicable at the time when the Additional Protocol entered into force."

Mr Saini for the Secretary of State submits:

"Ms A is not entitled to claim any rights arising under Community law by virtue of the Association Agreement or Article 41(1) of the Additional Protocol thereto because she invoked the provisions of those Community measures at a time when she was present in the United Kingdom in breach of its domestic immigration laws."

11. The question framed by Scott Baker J was in these terms:

"1. Is Article 41(1) of the Additional Protocol signed at Brussels on 23 November 1970 and concluded, approved and confirmed on behalf of the Community by Council Regulation (EEC) No 2760/72 of 19 December 1972 to be interpreted as prohibiting a Member State from introducing new national restrictions on the freedom of establishment of Turkish nationals as from the date on which that Protocol entered into force in the Member State concerned in the cases of:

(a) a Turkish national who is present in the Member State concerned in breach of its domestic immigration law;

(b) a Turkish national who seeks admission to the territory of the Member State concerned in order to exercise her claimed rights of freedom of establishment by seeking to establish herself in business in the Member State?"

The short reasons given by the judge show that he agreed with the Home Secretary's view that there was an apparent conflict of reasoning between paragraphs 56-65 and paragraphs 66-70 of the ECJ's judgment. He concluded:

"The question whether any Turkish national, regardless of whether his presence in the United Kingdom is lawful under domestic law, is entitled to the benefit of the standstill provision in article 41(1)…is an important one, and appears to have been left open to doubt by paragraphs 56-70 of the judgment in Savas."

12. Mr Saini, before us, accepts that the rulings of the ECJ are in themselves unambiguous. It seems to me that the judgment which precedes the rulings is no more self-contradictory than the rulings themselves. It amounts simply to this: that article 41(1) does not make lawful the otherwise unlawful presence of a Turkish national in a member state; but that in deciding whether such presence is lawful, the principles to be applied must be no less favourable than they were, in regard to establishment, on 1 January 1973. Mr Saini has not really sought, in argument before us, to urge otherwise. He has redirected his criticism to the failure of the ECJ to address in terms McCullough J's question 1(b) which asked:

"Is the Agreement…together with the Additional Protocol…to be interpreted as conferring benefits on a Turkish national who has (a) entered or (b) remained in the territory of a member state in breach of the immigration law of that member state?"

This too, it seems to me, is not a justifiable criticism. Question 1(b) is encapsulated and dealt with in the reasoning and ruling of the ECJ.

13. In my respectful view, the first limb of the question posed by Scott Baker J has already been answered by the decision of the ECJ in Savas, at least so far as it affects the appellant's case. The second limb of the question posed by Scott Baker J was added in order to answer a contingent question which has not yet arisen. By itself it could not justify a reference.
14. What remains, as the ECJ has also clearly said, is for the national court to decide whether, and if so to what effect, the standstill identified in Savas operates upon the appellant's claim. The concerns which animate the Secretary of State in these proceedings, I think, go to issues which may affect a Turkish national's immigration status independently of his or her freedom of establishment. That, too, is for the national courts to determine.
15. I would accordingly allow this appeal and set aside the reference to the European Court of Justice. It will be for the Administrative Court to determine the proceedings now before it unless the parties are able meanwhile to reach agreement on the correct outcome.

Lord Justice Waller :

16. I do not think that Savas left unclear the first question, which has been framed for consideration following the ruling of Scott Baker J, and the second question simply does not arise in the present circumstances. I shall try and explain shortly why I am clearly of that view. But I would also stress that there is a distinction between the circumstances of the instant case and the circumstances that existed in Savas, which perhaps should have been addressed, to see whether some assistance was necessary in relation to those circumstances. As I will attempt to explain, I have come to the conclusion that no assistance is necessary and thus that no reference is in fact necessary at all.
17. I must make one or two preliminary points and then examine a little the reasoning in Savas.
18. The first preliminary point is to emphasise the obvious. In the EEC treaty there is a distinction drawn between the "free movement of workers" and the "freedom of establishment", both being corner stones of EEC law. The latter applies to self employed, and involves the right of a self employed business man from one Member state to enter a Member state and establish a business. It entails ancillary rights without which the right of establishment is nugatory, including the right to enter the territory, and reside. [See for example Article 52 and paragraph 16.29 of Volume 52 of Halsbury's Laws 4^th edition]. That Article is however concerned with cross-border obligations; it has for example no application to the right of a national to establish a business within the territory of his own state.
19. The second point is that it would seem that so far as Article 41 of the Additional Protocol to the EEC-Turkey Association Agreement was concerned some advance had been made in introducing the progressive abolition of restrictions and a programme therefor so far as workers were concerned [see e.g. footnote 28 in Savas]; no attempt had been made to introduce a programme relevant to "freedom of establishment". But workers only obtain the benefit if they have been lawfully employed, and the position of Turkish workers was not the same as workers who were nationals of other Member states. The Court of Justice had held "in contrast to nationals of Member states, Turkish workers are not entitled to move freely within the Community but benefit only from certain rights in the host Member State whose territory they have lawfully entered and where they have been in lawful employment for a specified period". [page 742/3 of Savas]
20. The third point to make is that HC 510 paragraph 21 in force as at 1 January 1973 provided that "People admitted as visitors may apply for consent of the Secretary of State to their establishing themselves [in the UK] for the purpose of setting up in business…. etc" [see footnote 9]. The main question that arose in Savas, was whether the visitors there referred to were lawful visitors or included unlawful visitors. Savas had come as a visitor not as a businessman trying to establish his business in UK. He was in the UK unlawfully before he began to establish his business. The question was whether the Secretary of State had to consider Savas under Paragraph 21 or not, i.e. under the regulations as they existed on 1^st January 1973, and not under some regulations which had been brought in since that date.
21. The first argument of Savas was to the effect that by virtue of Article 41, he as a Turkish National simply had the right to come to the UK and establish a business, and was entitled to that right even though he had "carried on business activities in breach of the UK's immigration laws" His second argument which he appears to have made orally was that he no longer claimed rights of establishment directly but as a Turkish national he wished to ask a national court to determine whether the rules relating to "deportation" were stricter in relation to freedom of establishment than those applied at the date when the protocol entered into force.
22. The Advocate General seems to have given the following opinion. First, Article 41(1) had direct application in contrast to Article 41(2) which envisaged a programme for a gradual abolition of restrictions. [see paragraph 13]. Second, Article 41(1) did not give Savas any right of establishment (as opposed to a right to argue standstill) first because he was unlawfully in the UK but also because even if here lawfully i.e. even if he had applied before his visa expired, Article 41(1) did not give him any right of establishment [see paragraph 17 of the Advocate General's opinion on this last aspect]. So far as lawfulness was concerned; he applied by analogy the position as it would have been for "workers". On that basis Savas could not rely on the direct effect of Article 41(1) in support of his own alleged right of establishment when that establishment had been set up unlawfully in breach of immigration laws. In that context the Advocate-General also, as it seems to me, expressed the view as to the meaning of visitor in Paragraph 21 of HC 510 i.e. that visitor there equals lawful visitor [see 744 at the top].
23. The judgment deals with Savas' two arguments separately, but does not deal obviously because it was unnecessary to do so in the context of that case with the position of Savas if he had applied before his visa had expired. Paragraphs 58 to 62 deals with the position of workers and in essence say that a worker must be acting lawfully, and that Turkish workers "are not entitled to move freely within the community but benefit only from certain rights in the host Member state whose territory they have entered lawfully" [see paragraph 59]. These principles are said to apply by analogy [paragraph 63] to rights of establishment. Thus the court holds that Article 41(1) does not confer a right of establishment on a person who has established his business in breach of domestic law. It also recognises that "a Turkish national's first admission to the territory of a Member state is governed exclusively by that state's own domestic law, and the person concerned may claim certain rights under community law in relation to holding employment or exercising self-employed activity, and correlatively, in relation to residence, only in so far as his position in the Member state concerned is regular". [paragraph 65] I underline the words because there is no question (as it seems to me) that a Turkish national who has been conducting a lawful business in Turkey would have the right as a national of Turkey to rely on the community right provided by Article 41(1), however it should be emphasised that right is not a right of establishment, but simply a right to be treated under the rules prevailing as at January 1973. It follows also, as it seems to me, that the court was approving the interpretation of visitor in paragraph 21 as meaning lawful visitor. Thus Savas had no rights under that paragraph.
24. As regards the second argument, the finding of the court is limited to holding that as regards deportation or removal, Savas was still entitled to rely on Article 41(1), and argue before the national court, that the rules are now more harsh than they would have been in 1973, and if that argument succeeds the 1973 rules must apply.
25. If one then turns to the facts of the instant case, there is one factor not present in Savas. That factor is that for a time when the applicant began her business activities she did so with permission and while she was lawfully in the UK. The period was 25^th March 1994 to 24^th May 1995 [see paragraphs 15 and 16 of the schedule pages 15 and 16 of the bundle]. However, she was in breach of United Kingdom immigration rules and thus an "unlawful visitor" in the Savas sense by the time she made her application to remain as a business person on 8^th July 1997 [see paragraph 11 page 17], but that may not be the point so far taken by the Secretary of State. He has simply relied on the absence of an entry clearance.
26. The position that would seem to need consideration is whether the setting up of a business lawfully in the United Kingdom differentiates her case from Savas and whether (if not) the Secretary of State is free to take that point rather than the absence of an entry clearance. That is not because Savas has left anything unclear, and more importantly it is not because Savas has left unclear whether "Article 41(1) prohibits a Member state from introducing new restrictions on the freedom of establishment of Turkish nationals as from the date on which the Protocol entered into force in the Member state concerned, … in the cases of a Turkish national who is present in the Member state concerned in breach of its domestic immigration law" – the first question sought to be posed.
27. Savas has made absolutely clear that the applicant's position must be examined by reference to the 1973 rules. It will be for argument whether this applicant can distinguish her position from that of Savas and indeed as to whether the Secretary of State is free to take that point rather than whether she had an entry clearance. But no assistance will be gained from referring any question to the European Court.
28. For the above reasons the first question should not be referred.
29. As to the second question sought to be put, it does not arise at present, but I suggest that the mere fact that the person set up her business in the UK is unlikely to provide a community remedy if she was seeking to re-enter from Turkey.
30. For the above reasons I would allow the appeal.

The Lord Chief Justice of England & Wales:

31. I agree with the judgments of Lord Justice Sedley and Lord Justice Waller.

Order:

32. The order of Mr Justice Scott Baker dated 7 January 2002 be set aside.
33. Pursuant to section 11 of the Contempt of Court Act 1981 the publication of the name of the Appellant is prohibited and it is ordered that in any report of these proceedings in High Court and the Court of Appeal the Appellant shall be referred to as A.
34. Article 41(1) of the Additional Protocol to the Agreement Established an Association between the European Economic Community is hereby declared to have the effect that, notwithstanding any provision of the Immigration Rules to the contrary, a Turkish national seeking leave to remain in the United Kingdom as a Businessperson or self-employed person does not require an entry clearance, regardless of whether that national has remained has in the United Kingdom in breach of the immigration laws.
35. The decision of the Secretary of the State for the Home Department dated 8 October 1997 refusing the Appellant's application dated 23 June 1997 for variation of her limited leave to remain in the United Kingdom as a self-employed person is hereby quashed and the Secretary of State is directed to consider the said application afresh and according to law.
36. The Secretary of State for the Home Department pay the Appellant's costs in this court and in the court below.
37. There be a detailed assessment of the Appellant's costs in this court an in the court below.
(Order does not form part of the approved judgment)