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Cite as: [2004] 2 All ER 200, [2004] EWCA Civ 12, [2004] IRLR 206, [2004] ICR 204, [2004] ICR 1733, [2005] ICR 737

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		Neutral Citation Number: [2004] EWCA Civ 12
		Case No: A1/2003/0649/A

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE ALTMAN
AT THE EMPLOYMENT APPEAL TRIBUNAL

Royal Courts of Justice
Strand,
London, WC2A 2LL

23rd January 2004

B e f o r e :

LORD JUSTICE PILL
LORD JUSTICE MUMMERY
and
LORD JUSTICE MAY
____________________

Between:

	SERCO LIMITED	Appellants
	- and -
	STEPHEN LAWSON	Respondent
	- and -
	FOREIGN AND COMMONWEALTH OFFICE	Interested Party

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
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____________________

MR E SUTER (instructed by Serco Ltd) for the Appellants
MR ALGAZY and MR P SPENCER (instructed by Mills, Kemp & Brown, Barnsley, S70 2LP) for the Respondent
MR MOFFETT (instructed by the Treasury Solicitor) for the Interested Party
____________________

HTML VERSION OF JUDGMENT
____________________

This is the judgment of the Court:

Lord Justice Pill:

This is an appeal by Serco Limited ("the appellants") against a decision of the Employment Appeal Tribunal made on 11 March 2003 whereby they allowed an appeal from a decision of an Employment Tribunal held at Watford and promulgated on 30 October 2001. The Employment Tribunal had held that it had no jurisdiction to consider a complaint of unfair dismissal made by Mr Stephen Lawson ("the respondent") against his employers, the appellants. The Foreign and Commonwealth Office was granted permission to take part in the appeal as an interested party in relation to the territorial extent and applicability of the relevant legislation.

The appellants are a company registered in England and Wales with a head office in Middlesex. The company provided support services for the RAF and civilian police on Ascension Island. The respondent was appointed a security supervisor as from 22 September 2000. He is of British nationality, domiciled in England. He was interviewed in England, paid in pounds sterling in England and was given a "no tax" coding by the Inland Revenue on the ground that his work was on Ascension Island. No mention was made of any law other than the law of England applying to the contract.

Difficulties arose because of the number of additional hours the respondent was required to work. He resigned on 6 April 2001 in circumstances which he claimed amounted to a constructive dismissal.

Application was made to the Employment Tribunal on 8 June 2001. The qualifying period for an ordinary claim for unfair dismissal had not been served but it was claimed that the respondent's health and safety was being put in peril by the requirement to work long hours and a claim could be brought because the respondent was asserting a right under the Working Time Regulations 1998. It would be necessary for the Employment Tribunal to make findings of fact on this issue. The EAT dismissed a cross-appeal by the present appellants that the health and safety issue had not been raised before the Employment Tribunal.

The issue of jurisdiction does not turn upon the precise status of Ascension Island, a small island in the South Atlantic Ocean, but it may be described briefly. It is a dependency of St.Helena, which is an overseas territory of the United Kingdom. St.Helena has a legislative council. Legislative power over its dependencies is vested in its Governor. If there is no inconsistency with local law, and subject to local circumstances, the law of England will apply.

Elaborate arguments have been addressed to tribunals in this and other cases where the jurisdictional issue has arisen. A jurisdictional test was formerly provided in Section 196 of the Employment Rights Act ("the 1996 Act"). Sub-section (2) provided that sections 94 and 95, amongst other sections, did not apply to employment "where under the employee's contract of employment he ordinarily works outside Great Britain". The statutory provisions which originally conferred the right of action for unfair dismissal, the Industrial Relations Act 1971, Section 22, and the Trade Union and Labour Relations Act 1974, Schedule 1 para. 9(2), provided that the right did not apply to any employment "where under the contract of employment the employee ordinarily works outside Great Britain". Section 196 of the 1996 Act was repealed by Section 32(3) of the Employment Relations Act 1999 with effect from 25 October 1999. Claims have since been brought, in a variety of circumstances, by employees engaged in work wholly or mainly outside Great Britain, by which expression we refer to England and Wales, and Scotland.

Tests have been suggested as substitutes for the former test under Section 196. These have included a sufficient or substantial connection test, a "base" test, a "territorial extent" test based on Section 244 of the 1996 Act and the test favoured by the EAT in the present case which provides no fetter on jurisdiction where the claim is brought against an employer who resides or carries on business in England and Wales. That limit is supplied, it is contended, by Regulation 11(5) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 which defines the proceedings in which the rules shall apply. The EAT stated, at paragraph 17, that "in all cases it is the proximity of the respondent to the United Kingdom that provides the yardstick for determining jurisdiction."

In our judgment, consideration of this issue must start with the section in the 1996 Act creating the statutory right relied on. This case is concerned with the statutory right in Section 94 (1) of the 1996 Act not to be unfairly dismissed. Section 94 (1) provides that "an employee has the right not to be unfairly dismissed by his employer". The question is: what are the employments covered by the section ? The answer, in our judgment, is straightforward though it may be difficult to apply in some cases: employment in Great Britain. It is necessary to consider the several factors which have led us to that conclusion.

We start on the basis that it is highly unlikely that Parliament intended to give this statutory right to all employees wherever they worked, subject to being able to serve proceedings on an employer in Great Britain. Far from it being inevitable that the repeal of section 196 produced that result, as found by the EAT, it would be necessary to find the plainest indications in the legislation, without section 196, before it could be concluded that Parliament intended to confer such a wide jurisdiction upon a domestic tribunal.

Two possible reasons for the repeal of section 196 are evident from the legal context of the 1999 Act. They are obvious without reference to, though confirmed by, a statement of the Minister of State in the House of Commons when introducing the amendment to the Employment Relations Bill which led to the repeal of Section 196. The reasons are, first to meet the requirements of the Posting of Workers Directive (96/71/EC) and, second, an intention to mitigate the effect of the decision of this court in Carver v Saudi Arabian Airlines [1999] ICR 991, to which case reference will be made.

An examination of the 1996 Act as a whole does not support the startling proposition that, in the absence of the former Section 196, Section 94 (1) confers the right not to be unfairly dismissed on employees everywhere. As James LJ stated in ex parte Blain (1879) 12 Ch D 522 at 528: "the governing principle is that all legislation is prima facie territorial", although the position of British subjects was more broadly stated in that case, Cotton LJ stating, at page 531, that "all laws of the English Parliament must be territorial – territorial in this sense, that they apply to and bind all subjects of the Crown who come within the fair interpretation of them……."

In Tomalin v S Pearson and Son Ltd [1909] 2 KB 61 it was held that the Workmen's Compensation Act 1906 did not apply to an accident happening abroad. It was held that, subject to exceptions provided in the Act, including in section 7, it did not apply to an accident beyond the territorial limits of the United Kingdom. Cozens-Hardy MR stated, at page 64:

"What is the widow's claim here ? She is claiming, not as a party to the contract, not as claiming any rights under a contract made by her or by any person through whom she claims, but she is simply claiming the performance by the defendants of a statutory duty, which statutory duty is said to be found in the Workmen's Compensation Act. Now that brings us face to face with this proposition. What is the ambit of the statute and what is the scope of its operation ? It seems to me reasonably plain that this is a case to which the presumption which is referred to in Maxwell on the Interpretation of Statutes in the passage at p. 213, …… must apply: "In the absence of an intention clearly expressed or to be inferred from its language, or from the object or subject-matter or history of the enactment, the presumption is that Parliament does not design its statutes to operate beyond the territorial limits of the United Kingdom."

Farwell LJ stated, at page 65:

"The question is one purely of the construction of the statute. The words of s.1, sub-s 1, are so wide that some limitation must necessarily be affixed to them. The words are, "If in any employment personal injury by accident arising out of and in the course of the employment is caused to any workman," and so on. To my mind the words "any employment" there must be restricted to employment within the ambit of the United Kingdom or on the high seas as provided by s.7."

Section 244 (1) of the 1996 Act provides:

"This Act extends to England and Wales, and Scotland, but not to Northern Ireland."

We do not accept the submission made by Mr Suter, on behalf of the appellants, that the territorial limitation in Section 244 concludes the present issue. That section defines the area within which the enactment is law, the first question, but does not define the persons and matters in relation to which the statute operates, the second question. The question to be decided is: on what employees does the law of England and Wales confer the right not to be unfairly dismissed ? The distinction is illustrated by an example given by Mr Moffett, on behalf of the interested party, in a very different context. Section 10(4) of the Sex Offenders Act 1997 provides that the Act "extends to England and Wales and Northern Ireland", the first question, but Section 7 provides that certain acts "done by a person in a country or a territory outside the United Kingdom……shall constitute [a] sexual offence under the law of [the relevant] part of the United Kingdom", the second question.

The general principle is that "an enactment applies to all persons and matters within the territory to which it extends, but not to any other persons or matters" (Bennion, Statutory Interpretation (4^th Ed, 2002, page 306)). In Clark (Inspector of Taxes) v Oceanic Contractors Inc. [1983] 2 AC 130, at page 152, in the context of a tax statute, Lord Wilberforce considered the scope of the territorial principle. He stated:

"That principle, which is really a rule of construction of statutes expressed in general terms, and which as James LJ said is a "broad principle", requires an enquiry to be made as to the persons with respect to whom Parliament is presumed, in the particular case, to be legislating.

Who, it is to be asked, is within the legislative grasp or intendment, of the statute under consideration ?"

The question of comity, in its usual form, does not arise because, on the respondent's case, the powers of Courts in other jurisdictions would not be affected by the grant of rights in this jurisdiction. The power to claim here does not purport to conclude the right to claim elsewhere.

Far from supporting the proposition that the legislature was granting a right to employees everywhere to bring a claim in this jurisdiction, provided the employer was within the jurisdiction, there are several indications that the 1996 Act is to apply only to employment in Great Britain:

a) Section 201 confers a power to extend the provisions of the Act to offshore employment "even where" such application may affect the employee's activities outside the United Kingdom (Section 201(3)(b)).

b) Section 215 provides that, for the purpose of calculating periods of continuous employment, account is to be taken of a period of employment "even where" during that period the employee was engaged in work wholly or mainly outside Great Britain.

c) When Section 196 was repealed, provisions in it relating to mariners were in substance re-enacted in section 199 (7) making it possible for mariners, provided the criteria specified in Section 199(7) are met, to claim under section 94(1) of the 1996 Act even though their employment is mainly outside Great Britain.

These provisions would be unnecessary if the statute otherwise covered employment outside Great Britain, provided the employer was within the jurisdiction.

The provision in section 204 (1) that it is immaterial whether the law which governs the contract of employment is the law of the United Kingdom, or a part of the United Kingdom or not, is not inconsistent with the conclusion that the Act applies only to employment in Great Britain. Protection covering employment in Great Britain is not to be defeated by a choice of a law other than that of the jurisdiction.

For the respondent, Mr Algazy relies on the Rome Convention on the Law Applicable to Contractual Obligations (1981), as enacted in the law of England and Wales as Schedule 1 to the Contracts (Applicable Law) Act 1990 ("the 1990 Act"). He does so only as a means of undermining any argument that the law of the forum may be defeated by the choice by the parties of another law and the relevance of the Convention does not extend beyond establishing that proposition. Mr Algazy accepts that the Convention does not assist in the construction of the 1996 Act. Section 204 (1) of the Act and the Employment Tribunal (Constitution Rules and Procedure) Regulations 2001 are consistent in this respect with the requirement of the Convention. The right to bring a claim for unfair dismissal in Great Britain cannot be defeated by a choice of law other than that of a part of Great Britain. On the question whether it is only to an employment in Great Britain that the right to claim for unfair dismissal attaches, the Convention is not material.

Reference was made in argument to Directive 96/71/EC concerning the posting of workers in the framework of the provision of services. In Article 2 of the Directive, it is provided that:

"posted worker" "means a worker who, for a limited period, carries out his work in the territory of a Member State other than the State in which he normally works."

Article 3 of the Directive requires Member States to provide protection, with respect to a variety of matters arising out of the employment relationship, to workers posted to their territory. Article 6 provides:

"In order to enforce the right to the terms and conditions of employment guaranteed in Article 3, judicial proceedings may be instituted in the Member State in whose territory the worker is or was posted, without prejudice, where applicable, to the right, under existing international conventions on jurisdiction, to institute proceedings in another state".

The requirement to implement the Directive was undoubtedly a factor in the decision to repeal Section 196 of the 1996 Act, which was inconsistent with the provisions of the Directive. The requirement that the right to claim for unfair dismissal did not apply to employment where "under the employee's contract of employment he ordinarily works outside Great Britain" would not have provided that protection for workers posted to Great Britain required by the Directive. It does not throw light, directly, on the rights in the courts of Great Britain of employees who are not posted workers. Assuming that effect is given to the Directive in other Member States, a British worker posted to one of those states will acquire employment rights there but that does not necessarily eliminate his rights within this jurisdiction. The Directive does, however, demonstrate the need for a degree of flexibility in the application of employment law as between jurisdictions following the increased movement on a temporary basis of labour between jurisdictions within the Community.

We are in no doubt that the Employment Tribunal had no jurisdiction to consider a claim for unfair dismissal by the respondent. On the evidence, he was not employed in Great Britain within the meaning of Section 94 (1) of the 1996 Act. He was employed on Ascension Island, however strong were his and his employers' British connection. The test applied by the EAT is not the correct one. Save where there is express provision to the contrary, the Act covers employment in Great Britain. That is its "legislative grasp".

The question has been approached in different ways by differently constituted EAT's and tribunals and it is necessary to address the question further, at least to state that it follows that we do not accept that jurisdiction is determined by the rules of procedure. Neither do we accept the "substantial connection" test adopted by the EAT in The Financial Times Ltd v Bishop, His Honour Judge Burke QC, presiding (EAT/0147/03/ZT). In a judgment delivered on 25 November 2003, Judge Burke stated, at paragraph 72:

"In our view the repeal of section 196 (2) cannot be taken to have had the effect that employees who had or whose employment had a substantial connection with Great Britain should not be entitled to the rights conferred by the ERA and the ability to assert those rights against their employer in the Employment Tribunal. While the Court of Appeal in Paramount did not limit the relevant jurisdiction by a sufficient or a substantial connection test, it achieved that result by treating the presumption as rebutted but the operation of the broad jurisdiction thus arising as limited by a sufficient connection test upon the basis of which the courts would exercise its discretion. In our judgment, it being accepted that the presumption does not apply in full to the applicability of the rights provided by the ERA but that those rights are not to be regarded as provided to the whole world without restriction, the correct analysis in the present case, as the Employment Appeal Tribunal decided in Jackson, is that the presumption is rebutted but that there is an implied restriction of the applicability of the rights provided by the ERA to cases in which there is a sufficient or substantial connection with the United Kingdom and that there is to be found the limit for which the parties and we have been seeking

73. Such a test would involve consideration of all factors surrounding the employment, including the place of employment, the residence of the employer and the employee, and matters of that kind – but not the proper law of a contract (section 204 of the ERA). It will be for Tribunals in individual cases to consider the facts as a whole and weigh them so as to decide whether there was or was not the requisite connection with the United Kingdom."

A similar approach had been adopted by the EAT in Jackson v Ghost Ltd [2003] IRLR 824, Judge Peter Clark presiding, where, rejecting an employee's right to claim for unfair dismissal, it was stated that the employment must have "a sufficient, that is substantial connection with this country". The 1996 Act does not in our view permit the adoption of the sufficient connection test considered by Sir Donald Nicholl's V-C in Re Paramount in the quite different circumstances of jurisdiction in bankruptcy. ([1993] Ch 223 at pages 239-240).

For the interested party, Mr Moffett proposes a reversion to the "base" test advocated by Lord Denning MR in Todd v British Midland Airways [1978] ICR 959 at 964. Lord Denning stated:

"The "base" test, if I may say so, is a good sensible way of overcoming the literal meaning of the words "ordinarily working" in the statute. It affords good guidelines for the tribunals which have to deal with so many of these cases. A man's base is the place where he should be regarded as ordinarily working, even though he may spend days, weeks or months working overseas. I would only make this suggestion. I do not think the terms of the contract help much in these cases. As a rule, there is no term in the contract about exactly where he is to work. You have to go by the conduct of the parties and the way they have been operating the contract. You have to find at the material time where the man is based."

Todd was distinguished in Carver v Saudi Arabian Airlines [1999] ICR 991 on the basis that the test as stated failed to have regard to the words "under the employee's contract of employment" in Section 196 (2) of the 1996 Act. It was held that the question raised by Section 196(2) had to be determined by reference to the position as it appeared at the date of the contract from the relevant terms of the contract of employment, expressed or implied. We accept that the wording of the section, as construed in Carver, and the resulting exclusion from protection of employees who may have worked for some years in Great Britain, contributed to the decision to repeal the section.

Mr Moffett submits that, upon the repeal of Section 196, a reversion to the "base" test is appropriate. We do not accept that submission. The test was irrevocably linked to the wording of Section 196, and earlier legislation, and the concept of "ordinarily working". It is not appropriate to a statutory regime which does not include the section. Nor does it comply with the test as now enacted, that is, whether the employment is in Great Britain, though the location of the employee's base may throw some light on where the employment is.

We accept the need for a degree of flexibility in applying the test. The Posting of Workers Directive provides protection in a jurisdiction visited. Protection in a jurisdiction from which there is a temporary absence is not necessarily excluded and the existence of the Directive points to the need for a degree of flexibility in deciding where the employment is. A dismissal during a single, short absence from Great Britain, for example, would not normally exclude the protection of the 1996 Act. In most cases it will not be difficult to decide whether the employment is in Great Britain; borderline cases will depend on an assessment of all the circumstances of the employment in the particular case. The residence of the parties may be relevant to where the employment is, but the emphasis must be upon the employment itself. That, we repeat, is the "legislative grasp" of the 1996 Act.

This case is concerned with the statutory right not to be unfairly dismissed. Different considerations will apply when contractual claims, for example for wrongful dismissal, are to be determined. Upon a contractual claim, the power to stay may arise, but we see no need to consider that point in the present case.

We allow the appeal and dismiss the claim.