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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> British Pig Industry Support Group & Anor, R (on the application of) v Ministry Of Agriculture Fisheries & Food [1999] EWHC Admin 826 (30th November, 1999)
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Cite as: [2000] Eu LR 724, [1999] EWHC Admin 826
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QUEEN V Ministry of Agriculture Fisheries & Food Ex parte British Pig Industry Support Group and Meryl Suzanne Ward [1999] EWHC Admin 826 (30th November, 1999)
CASE NO: CO/0608/2000
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
CROWN OFFICE
ROYAL COURTS OF JUSTICE
STRAND, LONDON, WC2A 2LL
27th July 2000
THE HON MR JUSTICE RICHARDS
-------------------
V
Ministry of Agriculture Fisheries & Food
Ex parte
1.
2.
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________________
Ms E Sharpston QC & Ms K Sawyer (instructed by Tallent Godfrey Solicitors) appeared on behalf of the applicants
Mr C Vajda QC & Mr T Ward (instructed by the solicitor to the MAFF) appeared on behalf of the Respondent
Judgment
As Approved by the Court
Crown Copyright ©
MR JUSTICE RICHARDS:
1. The British pig industry is in a state of crisis. In recent years there has been a severe decline in prices and profitability and, despite a major cutback in the size of the national pig herd, serious problems remain and the prospects for many producers are bleak. The applicants in these proceedings contend that a very significant cause of the crisis has been what they term "the BSE tax", namely the costs that pig producers have incurred as a result of Government measures to deal with BSE, in particular the ban on the use of mammalian meat and bone meal in animal feed ("the MBM ban"). They complain that, although substantial financial assistance has been given to the beef and sheep industries to overcome the difficulties caused by BSE, there has been a failure to give equivalent assistance to the pig industry. Yet all three sectors are in direct competition. In the result there is unlawful discrimination against pig producers and the Government is in breach of a duty to remedy, or to use its best endeavours to remedy, the situation by obtaining the necessary Community authorisation for the grant of adequate state aid to the pig industry. The main issues raised concern the application of EC law. There are subsidiary points on domestic law.
2. Formally there is a challenge to (i) the decision of the respondent Ministry, recorded in a letter of 30 November 1999, not to apply for authorisation for aid to compensate the pig industry for the costs incurred as a result of the MBM ban, and (ii) the Ministry's continuing failure to seek authorisation to grant adequate aid to the pig industry. On 30 March 2000, after the commencement of these proceedings, the Ministry notified to the EC Commission a limited aid package for the pig industry. Unsurprisingly that decision is not challenged as such, but it is said that the package does not go far enough and that the decision to notify it therefore does not constitute a discharge of the Government's duty. I gave permission to amend the application to this court so as to include reference to the decision of 30 March in order that the matter could be considered by reference to the up-to-date factual position.
3. The first applicant, the British Pig Industry Support Group ("BPISG") is an association of pig producers and persons in allied trades which was formed in July 1998. It has campaigned actively on behalf of pig producers, including the making of submissions to the House of Commons Agriculture Committee's inquiry into the British pig industry. It played an active part in the formation of a National Pig Association. Although much of its work appears to have been taken over by that association, it continues to represent the interests of the British pig industry. It derives its financial support from voluntary donations.
4. The second applicant, Mrs Ward, is the Treasurer of the BPISG. She was joined as a party after the conclusion of oral argument in order to deal with concerns raised at the hearing with regard to BPISG's capacity to bring the application and the Ministry's ability to recover costs in the event that the application is dismissed. I shall make some observations on those matters at the end of this judgment. So far as the present application is concerned, however, the issues have fallen away. It is common ground that at least the second applicant has capacity to bring the application and that both applicants have a sufficient interest to bring it. There is therefore no procedural obstacle to a determination of the substantive issues.
The EC regulatory framework
5. Under the Common Agricultural Policy beef, sheep meat and pig meat are each subject to a separate Common Organisation of the Market ("COM"). Each COM is contained in Community legislation and provides the framework for Community support measures.
6. The COM for beef (and veal) is governed by Council Regulation (EEC) No. 805/68, as amended. The regime is very detailed. Producer prices are supported by a combination of tariff protection, export subsidies, intervention buying and private storage aid (though intervention is being phased out). Direct payments are made to producers e.g. under the Beef Special Premium Scheme, by way of Suckler Cow Premiums and in the form of Hill Livestock Compensatory Allowances. Support is generally financed wholly by the Community, although in some cases there is co-financing by the Community and a member state.
7. The COM for sheep (and goat) meat is governed by Council Regulation (EEC) No. 1837/80, as amended. It aims at a single, harmonised market throughout the Community, guaranteeing for producers a common level of support calculated against the "Community basic price". This price support is achieved through an annual ewe premium which is paid to producers when the market price falls below the basic price. Certain other payments are also made and there is market intervention in the form of aid for private storage.
8. The COM for pig meat is governed by Council Regulation (EEC) No. 2759/75, as amended. There are three basic methods of support: import tariffs, export refunds and aids for private storage (provided on a temporary basis where necessary to remove a surplus from the market). The regime is much lighter in terms of Community support than the regimes for beef and sheep meat. It does not have the same mechanism to allow for direct payments to producers. The result is that pig production is subject to the laws of supply and demand in a way that does not apply to beef and sheep production. That leads in turn to far greater market fluctuations.
9. Each of the COMs permits the grant of aids by member states in accordance with the provisions now contained in Articles 87-89 of the Treaty (formerly Articles 92-94). Article 87 (ex Article 92) EC provides:
"1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the Common Market.
2. The following shall be compatible with the Common Market:
....
(b) aid to make good the damage caused by natural disasters or exceptional occurrences;
....
3. The following may be considered to be compatible with the common market:
...
(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest ...."
10. Article 88 contains what is in effect an authorisation procedure for the grant of aid by a member state. Provision is made for the notification of a proposed aid to the Commission, which may decide that the state should abolish or alter the aid if it finds that the proposal is not compatible with the common market.
11. The Commission's current policy on state aids in agriculture is set out in the Community Guidelines for State Aid in the Agriculture Sector (2000/C 28/02). Paragraph 1.3 provides that recourse to state aid can only be justified if it respects the objectives of the Common Agricultural Policy. Under the heading "General Principles", paragraph 3.2 states:
"Although Articles 87, 88 and 89 are fully applicable to the sectors covered by the common organisations of the market, their application nevertheless remains subordinate to the provisions established by the regulations concerned .... Under no circumstances can the Commission approve an aid which is incompatible with the provisions governing a common organisation of the market or which would interfere with the proper functioning of the common organisation."
12. Paragraph 3.5 is concerned with the general prohibition on operating aids. It states:
"In order to be considered compatible with the common market, any aid measure must contain some incentive element or require some counterpart on the part of the beneficiary. Unless exceptions are expressly provided for in Community legislation or in these guidelines, unilateral State aid measures which are simply intended to improve the financial situation of producers but which in no way contribute to the development of the sector, and in particular aids which are granted solely on the basis of price, quantity, unit of production or unit of the means of production are considered to constitute operating aids which are incompatible with the common market. Furthermore, by their very nature, such aids are also likely to interfere with the mechanisms of the common organisations of the market."
13. Paragraph 3.6 is concerned with the general prohibition of retrospective aids. It states:
"For the same reason, aid which is granted retrospectively in respect of activities which have already been undertaken by the beneficiary cannot be considered to contain the necessary incentive element, and must be considered to constitute operating aid which is simply intended to relieve the beneficiary of a financial burden. Except in the case of aid schemes which are compensatory in nature, all aid schemes should therefore provide that no aid may be granted in respect of work begun or activities undertaken before an application for aid has been properly submitted to the competent authority concerned."
14. Section 11 deals with aids to compensate for damage to agricultural production or the means of agricultural production. Paragraph 11.1.1 points out that Article 87(2)(b) of the Treaty provides that aids to make good the damage caused by natural disasters or exceptional occurences are compatible with the common market. It notes that the Commission has also accepted, under Article 87(3)(c), two further groups of aids of this nature, one of which is "aid to encourage preventative measures against the outbreak of plant and animal diseases, including compensation for damage arising as a result of certain diseases". Paragraph 11.1.2 emphasises the importance of promptness in the payment of such aids:
"In order to avoid a risk of the distortion of the conditions of competition, the Commission considers it important to ensure that, subject to administrative and budgetary constraints, aid to compensate farmers for damage caused to agricultural production is paid as soon as possible after the occurrence of the adverse event concerned. Where aid is paid only several years after the occurrence of the event in question, there is a real danger that the payment of such aid will produce the same economic effects as operating aid .... Therefore in the absence of a specific justification, resulting for example from the nature and extent of the event, or the delayed or continuing nature of the damage, the Commission will not approve proposals for aid which are submitted more than three years after the occurrence of the event."
15. Section 11.2 deals with exceptional occurrence aid. Paragraph 11.2.1 indicates that the expression "exceptional occurrence" must be interpreted restrictively, though "in one case the Commission did recognise the very widespread outbreak of a completely new animal disease as an exceptional occurrence" (i.e. BSE). Paragraph 11.2.2 states that once the existence of an exceptional occurrence has been demonstrated, "the Commission will permit aid of up to 100% to compensate for material damage".
16. Section 11.4 deals with aid for combating animal and plant diseases. Paragraphs 11.4.1 and 11.4.2 state:
"Where a farmer loses livestock as a result of animal disease, or where his crops are affected by plant disease, this does not normally constitute a natural disaster or an exceptional occurrence within the meaning of the Treaty. In such cases aids to provide compensation for the losses incurred, and aids to prevent future losses may only be permitted by the Commission on the basis of Article 87(3)(c) of the Treaty ....
In accordance with these principles, the Commission considers that the payment of aid to farmers to compensate for losses resulting from animal or plant diseases may only be accepted as part of an appropriate programme at Community, national or regional level for the prevention, control or eradication of the disease concerned. Aids which simply compensate farmers for losses incurred without taking any steps to remedy the problem at source must be considered as pure operating aids which are incompatible with the common market ...."
17. Paragraph 11.4.3 provides that the objectives of the aid measures should be preventative, compensatory or a combination of the two. Paragraph 11.4.5 states that subject to compliance with the principles set out in the guidelines, aid may be granted at up to 100% of actual costs incurred. Compensation may include reasonable compensation for loss of profit.
BSE support measures
18. On 27 March 1996, in response to concerns about BSE, the Commission imposed a total prohibition on the export of live bovine animals or meat or their by-products which are liable to enter the food chain. On 29 March 1996 the Government extended an existing ban on the use of MBM for animal feed so that it applied to all farm animals.
19. Two measures were immediately implemented to support the beef market and to remove cattle which were potentially infected with BSE from the food chain. One was the Over Thirty Months Scheme ("OTMS"), under which the Government bought cattle over 30 months old in order to take them off the market and destroy them. The OTMS was an intervention measure under the relevant COM, co-funded by the Community (70%) and the member state (30%). It was not a state aid. It remains in force and has recently been extended.
20. The second measure was the Calf Processing Scheme ("CPS"), which compensated farmers for the slaughter and disposal of male calves. The CPS was a Community-funded scheme provided for by the COM and was likewise not a state aid. It was introduced in the United Kingdom on 22 April 1996 and ran until 31 July 1999.
21. Both those measures related only to beef. No equivalent schemes were introduced to support the pig market. The Ministry's evidence points out that the pig industry did not face a crisis of the kind which affected the beef industry at that time. There was no known risk of infection from pig meat, which was not excluded from the food chain or subject to an export ban. Indeed following the March 1996 announcement there was a sharp rise in the price of pig meat.
22. The MBM ban, however, affected all red meats. Prior to the MBM ban renderers had collected carcass waste from abattoirs in order to make MBM and tallow (the MBM being used as a source of protein in animal feed). A fee was paid to the abattoir. Following the MBM ban the rendering industry no longer had a market for MBM and its economic viability was in jeopardy. Slaughter houses, which are required by law to have waste material collected every 24 hours, were faced with the prospect of having to pay for the removal of the waste rather than receiving a fee for it. Their viability would have been threatened if the costs of disposal were passed on to them immediately. Thus there was the risk of an immediate and disorderly collapse of the meat supply/disposal chain. In order to prevent such a collapse, the respondent announced the Temporary Rendering Industry Support Scheme ("TRISS"), by which payments were made to eligible renderers (being those "engaged in the commercial production and sale of MBM and tallow from cattle, sheep or pig animal by-products") for the disposal of MBM. TRISS allowed renderers to maintain pre-crisis prices to slaughter houses for the waste removed by them.
23. TRISS was notified to the Commission on the basis that it would last for up to 2 years. The initial notification referred to TRISS and certain other schemes, including an emergency aid scheme for the slaughtering industry. The Commission wrote on 31 May 1996 to indicate an absence of objections to those schemes. It stated:
"The Commission has considered the aid measures in the context of the extraordinary situation on the beef and related markets in the wake of developments concerning Bovine Spongiform Encephalophathy (BSE). These developments include the introduction of a total ban on exports from the United Kingdom to any destination both of all live bovine animals as well as of meat, and of products liable to enter the animal or human food chain, from such animals slaughtered in that country. The consequential impact of BSE related developments on markets are of a magnitude way beyond those normally experienced .... The Commission also notes that the prohibition on inclusion of mammalian meat and bone meal in animal feed, introduced on 29 March 1996, plus the ban on exports of such meal, have removed the rendering industry's viability overnight, with obvious implications for the jobs of some 3,000 people directly engaged in this industry. An additional major consequence of this situation is that animal waste would, in the absence of aid, be uncollected. The Commission recognizes that unless urgent action is taken these circumstances would generate widespread business failures in the various sectors concerned, and unprecedented industry, public health, environmental and social problems.
The Commission has concluded that the situation in the United Kingdom beef and related products markets, including the total ban on exports of the products under consideration, has resulted in a situation which in terms of Article 92(2)(b) is an exceptional occurrence."
24. In July 1997 it was decided not to extend TRISS when it came to an end in April 1998, on the basis that the conditions which gave rise to the threat of collapse no longer existed and the support had served its purpose. It may be noted that while the scheme was in force it benefited the pig industry as it did the beef and sheep industries. Since it came to an end all three industries have had to bear the costs of offal disposal.
25. Mention should also be made of two matters announced in September 1999 which relate to BSE. Existing measures to combat BSE require the removal of specified risk material from cattle and sheep carcasses. Ministry inspections are carried out to ensure that the requirement is complied with. It was proposed to introduce charges in respect of these inspections, but the introduction of such charges has now been deferred. Similarly it has been decided to defer the introduction of charges for "cattle passports", the means by which individual animal movements are recorded from birth to death. In each case the imposition of charges is permitted by the relevant Community legislation. The Ministry's position is that neither measure constitutes a state aid. The applicants suggest that that is an open question but have advanced no argument to undermine the Ministry's contention. Neither measure has any direct bearing on the pig industry where such inspections and passports are not required.
26. As an indication of the total value of BSE support measures for the beef industry, financial assistance of £1.281 billion was given to producers alone, i.e. excluding slaughterers and renderers, in 1996-98, and the value of the September 1999 deferral of charges is said to be £89 million.
The impact of BSE on the pig industry
27. A report prepared for BPISG by an agro-food consultant, Dr John Strak, seeks to calculate the cost to the pig industry of the MBM ban. It refers to revised estimates published by the Meat and Livestock Commission in August 1999, in which the cost burden of the MBM ban following the phasing-out of support to the rendering sector was estimated at £5.26 per slaughtered pig, or a total of £74 million per year. The figure of £5.26 per pig represents 60% of the producers' estimated gross margin. Taking into account overhead costs, Dr Strak estimates that the BSE costs for pigs represent some 150% of a "target" margin that would reflect a reasonable long-run level of return. He calculates the total cost of BSE to the United Kingdom pig sector between April 1996 and the end of 1999 as being in excess of £266 million.
28. Dr Strak gives various figures by way of comparison between the pig industry and the beef and sheep meat industries. In terms of the gross output of each sector at "farm gate values", he gives the costs to the pig industry as 8.5% compared with a cost of 2.2% for sheep meat and 3% for beef. In terms of gross margins he compares the figure of 60% for pigs with figures of 6% for sheep and 10% or 14% for beef. In terms of "target" margins he compares the figure of 150% for pigs with a figure of 55% for beef, noting too that this overstates the effect of the costs on beef farming profits because it does not take account of the substitution possibilities open to cattle producers (but not to pig producers) which would mitigate the costs of the ban. Mrs Ward describes in her witness statement the effect of these costs on her own farming company. She says that they have resulted in a transition from profitability to a situation where losses are now unsustainable. The figures to which I have referred and the material underlying them form the basis for the applicants' submission that the MBM ban has had a disparate impact on the pig industry in comparison with the beef and sheep industries.
29. Whatever the merits of that argument, which I shall need to consider later, no one suggests that BSE costs are the only problem contributing to the crisis in the pig industry. A valuable and independent survey of the position is to be found in the report of the House of Commons Agriculture Committee on the British pig industry published in January 1999. The introduction to the report refers to the fact that by October 1998, after 16 months of continuous decline, United Kingdom pig prices had sunk to just 60 pence per dead-weight kilogram, roughly half the market value at the same time in 1997 and the lowest price recorded in 23 years. That compared with prices ranging from 95 pence to 100 pence per dead-weight kilogram that were needed in order to cover production costs. Consequently virtually all United Kingdom producers had sustained very considerable financial losses and were continuing to do so. That was expected in the short term at least to result in a very sharp rise in the industry's rate of bankruptcies and liquidations. The "pig cycle" - the cyclical rise and fall in the size of the national breeding herd in response to prices - was a well-established feature of the sector, but the depth of the slump in prices, its prolonged duration, the severity of its effects and the concatenation of destabilising factors underlying it were without precedent in the industry's history.
30. Later in the report the Committee referred to a number of underlying causes of the crisis: the increase in UK pig meat production between 1997 and 1998 and similar increases in each of the major EU pig meat producing countries, the rest of the EU and the USA; a reduction in export opportunities, with recession in Japan leading to reduced demand, Korea moving from being a net importer to a net exporter, other South East Asian countries and Russia being unable to afford their previous levels of imports, and increasing competition between the USA and EU for exports to third world country markets; the fact that the Netherlands market made a strong and faster than anticipated recovery from a severe outbreak of classical swine fever; the fact that in the United Kingdom the boost to domestic pig meat sales from the BSE crisis subsided; and the rise in the strength of sterling relative to other currencies. The Committee stated that no one factor in isolation could be said to have brought the crisis to a head in summer 1998. The collapse of the Russian rouble and the subsequent inability of that country to continue its previous level of pig meat imports constituted, however, a very significant blow.
31. The Committee went on to refer to the lightness of the regime for pig meat under the relevant COM and to the absence of direct UK Government intervention in the pig meat market. It also mentioned two aspects of domestic legislation with adverse economic consequences for domestic producers: recent welfare legislation for pigs (a reference to 1994 regulations introducing higher standards for the United Kingdom than for the rest of the EU) and the MBM ban. As to the latter, account must be taken of the fact that the Select Committee was considering the matter on the basis that the costs of the MBM ban were lower than they are now accepted to be. But the Committee's observations about the range of factors affecting the industry remain valid. Further, although there has been an overall rise in pig prices since the date of the Committee's report, they are still barely within the break-even range.
Aid to the pig industry
32. It was recognised by the Government from the outset that the MBM ban imposed costs on pig producers as it did on beef and sheep producers. It was also recognised that the phasing out of TRISS in 1998 would result in costs being passed on to those producers. The MBM ban was considered to be a contributory factor in the difficulties faced by the industry. It was only in May 1999, however, when prices had still not risen despite cut-backs in production, that the Ministry decided to implement a strategy to help the pig industry with the difficulties it faced. The first step was to ask the Spongiform Encephalopathy Advisory Committee to relax the MBM ban so as to allow porcine MBM to be fed to poultry. The Committee advised against that course and the Ministry accepted that advice.
33. Meetings were then held with representatives of the industry, during which one of the matters discussed was the possibility of aid for the disposal of pig offal. Officials were instructed to consider such a proposal. An outline proposal was set out in a document dated 8 October 1999 presented to the Commission. The document referred to the MBM ban, describing it as a public health protection measure which adversely affected the UK pig industry by making feed more expensive and by giving rise to a disposal cost which was passed back to the producer. Such costs did not generally fall on pig industries in other EU countries. The costs were estimated at about £5 per pig (close to the figure of £5.26 relied on by the applicants in these proceedings). Reference was made to the fact that UK pig producers believed that they were suffering through no fault of their own from the BSE crisis, while beef and sheep farmers had received significant additional financial support since March 1996. The situation had been alleviated to some extent by TRISS which the Commission had approved as a state aid, but this had come to an end in April 1998 and pig producers had since faced increasing costs due to waste disposal which had contributed to serious adverse developments in the UK pig sector. That was illustrated by an unprecedented 12% reduction in the UK pig breeding herd between June 1998 and June 1999. Unfortunately the industry remained in crisis and there was a risk that, if remedial action were not taken at this critical time, the industry would enter a crisis from which it might not be able to recover. Against that background a proposal was put forward in these terms:
"The Ministry is therefore considering the possibility of a temporary scheme to assist pig farmers to adjust to exceptional waste disposal costs. Under this a payment per pig slaughtered in, say, the six months period October 1999 to March 2000 could be made to pig abattoirs to be passed on by them to producers. Such a scheme would terminate in March 2000 by which time the industry should have adjusted to the new situation."
34. The proposal was discussed at a meeting with Commission officials on 12 October 1999. The minute of that meeting indicates that the Commission officials, though expressing only very informal and preliminary views, had "significant doubts" about the scheme. It was pointed out that TRISS has been approved as a transitional measure under the head of "exceptional occurrence" aid under Article 87(2)(b); to ask for more transitional aid 18 months after the ending of TRISS looked odd. The scheme presented appeared to be an operating aid and it would be very difficult for the United Kingdom to prove that it was not a market support measure. The only possibility of the Commission approving a scheme of this nature would be under the environmental aid guidelines; and for that purpose it would be more palatable if it were decoupled from pigs and farmers and dealt with as an aid to abattoirs and linked to the costs of disposal paid by abattoirs.
35. On 24 November 1999 the chairman of the National Pig Association wrote to the Agriculture Commissioner, Herr Fischler, to seek EU assistance for the UK pig industry in connection with the extra costs resulting from BSE (for which the figure of £5.26 per pig was given). The applicants rely on the Commissioner's response to that letter and to a similar letter to the NFU as indicating a willingness on the part of the Commission to entertain an application for aid. The Commissioner's response to the National Pig Association, dated 9 December 1999, referred to the fact that the previous aids were authorised as exceptional occurrence aids under Article 87(2)(b) but were discontinued by the UK Government on the grounds that the worst of the crisis was over and the industry should be expected to support itself. The letter continued:
"If the UK were now to seek to reintroduce these or similar aid measures, it would be necessary to demonstrate the conditions for the application of Article 87(2)(b) continue to be met, namely that the losses currently being incurred by the UK pig producers are the direct result of the exceptional occurrence recognised by the Commission and not due to other factors.
Alternatively, there are a number of grounds on which aid might be paid to facilitate the development of the pig sector pursuant to Article 87(3)(c) of the Treaty. The underlying principle is that the aid should help facilitate the development of the sector, for example by helping to restructure the industry to meet changed market conditions. Aid which is simply intended to offset current trading losses is not acceptable. Similarly, the Commission does not take a favourable view of aid which is granted simply to meet the legislative requirements in force in a Member State, even if these are stricter than those applying in the other Member States."
36. The letter from the Commissioner to the NFU was dated 22 December 1999 and made similar points. In relation to exceptional occurrence aid it added the point that it would be necessary to consider whether the MBM ban could continue to be considered as a short-term restriction designed to deal with the effects of the BSE crisis or was now a permanent public health measure. The last paragraph of the letter stated:
"In conclusion, I would add that my staff are always available to discuss informally proposals to grant aid with Member States, and to assist in designing measures which meet the Community rules. However, while certain contacts with the UK authorities took place in the early autumn, there have been none more recently."
37. The Ministry's evidence is that officials had continued to raise informally the issue of the offal disposal aid but that the position had remained the same as in the meeting of 12 October 1999. The Commissioner's letters to the National Pig Association and NFU are said to have made it reasonably clear that the Commission would be unlikely to approve such an aid to offset the ongoing costs to the pig industry arising from the MBM ban. Such views, it is said, were reiterated by the Commissioner at meeting with the House of Commons Agriculture Committee on 8 February 2000. A letter from UKREP dated 9 February described the position as follows:
"... Pressed by Mark Todd MP, Fischler confirmed that an aid to offset offal disposal costs would not be allowable within the state aid rules. He acknowledged that the alternative - aid conditional on restructuring - was probably not what the UK industry wanted.
The MPs present ... acknowledged later that Fischler's advice on offal disposal costs had been very clear - and a contrast with the welcoming messages which the NFU had taken from correspondence with him. Their own view was that the UK sector would not want aid conditioned on restructuring. When some of them put this to Bensted-Smith over lunch, he made clear that the Commission would be prepared to discuss the degree of restructuring required (although it would need to be significant) and to take a 'creative' approach to the elements included in an aid scheme.
It is helpful that Fischler's message firmly echoed the line his officials are taking on offal disposal costs ...."
38. There followed a breakfast meeting between the Minister and the Commissioner on 9 March 2000. The minute of the meeting records, under the heading "Pig sector":
"Commissioner Fischler was clear that an MBM disposal compensation scheme would not be accepted by the Commission under State Aid rules. However if the UK opted to put forward a proposal for a State Aid, the Commission would look favourably at restructuring/outgoers schemes (along the lines of those introduced in Ireland and Belgium)."
39. The Ministry's view was that the possibility of an aid in the form of an offal disposal scheme had been exhausted. Parliament was told by the Minister that the proposal "is not a runner".
40. The Commissioner's suggestion of a restructuring scheme was, however, taken forward, in reliance upon Article 87(3)(c) (development aid). It was the subject of informal discussion in March. A formal notification of a proposed "Pig Industry Restructuring Scheme 2000" was made on 30 March 2000. The stated aim of the scheme is to enable the industry to restore its long-term viability. As originally notified it had three main elements: a total exodus element, for those pig farmers who wish to leave agricultural production completely; an outgoers element, aimed at those who wish to leave pig farming but remain in agricultural production; and a restructuring element for those who wish to remain in pig production and want to restructure their business to make it viable in the long run. Subsequent correspondence indicates, however, that the exodus element has been incorporated within the outgoers element. The scheme is proposed to last three years. In the first year the aid will amount to £26 million; an additional £20 has been sought from the Treasury for each of the two subsequent years. It is likely that the bulk of the first year's budget will be applied to the outgoers element, with the budget for the two following years being devoted exclusively to the restructuring element. The Ministry's position is that it believes that the scheme is the most suitable available for the pig industry having regard to legal and budgetary constraints and relevant policy objectives. The suggested content of the restructuring part of the scheme is said to follow closely proposals made by the National Pig Association.
41. The applicants say that the proposed restructuring scheme is wholly inadequate to tackle the problems faced by pig producers as a result of the MBM ban. During its first year, at least, it provides only minimal help to those remaining in the industry. In any event sums of £20 million or less per year are far less than the annual cost of £74 million referred to by Dr Strak and there is no way in which the proposed investment could generate cost savings to offset that annual cost.
The issues
42. At the heart of the case advanced by the applicants is the Community law principle of non-discrimination, which requires that similar situations should not be treated differently unless the differentiation is objectively justified (see e.g. Cases 103 & 145/77 (Royal Scholten-Honig v. IBAP ("Isoglucose") [1978] ECR 2037 at 2072 paragraph 27). Article 34 (ex Article 40) EC provides for the application of the principle in the operation of the COMs, but it is common ground that that is merely a specific enunciation of a fundamental principle applying in EC law.
43. The main issues can be summarised as follows: (1) whether the situation is one in which the principle of non-discrimination can be relied on at all, (2) if so, whether there is unlawful discrimination in breach of the principle, and (3) if so, whether the Ministry is in breach of a duty to remove the unlawful discrimination. A subsidiary issue is (4) whether by reason of the matters complained of the Ministry has acted unlawfully in terms of domestic law.
Issue (1): can the principle of non-discrimination be relied on?
The applicants' case
44. Miss Sharpston's case starts from the uncontentious proposition that in an agricultural market governed by a COM the competence of an individual member state is greatly circumscribed. The position is summarised by Kapteyn and VerLoren van Themaat in "Introduction to the Law of the European Communities", 3rd edition, at page 1142:
"Thus standing case-law indicates that the common organizations of the market mean that at the production and wholesale stages the Member States have scarcely any room for manoeuvre left in relation to the volume of production and prices, whereas the possibility to apply national aid measures concerning incomes, production or trading is expressly or impliedly excluded by the schemes of market organization."
45. The very fact that in the COM for pig meat, as in the COMs for beef and sheep meat, express provision is made for the grant of aids by member states in accordance with the state aid rules in the Treaty highlights the Community context and the supervisory role of the Commission. Further, when granting state aids in agricultural markets governed by COMs, member states are required not only to comply with the specific state aid provisions of the Treaty but also to ensure that the measures adopted do not jeopardise the aims or functioning of the COM. In Case 177/78 Pigs and Bacon Commission v. McCarren & Company Limited [1979] ECR 2161 at 2187-2191, the ECJ held:
"... although Articles 92 to 94 are fully applicable to the pigmeat sector, their application nevertheless remains subordinate to the provisions governing the common organization of the market ... [para 11]
... Member States are under an obligation to refrain from taking any measure which might undermine or create exceptions to it ... [para 14]
It follows that recourse to the provisions of Articles 92 to 94 of the Treaty cannot modify the requirements flowing, for the Member States, from observance of the rules relating to that common organization. [para 21]".
The effect of that ruling is embodied in paragraph 3.2 of the Community Guidelines for State Aid in the Agriculture Sector, quoted above.
46. It follows, says Miss Sharpston, that in granting aid to producers in agricultural markets that are subject to a COM, a member state is implementing the COM or is acting subject to and within the framework of the COM. In so doing it is required to respect the fundamental principles of EC law: see Joined Cases 201 and 202/85 Klensch v. Secrétaire d'Etat à l'Agriculture et à la Viticulture [1986] ECR 3477.
47. The applicability of the principle of non-discrimination to the grant of state aid was considered by Laws J in R v. Ministry of Agriculture Fisheries and Food, ex parte First City Trading Limited [1997] Eu LR 195. That case concerned a scheme adopted to give effect to the emergency aid scheme for the slaughtering industry which was notified to the Commission together with TRISS. The applicants claimed that their exclusion from the scheme was discriminatory and unlawful. The central question was whether the EC principle of non-discrimination applied. It is necessary to quote a lengthy extract from the judgment (pages 210- 211):
"These fundamental principles ... are not provided for on the face of the Treaty of Rome. They have been developed by the ECJ ... out of the administrative law of the Member States. They are part of what may perhaps be called the common law of the Community. That being so, it is to my mind by no means self-evident that their contextual scope must be the same as that of Treaty provisions relating to discrimination or equal treatment, which are statute law taking effect according to their express terms. There is a critical distinction to be drawn between these following situations. On the one hand, a member state may take measures solely by virtue of its domestic law. On the other a Community institution or member state may take measures which it is authorised or obliged to take by force of the law of the Community. In the former situation I contemplate a measure which is neither required of the member state nor permitted to it by virtue of Community Treaty provisions. It is purely a domestic measure. Even so, it may affect the operation of the common market and accordingly be held to be "within the scope of application" of the Treaty. This was the Phil Collins case. It is of the first importance to notice that its falling within the Treaty's scope is by no means the same thing as being done under powers or duties conferred or imposed by Community law. The second situation primarily includes (so far as member states are concerned) measures which Community law requires, such as, for example, law which is made to give effect to a Directive. It includes also an act or decision done or taken by a Member State in reliance on a derogation or permission granted by Community law; as where for instance a restriction on imports or exports is sought to be justified by reference to Article 36 of the Treaty. In the first situation, the measure is in no sense a function of the law of Europe, although its legality may be constrained by it. In the second, the measure is necessarily a creature of the law of Europe. Community law alone either demands it or permits it.
The correct resolution of this part of the case depends upon the nature of the legal obligations which a member state respectively undertakes in the first and second situations. There are here, as it seems to me, two fundamentally different kinds of legal obligation. The first is the duty to obey the Treaty, a duty plainly imposed upon the member state in the first situation where its measure is within the Treaty's scope. Like any statute law containing orders or prohibitions, the Treaty is dirigiste: it is law in the shape of command. Law of this kind may intrude into areas previously altogether free of any legal controls, because of the sovereign force of the legislation. It may open a new jurisdiction. But it is to be sharply distinguished from law which is made by a court of limited jurisdiction, such as the ECJ. The legitimacy of that law depends upon its being elaborated by the court within the confines of the power with which it is already endowed. Its writ cannot run where it could not run before. The position is, or may be, different in the case of a court whose powers are inherent and original, not conferred by any legislation. But the ECJ has no inherent jurisdiction. Its authority is derived solely from the Treaties. Although (by virtue, ultimately, of the European Communities Act 1972) its decisions are as a matter of English law supreme, its supremacy runs only within its appointed limits.
Although of course I am being asked to apply the Community principle of equal treatment as a domestic judge, I must decide whether to do so by having regard to the lawful confines of the power of the ECJ, since it is a function of that Court's internal law, its common law, which is relied on. If this matter were referred under Art. 177, the ECJ would have to decide upon the proper scope of the internal law .... The power of the ECJ, as it seems to me, to apply (whether on an Art. 177 reference or otherwise) principles of public law which it had itself evolved cannot be deployed in a case where the measure in question, taken by a member state, is not a function of Community law at all. To do so would be to condition or moderate the internal law of the member state without that being authorised by the Treaty. Where action is taken, albeit under domestic law, which falls within the scope of the Treaty's application, then of course the Court has the power and duty to require that the Treaty be adhered to. But no more: precisely because the fundamental principles elaborated by the Court of Justice are not vouchsafed by the Treaty, there is no legal space for their application to any measure or decision taken otherwise than in pursuance of Treaty rights or obligations. This is as true of a case such as Phil Collins as it is of a domestic measure having no connection whatever with the law of the Community. No court can expand the Treaty provisions ... It follows that in the first situation I have described there is no question of the application of the Community's internal fundamental principles."
The position is altogether different where a measure is adopted pursuant to Community law; this is the second situation. Then, the internal law of the ECJ applies. Decisions of the Community institutions are plainly subject to it: they have no other domestic law but the court's internal law. Their very existence is a function of the Treaty, by which the arbiter of their actions is the ECJ. Decisions of the member states are likewise subject to the Community's internal law when and to the extent that they are taken so as to implement Community law, or must necessarily rely on it (as in the Article 36 example). This must be so, since in all such instances the member state's domestic law is no more than the vehicle for a measure whose validity falls to be tested according to the law of the Community. If the member state were in such cases permitted to legislate or take other action purely according to its own rules, free from the constraints and disciplines of the Community's internal law, the legal regime of the Community would plainly lack harmony and uniformity."
48. Laws J went on to hold that, even on the assumption that the scheme in question fell within the state aid provisions of the Treaty (it had been notified to the Commission as a state aid but the judge ultimately held that it was not a state aid), its promotion remained within the first situation described and the EC principle of non-discrimination did not apply to it.
49. The judgment in First City Trading was cited with approval by the Divisional Court in R v. Customs and Excise Commissioners, ex parte Lunn Poly Limited [1998] STC 649 at 658-659. Following Laws J's approach, the court held that the principle of non-discrimination could not be invoked by way of challenge to a national measure adopting differential rates of insurance premium tax. The measure did not fall within the second situation even though the court went on to find that it was a state aid and was unlawful for lack of notification under the state aid provisions of the Treaty.
50. Miss Sharpston submits that the present case is to be distinguished from those under consideration in First City Trading and Lunn Poly and that, unlike those cases, it falls within the second situation described by Laws J. The aid scheme in First City Trading "was neither required by Community law, nor did the Government have to rely upon any Community permission in order to implement it" (213C). The present case, by contrast, has to be viewed within the framework of the COMs. The measures granting financial assistance have been enacted or permitted by Community law, with the possible exception of the postponement of charges for inspections and cattle passports. The OTMS and CPS were both adopted under the relevant COM. State aids such as TRISS received the express approval of the Commission and would have been unlawful without it. Commission approval would be required for the additional aid that the applicants seek. In all the circumstances the Ministry is acting pursuant to Community law in relation to the grant of financial assistance; this is not a case involving purely domestic measures.
51. Alternatively, if the case is not distinguishable from First City Trading on its facts, Miss Sharpston submits that the reasoning in First City Trading is wrong and should not be followed. In circumstances where the adoption of national measures is circumscribed by the COM and dependent on authorisation by the Commission, there is a strong case that the member state is acting within the scope of Community law and is required to comply with principles of Community law, including the principle of non-discrimination. Laws J was not referred to various relevant decisions, including Pigs and Bacon Commission (above), Case 117/83 Könecke v. Balm [1984] ECR 3291 and Case 207/86 Apesco v. Commission [1988] ECR 2151.
52. I have already covered Pigs and Bacon Commission. In Könecke, national legislation permitting recovery of a mistakenly released deposit for private storage aid was held to be incompatible with Community law because the Community legislation on private storage aid had to be regarded as forming a complete system and not empowering member states to rectify a lacuna, as the national legislation in question had sought to do. In Apesco the ECJ held that the principle of non-discrimination applied to member states "when they are adopting measures relating to the common organisation of the markets pursuant to Community regulation" (2177, para 23). The measures in question, namely the selection of vessels authorised to fish in certain Community waters, were adopted pursuant to rules in the Act of Accession of Spain and Portugal, which implemented in this respect certain Community regulations. Miss Sharpston nevertheless submits that the national measures were neither required by a specific provision of Community law nor were introduced on the basis of an express permission or authorisation of a provision of Community law.
53. It is further submitted that other cases subsequently decided by the ECJ suggest that the court should not feel constrained to follow Laws J's decision. Reliance is placed in particular on CaseC-309/96 Annibaldi v. Sindaco del Comune di Guidonia and Presidente Regione Lazio [1997] ECR I-7493, where it was held that national legislation restricting activities in a national park did not fall within the scope of Community law, so that the ECJ had no jurisdiction to give a preliminary ruling. Miss Sharpston pointed to the careful analysis carried out by the ECJ before reaching that conclusion: it held that the measure was not intended to implement a provision of Community law, pursued objectives other than those covered by the Common Agricultural Policy and was concerned with an area specifically within the purview of the member states under the Treaty.
54. A further submission is that the distinction drawn by Laws J between Treaty law and judge-made law is not valid. The principle of non-discrimination in Article 34(3) (ex Article 40(3)) EC is merely a specific enunciation of the general principle of equality which is one of the fundamental principles of Community law (see Klensch, above, at para 9 of the judgment). Fundamental principles have the same effect in Community law whether they are the subject of an express Treaty provision or their existence has been recognised by the ECJ without such express provision. They have effect in the United Kingdom in precisely the same way through the European Communities Act 1972.
55. Miss Sharpston suggests that the court should feel sufficiently confident to decide this point in the applicants' favour. But at the very least the court should entertain sufficient doubts to prompt it to make a reference for a preliminary ruling under Article 234 (ex Article 177) EC. In First City Trading, Laws J said that the issue raised "deep questions" and that he might very likely have found it necessary to make a reference if he had been in favour of the applicants on the facts (214D).
The Ministry's case
1. For the Ministry, Mr Vajda QC submits that the principle of non-discrimination does not apply to the circumstances of this case. The decision under challenge is a domestic measure which is not adopted pursuant to Community law and does not implement the relevant COM. Reliance is placed on the decisions in First City Trading and Lunn Poly. The former is said to be authority for the proposition that a notifiable state aid in an agricultural sector governed by a COM is not subject to the principle of non-discrimination; and the present situation is a fortiori, since it concerns a failure to act, which cannot possibly be said to be a measure implementing the COM. The latter authority adopts the same reasoning as First City Trading and, although not concerned with a COM, again holds that a notifiable state aid is not subject to the principle. I should follow those decisions unless convinced that they are wrong: R v. Greater Manchester Coroner, ex p. Tal [1985] QB 67. The cases cited by the applicants do not have that effect. They are all concerned with very different situations, as is apparent from the brief summaries already given of them.
2. The fact is, says Mr Vajda, that there is no case where the principle of non-discrimination has been held to apply to the grant of state aids. The mere fact that Commission authorisation is needed is not sufficient to engage the principle. Indeed, what has to be considered in relation to an authorisation shows that the principle of non-discrimination does not have the same scope for application in the area of state aids as in other areas. Aids are inherently discriminatory; by their very nature they discriminate in favour of one group and against another and are thereby liable to have an adverse effect on competition. That is why they are subject to the Commission's supervision. The Commission has to weigh the benefits of an aid against its adverse effects and to decide whether the criteria for approval are met. If the Commission approves an aid there is no room for the application of the principle of non-discrimination. The principle has already been taken into account, and it would undermine the whole policy of state aids if competitors were able to rely on the principle to challenge the grant of an approved aid by a member state. What competitors must do is challenge the Commission's approval on the ground that it exceeds the Commission's margin of appreciation. Thus the situation is very different from that concerning e.g. taxes and levies, as in Isoglucose, where equality of treatment is a basic principle. Mr Vajda went so far as to suggest at one point that applicants' submissions, if correct, would effectively deprive the Commission of its discretion in respect of the authorisation of aids and would subvert the institutional balance within the Community.
3. The Ministry resists a reference to the ECJ on the ground that First City Trading was clearly correct and that a reference is unnecessary since the applicants must fail in any event on the other issues.
Conclusion on issue (1)
4. In order to determine whether the principle of non-discrimination can be relied on by the applicants, it is necessary to see wherein the discrimination is said to lie. This requires some disentangling of the strands of the applicants' case. It seems to me that there are two broad aspects to that case:
(1) The first concerns the overall difference of treatment between the beef and sheep meat sectors on the one hand and the pig meat sector on the other. What is complained about here is the grant of far greater financial assistance to the beef and sheep meat sectors than to the pig meat sector. Although the applicants originally thought that all the material financial assistance took the form of state aid, they have had to accept that much of it has taken the form of Community support measures under the relevant COM: the most important instances are OTMS and CPS assistance, as explained above. Some of it, notably TRISS, has taken the form of state aid. In my view the deferment of charges for inspections and cattle passports constitutes a third category, of national measures that are not state aid. So it is that mix of measures at the Community and national level that is said to have produced a situation of unlawful discrimination against the pig industry.
(2) The second aspect is more specific and focuses on the MBM ban. It is said that the ban has had a differential financial impact on pig producers, in that it has caused them much higher relative costs than it has caused beef and sheep producers. The financial assistance granted in various forms to the different sectors has not compensated the pig producers for that greater cost burden but has, on the contrary, favoured the beef and sheep producers. The end result is a breach of the principle of non-discrimination, the ultimate source of which is the MBM ban itself.
5. In relation to both aspects, one of the problems faced by the applicants is that they are not attacking the lawfulness of the measures which are said to have given rise to the situation of discrimination. They do not contend that the MBM ban was unlawful by reason of its discriminatory impact; nor do they contend that the various measures of financial assistance to date have been unlawful by reason of their discriminatory impact. What they say is that those measures have resulted in fact in discrimination, albeit that it was unintended, and that it is the Government's duty to rectify that situation by granting adequate aid to the pig industry. I explain later in this judgment, in examining the third main issue, why I do not consider such a case to be legally tenable. For present purposes, however, I think it right to leave aside that major reservation and to concentrate on whether the applicants can rely on the principle of non-discrimination at all.
6. Although the applicants complain of a failure to act to remove discrimination, I have found it helpful to consider whether the principle of non-discrimination could have been invoked in a challenge to the lawfulness of the various measures that are said to have given rise to the discrimination in the first place. Clearly it could have been invoked in relation to the Community support measures adopted pursuant to the relevant COMs, such as the OTMS and CPS. It is in relation to the various national measures that greater difficulty arises. The starting point, however, is that in so far as those measures have amounted to state aid, then First City Trading and Lunn Poly are authorities for the proposition that they are purely domestic measures to which the principle of non-discrimination does not apply. The former decision was taken in the context of a COM and the latter endorses the reasoning in it.
7. I do not accept Miss Sharpston's attempt to distinguish First City Trading. The COM context applied in that case as in this; the measure in question was one of the measures adopted in response to the BSE crisis and was notified in conjunction with the TRISS aid. The fact that in this case the applicants are also relying on the effect of certain Community support measures does not impinge on Laws J's reasoning and is not a material distinguishing feature.
8. I see greater force in the alternative challenge to the correctness of the decision in First City Trading, as followed in Lunn Poly. The distinction between the two situations that Law J describes, in the first of which the measure is part of the internal law of the member state and is "in no sense a function of the law of Europe, although its legality may be constrained by it", whereas in the second the measure is "necessarily a creature of the law of Europe" which Community law alone either demands or permits, is not an easy one to apply. The grant of state aid is a domestic measure which in one sense is part of the internal law of the member state albeit that its legality is constrained by Community law. On the other hand, when one examines the extent of the constraints that Community law imposes upon its legality, it can reasonably be said to have important characteristics of the second situation. Any state aid is prohibited by Community law unless, in effect, it is notified to the Commission and the Commission approves it as meeting the criteria laid down by Community law. Its lawfulness is therefore ultimately dependent upon a specific permission under Community law. In the context of an agricultural COM, the state aid provisions are subordinate to the COM and an aid will not be approved if it is incompatible with the COM or would interfere with the proper functioning of the common organisation. Thus, although the grant of state aid cannot in my view be said to amount to "implementation" of the COM or to be done "pursuant to" Community law, I think it well arguable that the grant of aid by a member state falls within the scope of Community law to the extent that the fundamental principles of Community law apply to it. I also see some substance in Miss Sharpston's challenge to the validity of the distinction drawn in First City Trading between Treaty law and the fundamental principles of Community law as developed in the case-law of the ECJ.
9. I have considered the relevant ECJ authorities cited by counsel, but I do not think it necessary to examine them in any detail here. None of them is decisive of the present issue. For example, the decision in Pigs and Bacon Commission serves only to emphasise the constraints to which the grant of state aid is subject in the context of a COM. Cases such as Kõnecke and Apesco fall in any event within the second of the situations described by Laws J, in that they involve national measures implementing or adopted pursuant to Community provisions. Annibaldi shows how carefully the ECJ will examine the matter before declining jurisdiction on the ground that a national measure does not fall within the scope of Community law; but it does not help greatly in determining whether a state aid measure does or does not fall within the scope of Community law.
10. As to Mr Vajda's point that state aids are inherently discriminatory and there can be no room for the application of the principle of non-discrimination once the Commission has approved an aid, it is a point that bites in my view at the level of issue (2) rather than at the threshold stage here under consideration. One of the matters that the Commission has to consider when giving its approval is whether the discrimination inherent in the grant of an aid is justified. That does not mean that there is no scope for application of the principle of non-discrimination at all, but that the focus in relation the application of the principle will be on the existence or otherwise of objective justification for undoubted differences in treatment. Certainly in the absence of a more thorough analysis of state aid cases than was appropriate in the course of the argument before me, I would not be prepared to hold that the principle is necessarily inapplicable in the state aid context on the ground advanced by Mr Vajda. Nor am I attracted by Mr Vadja's submission that the applicants' case, if correct, would deprive the Commission of its discretion in respect of the authorisation of aids.
11. So far as concerns the applicability of the principle of non-discrimination to the grant of state aid by a member state, the position that I have reached is this. In the ordinary course I should follow First City Trading and Lunn Poly unless convinced that they are wrongly decided on this point: see ex p. Tal. I am not convinced that they are wrongly decided. I do, however, have real doubts about them. In a Community law case it is open to me to make a reference to the ECJ rather than simply following the earlier decisions. In the present case I would be inclined to make such a reference if I were in the applicants' favour on the other issues; just as Laws J said that he would probably have made a reference in First City Trading if he had been in favour of the applicants on the facts. For the reasons given in the rest of this judgment, however, I am against the applicants on virtually every other point in the case. That being so, a reference on this point is neither necessary nor appropriate. The most sensible way to proceed is to assume for present purposes that the principle of non-discrimination applies to the grant of state aid, at least in the context of a COM, and to show why in my view the applicants cannot succeed even on that favourable assumption.
12. I am also prepared to proceed on the assumption that the principle of non-discrimination applies to the third category of financial assistance, the deferment of charges (being charges that are permitted but not required by the regulations under the COM), where the applicants' case as to the applicability of the principle may well be weaker than in relation to state aids. For the purposes of the other issues I shall also make a similar assumption that the principle of non-discrimination could have been invoked in a challenge to the lawfulness of the MBM ban itself, though the point was not put in that way in argument and I see serious difficulties in it.
13. Looking at the matter broadly, and leaving on one side for the time being the fact that the applicants challenge the failure to grant an aid to rectify the allegedly discriminatory situation rather than the measures that gave rise to that situation, my conclusion is that the applicants do not necessarily fall at this hurdle. There is some scope for application of the principle of non-discrimination, certainly in relation to the Community support measures and possibly in relation to some of the national measures that gave rise to the situation. I therefore turn to consider whether, even if the principle does apply, there has been any breach of it; and, if so, whether the case against the Ministry for breach of duty to remedy it is well founded.
Issue (2): is there a breach of the principle?
The applicants' case
1. Miss Sharpston submits that the principle of non-discrimination - that similar situations should not be treated differently unless that differentiation is objectively justified - applies not only to the treatment of producers within the same COM but also to producers of competing products who are subject to different COMs. Beef, sheep meat and pig meat compete with one another although they are subject to different COMs. Each has been affected by the BSE crisis. In the case of beef and sheep meat very substantial financial assistance has been granted to alleviate the burdens falling on the industries concerned. In the case of pig meat, however, no equivalent assistance has been granted. There is no objective justification for that difference of treatment, which therefore amounts to a breach of the principle of non-discrimination.
2. For the proposition that the principle applies to differences of treatment as between sectors in different COMs that are in competition with one another, Miss Sharpston relies on the decision in Isoglucose (above). That case concerned a Council regulation which laid down common provisions for isoglucose, including the imposition of a production levy. The validity of the regulation was challenged inter alia on the ground that it discriminated against producers of isoglucose as compared with manufacturers of sugar, which was subject to a separate COM. The ECJ upheld the challenge, holding that the products were in comparable situations (isoglucose was a direct substitute for, and in direct competition with, liquid sugar), that the manufacturers were indeed treated differently as regards the imposition of the production levy, and that the "manifestly unequal" charges thereby imposed were not objectively justified. Miss Sharpston submits that any difficulty of making comparisons as between products in different COMs cannot exclude the principle of non-discrimination or justify a difference of treatment, and that Isoglucose supports that view.
3. As to the existence of competition between beef, sheep meat and pig meat, Miss Sharpston relies on evidence gathered by Dr Strak in the form of letters from British supermarkets and a consumer survey. That material certainly supports the contention that a substantial degree of demand substitutability exists as between the different meats. The switch to pork in the immediate aftermath of the BSE crisis, and the consequent effect on the price of pork, provide a good illustration of the point. Competition between the meats at the retail level has an inevitable effect higher up the supply chain.
4. It is obvious, says Miss Sharpston, that the beef and sheap meat sectors have received far more in the way of financial assistance to cope with the effects of BSE than has the pig meat sector. By contrast, no aid has been granted to compensate pig producers for the damage they have suffered as a result of BSE. No objective justification for that difference of treatment has been put forward in the Ministry's evidence.
The Ministry's case
5. Mr Vajda stresses that the Minister is very sympathetic to the pig producers but does not accept that they are the victims of unlawful discrimination. Pig producers are not in a similar situation to cattle or sheep producers as regards the effects of BSE. For example, the beef industry lost all its export markets, had animals slaughtered and removed from the food chain and suffered a fall in demand on its domestic markets. The pig industry, by contrast, benefited from initial price rises; and the subsequent fall in pig prices has been due not only to BSE but also to the pig cycle and a range of other factors (changes in supply and demand overseas, currency movements, etc.). The MBM ban has aggravated the problems but is not to be seen as the main cause of the present crisis in the industry.
6. Further, it is a well-established feature of the Common Agricultural Policy that the regime under the beef COM (as indeed under the sheep meat COM) is more favourable to producers than the regime under the pig meat COM. At the Community level the beef industry receives over 15 times the level of financial support received by the pig industry (£3,400 million as compared with £200 million).
7. Mr Vajda submits that the various measures of financial assistance for beef producers must be seen in the light of the particular problems affecting that sector and the support regime under the COM. The OTMS assisted in taking cattle off the market and destroying them. The CPS compensated for the slaughter and disposal of calves. Both were Community support measures under the COM. The deferral of charges for inspections in respect of the removal of specified risk material (a benefit applying to sheep producers as well as beef producers) and for cattle passports is irrelevant to the pig sector since it is not subject to inspection or passport requirements.
8. The only respect in which BSE could be said to have had a similar impact on pig producers as on cattle and sheep producers is the MBM ban. But in that respect there has been equal treatment at all material times. Pig producers benefited from TRISS while it was in force. Since it has been phased out, beef producers and sheep producers have lost the benefit of the aid in the same way as pig producers have done.
9. Thus, in so far as the pig industry can be said to be in a comparable situation to the beef and sheep industries, they have been treated the same. In so far as the situation is different, differences of treatment are permitted. The mere fact that there is a degree of demand substitutability between them does not create a requirement that the different sectors be treated equally in terms of financial support. Otherwise the very existence of materially different COMs, including the OTMS and CPS, would offend the principle of non-discrimination and be unlawful. The truth is that in assessing comparability it is necessary to take into account the complexities of the different agricultural regimes as well as the differing effects of BSE upon the different industries. The situation is very different from that under consideration in Isoglucose, where there was a straightforward difference of treatment between two products (isoglucose and sugar) that were found to be in a comparable situation and were indeed expressly equated under the relevant Council regulation (which stated that one was a direct substitute for the other). The difference here is illustrated by Commission Decision 2000/42/EC, in which the Commission relied on the existence of separate COMs for beef and pork in support of the view that the product markets are separate. The Ministry does not need to go that far, but the decision evidences the policy differences between the regimes for the different meats.
10. Alternatively, Mr Vajda submits that any difference in treatment was objectively justified. The aid package notified in March 2000 was the only form of package that had a realistic prospect of obtaining Commission authorisation. In any event, the respective industries are facing different problems and it is appropriate to take those differences into account in formulating aid packages that will be best adapted, having regard to legal, policy and budgetary constraints, to each particular industry. It is moreover justifiable not to affect the balance of the different COMs by giving aid to the pig industry to offset advantages conferred by Community support measures on producers in other COMs. The position is a fortiori that in First City Trading, where any difference of treatment between undertakings operating in the same COM was held to be objectively justified (see 219F).
11. In assessing the issues of discrimination and objective justification, Mr Vajda submits that the decision-maker should be accorded a wide discretion and that the court should intervene only if the decision-maker has clearly exceeded that margin of discretion: see the opinion of the Advocate General in NIFPO v. DANI [1998] ECR I-681 at I-709 paras 64-71, where it is stated that in reviewing an alleged breach of the principle of non-discrimination in the Council's implementation of the Common Agricultural Policy, the ECJ must confine itself to examining whether the decision contains a manifest error or constitutes a misuse of powers of whether the authority in question clearly exceeded the bounds of its discretion (see also the ECJ's judgment at I-738 para 62). (Miss Sharpston counters by reference to Case 114/76 Bela-Muhle v. Grows-Farm [1977] ECR 1211 - where a measure was held unlawful because it involved an unjustified discriminatory distribution of a cost burden between various agricultural sectors - and Isoglucose that the court should apply a more rigorous analysis in determining whether a measure breaches the principle of non-discrimination; and in relation to objective justification she refers to Laws J's statement in First City Trading at 219D that "the European rule requires the decision-maker to provides a fully reasoned basis" for the decision.)
Conclusion on issue (2)
1. On this issue I can express my conclusion more briefly since I am persuaded of the correctness of Mr Vajda's submissions. I accept in particular that pig producers are not in a similar situation to cattle and sheep producers as regards the effects of BSE. The BSE crisis hit beef producers, in particular, in ways that were different from and far worse than those affecting pig producers. The existence, as a matter of Community policy, of very different regimes within the different COMs makes overall comparisons very difficult, if not impossible. Within that complex economic picture the applicants have failed to separate out individual elements or a combination of elements that can properly be regarded as the application of different treatment to similar situations. The circumstances do not resemble those in Isoglucose, where it was possible, despite the existence of different COMs, to identify dissimilar treatment of producers in a comparable situation. I stress that I do not base my conclusion on treating the COMs as different product markets. On the evidence before me I accept that there is competition between the products concerned and that it is therefore possible in theory for a breach of the principle of non-discrimination to arise out of differences of treatment between them even though they are subject to different COMs. My point is that in practice the situations of producers under the different COMs are very dissimilar and the applicants have failed to identify differences of treatment that engage the principle of non-discrimination as a matter of fact.
2. Accordingly, in so far as the applicants' case is based on an overall difference of treatment between the beef and sheep meat sectors on the one hand and the pig meat sector on the other, in my judgment that difference of treatment does not amount even to a prima facie breach of the principle of non-discrimination.
3. As to the specific case based on the MBM ban, the ban has applied equally to producers in all three sectors. In itself it does not involve any difference of treatment. The principle of non-discrimination can of course be breached by treating persons in the same way where their situations are different; but the applicants did not mount a challenge to the MBM ban on that basis, though there was some questioning of the need for the ban at all in relation to pig producers. Although I accept on the evidence before me that the ban has had a proportionately greater financial impact on pig producers than on beef or sheep producers, that is not sufficient to render the measure discriminatory. So too when it came to alleviating the effects of the ban by aid in the form of TRISS, there was equal treatment as between producers; and the phasing out of TRISS deprived all producers of the benefits flowing from the aid. The applicants' ultimate complaint in these proceedings is that since the phasing out of TRISS the Government has failed to give aid in respect of the financial burden of the MBM ban. But none of the sectors have been given such aid and again there has been no relevant difference of treatment.
4. The serious problems facing the pig industry are evident from my summary of the evidence. The case for the grant of aid to the industry appears very strong. The Ministry has effectively acknowledged the appropriateness of aid, though there is a major difference of view between the parties as to the form and amount of aid that is appropriate and permissible. In my judgment, however, what is being sought by the producers is not the removal of a difference of treatment as between producers in a similar situation, but a response to the special circumstances of the pig industry which for a variety of reasons is in a very different situation from the beef and sheep meat industries.
5. If, contrary to the above, there is in this case any prima facie breach of the principle of non-discrimination, then in my view the difference of treatment giving rise to that prima facie breach is objectively justified. The differences between the different COMs, including the much lower support for the pig industry under its COM than for the beef and sheep meat industries under their COMs, justify in general terms the giving of lower financial assistance to the pig industry than to the beef or sheep meat industry; and the complexities of the overall picture are such that it is impossible to say that the overall balance of financial assistance has tipped unjustifiably against the pig industry. The absence of any realistic prospect that the Commission would approve an aid package of the kind sought by the applicants - a point with which I deal under issue (3) - lends support to that view.
6. The extent to which a decision-maker should be allowed a margin of appreciation in a case of this kind was described by Laws J in First City Trading as "a nice question" (see his analysis at 218F-219). The question becomes all the nicer in the present case, where I am concerned in part with the effect of formal decisions taken in the past (as to the imposition of the MBM ban and the grant of financial assistance) and in part with an alleged failure to remedy the existing situation. There is no formal decision by the Ministry as to whether the existing situation involves a relevant difference of treatment or whether any such treatment is objectively justified. The Ministry's stance has to be gleaned from its evidence and the submissions made on its behalf. The overall situation is very different from that to which the ECJ's observations in NIFPO v. DANI were directed, i.e. a formal decision by a Community institution. I am inclined to agree with Laws J in First City Trading that it is for the Ministry to put forward "a fully reasoned case" and that the role of the national court is to test the solution arrived at and to pass it "only if substantial factual considerations are put forward in its justification: considerations which are relevant, reasonable and proportionate to the aim in view" (219D-E). I am satisfied that a sufficiently reasoned case has been put forward here by the Ministry and that it meets that test.
Issue (3): is there a breach of duty?
The applicants' case
7. The issue here is whether, on the assumption that the existing situation involves a breach of the principle of non-discrimination, the Government is under a duty, and is in breach of its duty, to seek Commission authorisation for the grant of state aid to remove that discrimination.
8. Miss Sharpston contends the Ministry was and is under a duty to approach the Commission for authorisation to pay aid in respect of the costs incurred by the pig industry as a result of the MBM ban, at a level which would remove the discrimination and "create harmonious levels of competition". The duty is said to arise from the duty of sincere co-operation under Article 10 (ex Article 5) EC and the duty to implement the COMs in a way that respects the principle of non-discrimination. It rests on the Government because it was the unilateral act of the Government which imposed the relevant burdens on producers in the first place, albeit that the subsequent grant of financial assistance to the beef and sheep meat sectors was the act of the Commission as well as the Government. The grant of state aid by the Government is the obvious means of remedying the discrimination that has arisen.
9. It is further submitted that the history of contacts with the Commission prior to the notification of the restructuring scheme on 30 March 2000 shows a failure to comply with that duty, and that the restructuring scheme itself is inadequate for the reasons already indicated. The Ministry should have put a detailed case to the Commission and made a sustained approach to obtain the Commission's approval. In practice, however, it limited itself to inadequate, informal soundings. It did so despite an expressed willingness on the part of the Commission to engage with the problem. To the extent that the Commission made adverse comments on what was put forward, those comments must be viewed with caution for the very reason that the factual position had not been adequately explained; and the Commission did not adopt, and was not required to adopt, a formal position. If the matter had been pursued properly, there is a real possibility that the Commission would have granted approval, which is sufficient for the applicants' purposes. In order to establish a breach of duty, the applicants do not have to show that approval would have been obtained if a proper approach had been made. Of course, if the Ministry had done its best and the Commission had refused approval, the applicants could not then complain - though they would have been able to challenge the decision before the ECJ. But things simply did not get that far.
10. It is said that the history of dealings with the Commission shows that there was a real possibility of the Commission granting approval. Such aid could have been approved first under Article 87(2)(b) as an exceptional occurrence aid. Once the existence of an exceptional occurrence has been demonstrated, the Commission must permit aid of up to 100% (see Guidelines paragraph 11.2.2 and the mandatory terms of Article 87(2) itself). The aid originally granted in the wake of the BSE crisis was approved under this head. There is no apparent time limit for reliance on the provision. The continuation of the OTMS scheme, although now accepted not to constitute a state aid, shows the continuing need to deal with the BSE crisis. The Commission, it is submitted, at no time ruled out the possibility of the grant of an aid to the industry under this head. What was needed was a detailed case to show that continuing losses were being incurred as a direct result of the exceptional occurrence of BSE rather than other factors. Such a case existed, as is shown by the report of Dr Strak on which the applicants rely in these proceedings. That is contrasted with the brevity of the outline proposal submitted by the Ministry in October 1999 and the failure to put forward any more substantial case thereafter. Thus it is submitted that the failure or refusal to seek authorisation has been in breach of duty and/or based on a misdirection in law.
11. Alternatively it is possible that the Commission would have approved the aid under Article 87(3)(c). Paragraph 11.1.1 of the Guidelines states that the Commission has accepted aid under this article to provide compensation for damage arising as a result of certain diseases. There is no time limit (paragraph 11.1.2). Compensation may be up to 100% of the actual costs incurred (paragraph 11.4.5).
The Ministry's case
1. Mr Vajda submits that the appellants' case as to breach of duty does not get off the ground for a number of reasons. He contends that Article 10 is not of direct effect and cannot therefore be invoked by the applicants in the national court: see e.g. Case 9/73 Schlûter v. Hauptzollampt Lõrrach [1973] ECR 1135. (In reply, Miss Sharpston accepts that Article 10 is not directly effective but says that it can nonetheless be invoked in the present circumstances, in part because the applicants challenge a failure to act, in part because the applicants' case is based on an alleged misdirection of law and in part because the alleged breach of duty consists in a failure to comply with Article 10 in conjunction with the COM regime. The overall Treaty commitment is one that the Ministry has to respect. In support of the applicants' ability to rely on Article 10, Miss Sharpston refers to Joined Cases C-6/90 and C-9/90 Francovich v. Italian Republic [1991] ECR I-5357, where the ECJ relied on Article 10 as a basis for holding that member states are under an obligation to make good loss and damage caused by their breaches of Community law.)
2. Mr Vajda further contends that there is no breach of Community law to which an obligation under Article 10 could attach itself and that there is no Community right to state aid. In any event the Ministry's conduct is in harmony with the Community institution which has responsibility for state aid, i.e. the Commission.
3. As to the last point, it is said that the Ministry's approach towards ascertaining the Commission's position with regard to the grant of state aid for the pig industry accords with the guidance issued by the Department of Trade and Industry for Government departments and agencies. The recommended procedure allows for a period of informal exploration of a draft proposal with the Commission in order to enable the Government to form a view as to its prospects of success without making a formal application. If Commission officials indicate during that informal process that a scheme would be considered unlawful, it may be abandoned without a formal notification. That is what happened in the present case. The original proposal was brief but provided a sufficiently detailed exposition of the problem. It was the subject of detailed discussion with Commission officials. In the light of the adverse reaction of those officials and the Commissioner himself, it was decided not to proceed with the original proposal but to develop and notify an aid package that would have a realistic prospect of success. In so acting the Ministry, if (contrary to its contention) it was under any Community law obligation to seek authorisation for financial aid for the pig industry, complied with that obligation. It was not incumbent on the Ministry to notify an aid package in line with its original proposal in circumstances where the Commission's reaction had made clear that such a proposal would not gain authorisation. In any event any further attempt to seek approval for such an aid would be futile. The history of dealings with the Commission makes it clear that a proposal for aid in respect of the MBM ban would not be approved (whereas a proposal of the kind put forward, for aid for restructuring the pig industry so as to reduce capacity, might be viewed favourably).
Conclusion on issue (3)
4. I have come to the firm conclusion that, even if the applicants had been able to satisfy me that the existing situation involved a breach of the principle of non-discrimination, their challenge to the Government's failure to rectify that situation would lack a proper legal basis and would fail.
5. I have commented already on the fact that the applicants do not challenge the lawfulness of the measures that gave rise to the situation of which they now complain, i.e. the MBM ban itself and the various forms of financial assistance that have been granted to the beef and sheep meat sectors. It is of course far too late to challenge those measures, even if the applicants would otherwise have had the standing to challenge them. But the applicants' case is not that the measures could have been challenged successfully at the time. Their case is that, although the measures were lawful at the time, they have resulted in unlawful side-effects and the Government is therefore now under a duty to act to remove those side-effects; and only in that way can the original legality be preserved. That argument faces serious difficulties.
6. First, I do not accept that a series of lawful measures, none of which was in breach of the principle of non-discrimination, could produce by way of "side-effects" a state of affairs that was in breach of that principle and thereby unlawful. Miss Sharpston was unable to produce any case in support of her argument on this point. She did refer me to Case 165/84 Krohn v. BALM [1985] ECR 3997, but I found that authority unhelpful: it was a decision on the interpretation of a Community regulation and in my view has no wider significance.
7. Secondly, I am not satisfied that a member state would be under a duty to take action to correct that state of affairs if it were to arise. In circumstances where the measures giving rise to that state of affairs are said to include Community support measures as well as national measures, it would be surprising if the duty to rectify any unlawful discrimination rested on the member state alone. Yet Miss Sharpston has not suggested that the Community institutions are under any such duty, or on what basis such a duty might be held to arise. The relevant COMs impose no such duty; and in any event no breach of the COMs is alleged. That suggests to me that the applicants' case puts undue weight on Article 10 as generating a duty on the member state for which no other basis could exist.
8. Thirdly, the applicants' case depends on giving Article 10 direct effect which, as Miss Sharpston accepts, it does not have. There is no other directly effective provision of Community law upon which the alleged duty can be based, whether by itself or in conjunction with Article 10. Reliance on Francovich gets the applicants nowhere, since Article 10 was used in that case not as a self-standing provision which could be invoked in the national court, but as part of the reasoning by which the ECJ reached the conclusion that in certain circumstances an individual has a right to recover damages in the national court for a member state's breach of Community law. The applicants are not relying on such a right of action. Nor is this a case where the applicants can invoke Community law in the national court in the absence of directly effective rights. The fact is that they are seeking to rely on Article 10 so as to compel the Ministry to seek authorisation for a more extensive aid package than that already notified. In my judgment it is not open to them to enforce in that way, in the national court, a duty arising under Article 10 by itself.
9. Even if the Ministry were under a duty of the kind for which the applicants contend and it were open to the applicants to enforce it in the national court, I am not persuaded that the Ministry is in breach of duty. At bottom the question is whether the question of a more extensive aid package to compensate the pig producers for the costs of the MBM ban was properly pursued with the Commission and whether there is a real possibility that, if the matter had been so pursued, the Commission would have approved such a package.
10. As to that, I take the view that the Ministry's general approach towards the Commission was appropriate and reasonable. It was not incumbent on the Ministry to submit a formal notification of proposed aid if it was plain from informal soundings that the Commission would not approve such aid. The original proposal was accompanied by a sufficient exposition of the problem to enable the issues to be sensibly discussed, as is apparent from the note of the meeting at which they were in fact discussed. There could have been a more detailed and intensive follow-up of that meeting: the Commissioner's letter to the NFU of 22 December 1999 refers to the absence of recent contacts, though it is fair to say that the Ministry's evidence is that contacts had continued. The Commissioner's letters of December 1999 also indicate, however, the substantive difficulties facing any aid application of the kind sought by the applicants. The views expressed by the Commissioner to the representatives of the Agriculture Committee on 8 February 2000 make it clear that such an application was "not a runner", as the Minister told Parliament. I do not accept that the Commission's attitude was based on an inadequate understanding of the true factual position or a failure by the Ministry to explain the position.
11. There was in my judgment no real possibility of persuading the Commission to grant exceptional occurrence aid under Article 87(2)(b). It is true that the BSE crisis was recognised at the time as an exceptional occurrence, that no formal time limit appears to exist for reliance on Article 87(2)(b) and that there exists a substantial case that continuing losses are being incurred as a result of the BSE crisis, in particular the MBM ban. But the terms of the Commission's letter of 31 May 1996 indicating an absence of objections to TRISS show that the aid was accepted as a vital short-term measure in the situation that existed in the immediate aftermath of the BSE crisis; and the Community Guidelines for State Aid in the Agriculture Sector evidence the importance of promptness in the payment of exceptional occurrence aids (see paragraph 11.1.2). The reality of the matter is that the lapse of time has created a different situation and one is no longer concerned with that immediate aftermath but with a longer-term public health measure (the MBM ban) and a range of longer-term problems affecting the profitability of the pig industry. A further point of difference is that TRISS and the Commission's approval of it focused on the direct effects on renderers and only the indirect effects on others, whereas the applicants are now seeking aid directly for the pig industry.
12. Equally I do not consider there to have been any real possibility of gaining approval under Article 87(3)(c) for aid to compensate for the costs of the MBM ban. It does not seem to me that such aid could qualify as a development aid under that provision. It would have the characteristics of an objectionable operating aid: see e.g. paragraphs 3.5-3.6 and section 11 of the Community Guidelines.
13. In all the circumstances I take the view that the Ministry had no realistic option but to abandon the idea of an aid to compensate for the costs of the MBM ban and to move to a different kind of aid package, as it did. It would have been futile to pursue the original proposal.
14. For those reasons I reject the applicants' case both as to the existence of a duty and as to breach of that duty.
Issue (4): the position under domestic law
1. The applicants' case under domestic law has not been developed at any length. The assertion is that the Ministry has acted in breach of Wednesbury principles and upon a misdirection of law. As regards the latter point, the alleged misdirection appears to be a reference back to the issues of Community law which I have already covered and in respect of which the applicants' case has failed. So far as Wednesbury principles are concerned, there has been no failure to take relevant considerations into account: the Ministry has plainly had regard to the concerns raised by the applicants and has indeed responded to them by the notified aid package. In all the circumstances a case on irrationality does not begin to get off the ground. In my view the Ministry could not have been impugned on grounds of irrationality if it had abstained altogether from raising the question of an aid package with the Commission. Given the reaction of the Commission to the original proposal, there is no possible basis for challenging the rationality of the decision not to pursue it but to proceed instead with the proposal for restructuring aid. I think it unnecessary to give more elaborate reasons for rejecting the applicants' case on this issue.
Footnote on capacity
2. As indicated near the beginning of this judgment, there was at one point a substantial issue as to the BPISG's capacity to bring these proceedings. Joinder of Mrs Ward as second applicant has removed the problem. The Ministry no longer seeks to contest the issue of capacity. In the circumstances, and given that this judgment is already very long, I shall make only brief observations on the issue.
3. The Ministry's concern was that the BPISG was an unincorporated association and that if it were to lose the proceedings there would be no legal person party to the proceedings against whom a costs order could be made. There have been inconsistent decisions of the courts on the question whether an unincorporated association has the capacity to bring judicial review proceedings: see e.g. on the one hand R v. Darlington Borough Council, ex p. Association of Darlington Taxi Owners [1994] COD 424 (where proceedings were held not to be properly constituted because the applicant association lacked legal personality) and, on the other hand, R v. Traffic Commissioner for the North Western Traffic Area, ex p. Brake [1996] COD 248 (where legal personality was held not to be dispositive of whether sufficiency of interest could be established and proceedings brought). For my part, I do not think that there is any overriding requirement for an applicant for judicial review to have legal personality, but it is important in such a case that adequate provision should be made for the protection of the respondent in costs.
4. In R v. Leicestershire County Council, ex p. Blackfordby and Boothorpe Action Group Ltd. (15 March 2000, unreported) I held that the incorporation of a local action group into a company limited by guarantee ought not to be a bar to the bringing of judicial review proceedings and that the costs position could be dealt with adequately by requiring the company to provide adequate security for costs. Mr Vajda submits that the matter cannot be dealt with in that way in the case of an unincorporated association because security for costs can be required under CPR Rule 25.13(2)(c) only in the case of a corporate body, and the other provisions of that rule are of no help. At first blush that looks right, though I make no decision on the point since it has not been the subject of argument. If it is right, then it lends strong support to Mr Vajda's further submission that the court, if granting permission for a judicial review application by an unincorporated association, ought to make it a condition of the grant of permission that a legal person be joined as a party to the proceedings for the purposes of ensuring that an effective costs order can be made where appropriate in favour of the respondent. In the event it is the joinder of a legal person in the form of Mrs Ward that has solved the problem in the present case and has caused the technical issue of capacity to fall away. Respondents should be alert to the possibility of asking the court to impose such a condition at the permission stage.
Conclusion
5. For the detailed reasons given in this judgment, the application for judicial review is dismissed. In my judgment the applicants' case, although argued with great skill and ingenuity, faces insuperable legal difficulties. I do not think that there is any realistic prospect of the Commission approving aid of the kind that the applicants seek. More importantly, I do not consider there to be a legal basis for compelling the Ministry to seek approval for such aid.
MR JUSTICE RICHARDS: Judgment has been handed down in this case; copies are available in court. For the reasons given in the judgment the application for judicial review is dismissed.
MR VAJDA: My Lord, I make application for costs but only in relation to the first applicant, that is pursuant to the letter that your Lordship will have seen that accompanied our submissions.
MR JUSTICE RICHARDS: Yes, right.
MS SHARPSTON: In relation to costs, obviously in the normal course costs do follow the event. But I would seek at least to invite your Lordship to consider in the exercise of your discretion either to make no order for costs or, alternatively, under part 44.26(b) to make a stated amount order. This is, of course, against a background of correspondence that has passed between the parties, as your Lordship is aware, which led to the Treasurer being joined as a second applicant, and that is a limited guarantee there, as to that event.
My Lord, as to that I would say, as your Lordship has very clearly recognised, the British pig industry is in a state of crisis and it was against that background of crisis, of financial stringency, of six pig producers going out of business every week, that resources were pooled together in order to bring the present application. It has been an application that was responsibly conducted, I do not think any point is taken against me on that; it was entirely proper to bring these matters before the court.
Your Lordship has found that the group is not entitled in law to redress as it seeks, but there was a genuine grievance. It was right to wish for the court to examine and, indeed, the granting of permission without any difficulty may have attested the appropriateness of the grant of that permission; that the respondent, in fact, made the application for the limited package that it is now seeking to have authorised by the Commission.
It was an application, my Lord, that was brought on behalf of the entire pig industry, that means, as your Lordship will recall from Dr Strak's report, about 20,000 fulltime jobs, the majority of producers and the majority of the ancillary trades actively supported this case being brought. There was, if I may put it this way, a very widespread public interest therefore in the case being brought and being determined by the court. So although it is not a public interest case in the very wide sense, there is a very strong public interest element which led to the bringing of the present proceedings. It is for those reasons that I would invite your Lordship to consider not making a full costs order, so to speak, against the applicant.
My Lord, it may also assist if I say at this point that I am not seeking permission to appeal. I am not doing that because, quite simply, there is no way that a group that is funded as it has been out of an industry in crisis would possibly have the resources to mount an appeal against your Lordship's judgment. Thank you.
MR JUSTICE RICHARDS: Thank you very much, Miss Sharpston. Of course I understand and sympathise with the crisis in the industry and the financial problems faced by the producers. I accept that there was here a genuine grievance and it is quite clear that the application has been responsibly and very well conducted. Nonetheless, I see no reason why costs should not follow the event; that is the ordinary order. There are, in this case, no circumstances that in my judgment could properly justify the court departing from that order in the exercise of its discretion. The fact is that the applicants have lost fair and square on the law and the legal merits of the case. The public interest element, to the extent that there is truly a public interest element, is, in my judgment, not sufficient to justify anything other than the normal order. I will, therefore, grant an order, as requested by Mr Vajda, that is to say for the costs to be paid by the first applicant.
MR VAJDA: Mr Patel asks me, if I understand, that £5,000 was paid into court and your Lordship may recall there was correspondence at the beginning of this action about whether we formally needed an order that that money can now be released.
MR JUSTICE RICHARDS: Well, if you do need an order for it to be released, I can see no objection to it.
MS SHARPSTON: No, thank you.
MR JUSTICE RICHARDS: And, of course, as regards costs they will be subject to detailed assessment. Once again can I thank all counsel and instructing solicitors for their assistance in the case.
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