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Cite as: [2003] ScotCS 349

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ABNA Ltd, RE for Judicial Review [2003] ScotCS 349 (23 December 2003)

OUTER HOUSE, COURT OF SESSION

P1538/03

OPINION OF LORD WHEATLEY

in the Petition of

ABNA LIMITED AND OTHERS

Petitioners;

for

Judicial Review of the Feeding Stuffs (Scotland) Amendment (No.2) Regulations 2003

________________

Petitioners: Johnston; Brodies, W.S.

Respondents: Poole; Solicitors to the Scottish Ministers

23 December 2003

[1] The petitioners are manufacturers of compound animal feeding stuffs in the United Kingdom. They represent a wide variety of interests in the development, manufacture and distribution of animals feeds throughout the United Kingdom, and in particular, all of them have extensive interests in Scotland. They seek a judicial review of The Feeding Stuffs (Scotland) Amendment (No.2) Regulations 2003 (SSI 2003/312) which came into force on 6 November 2003. The Scottish Ministers were represented at the hearing but did not appear in order to oppose the application for judicial review but rather to offer a number of comments on the application which were relevant to the question of whether it should be granted.

[2] On 11 June 2003 the Scottish Ministers made Regulations entitled "The Feeding Stuffs (Scotland) Amendment (No.2) Regulations 2003 (SSI 2003/312)" ("the 2003 Regulations"). The 2003 Regulations amend The Feeding Stuffs (Scotland) Regulations 2000 (SSI 2000/453), ("the 2000 Regulations"). These Regulations are intended to implement, among others, Directive 2002/2/EC of the European Parliament and of the Council ("the Directive"), which in turn amended Council Directive 79/373/EEC. The Directive came into force on 6 March 2002. Every member state was obliged to implement the Directive in their national law by 6 March 2003 and to apply the implementing measures from 6 November 2003. The Regulations accordingly came into force in Scotland on 6 November 2003. It is significant to note that regulations in virtually the same terms were made at the same time by the legislatures for England and Wales, and Northern Ireland.

[3] Regulation 5 of the 2003 Regulations (which is the first regulation in respect of which the petitioners now seek a judicial review) inserts a new para.19A into the 2000 Regulations. Regulation 5 provides as follows:

"After Regulation 19 (control of feeding stuffs intended for particular nutritional purposes, and supplementary provisions relating to statutory instrument) there shall be inserted -

Provision of information in relation to compound feeding stuffs for animals other than pet animals

19A Where a person to whom a compound feeding stuff for animals other than pet animals is supplied so requests, the supplier of that compound feeding stuff shall provide the person making that request with details of the exact percentages by weight of feed materials used in that compound feeding stuff."

[4] Regulation 8 of the 2003 Regulations, which the petitioners also challenge, provides that para.19 of Schedule 4 of the 2000 Regulations is to be amended inter alia in the following way:

"(c) for paragraph 19 there shall be substituted -

19. In the case of any compound feeding stuffs for animals other than pet animals -

All the feed material shall be declared in the statutory statement -

(i) by their specific names, and,

(ii) with an indication, in descending order, of the percentage by weight of each feed material contained in the compound feeding stuff, subject to a limit of variation of ± 15% in relation to each declared percentage; and

the statutory statement shall contain the following declaration -

'The exact percentage by weight of feed materials used in this feeding stuff may be obtained from ... (name or trade name, address or registered office, telephone number and email address of the supplier of the compound feeding stuff)."

[5] Regulation 5 of the 2003 Regulations implements Article 1(1) of the Directive. In particular, Article 1(1)(b) of the Directive amended Article 5(1) of the Directive of 79/373. The relevant provision of Article 5 as consolidated therefore now states:

"1. Member states shall prescribe that compound feeding stuffs may not be marketed unless the particulars listed below, which shall be clearly visible, legible and indelible and for which the manufacturer, importer, seller or distributor established within the Community shall be held responsible, are shown, in a space provided for that purpose, on the packaging, on the container or on a label attached thereto -

(i) in the case of compound feeding stuffs other than those intended for pets, the indication 'the exact percentages by weight of feed materials used in this feeding stuff may be obtained from ... (name or trade name, address or registered office, telephone number and e-mail address of the person responsible for the particulars referred to in this paragraph)'. This information shall be provided at the customer's request."

[6] Regulation 8 of the 2003 Regulations implements Article 1(4) of the Directive. In particular, it inserts a new Article 5(c)(2)(a) into the Directive. It replaces the existing Article 5(c) of the Directive of 79/373. Article 5(c) therefore now states inter alia:

"........

2. The listing of feed materials for feeding stuffs shall be subject to the following rules:

(a) compound feeding stuffs intended for animals other than pets

(i) listing of feed materials for feedingstuffs, with an indication, in descending order, of the percentages by weight present in the compound feedingstuff;

(ii) as regards to above percentages, a tolerance of +/- 15% of the declared value shall be permitted; ...".

[7] It is clear that the purpose of regulations 5 and 8 were introduced into domestic legislation to comply with the requirements of Article 1.1(b) and Article 1.4.2 of the Directive, and this is expressly stated in the explanatory note to the statutory instruments. The petitioners seek interim suspension of regulations 5 and 8 in order to suspend the application of the revised provisions of the Directive, pending the resolution of a reference to the Court of Justice of the European Communities by the High Court in England, which is at the instance of the petitioners in the present application, and which is based on the identical subject matter. This reference, number C453/03, was submitted by the English court in October 2003.

[8] The Directive was made by the European Parliament and the Council, notwithstanding protracted and serious opposition to it by the European Commission and others, including those representing the interests of the present petitioners. Those parts of the Directive which are in dispute are hereinafter referred to as "the contested provisions".

[9] The petitioners have expressed serious concern at the consequences to them of regulations 5 and 8 of the 2003 Regulations. They are satisfied that to comply with these provisions will cause serious and irreparable damage to their businesses. In effect, the disclosure of exact percentages by weight of the ingredients in their various products will reveal vital and confidential information and technical knowledge, which has gone into the composition of their various feeds stuffs, and which has been achieved by many years of research and development. In these circumstances, the disclosure of such detailed information will allow their trade competitors simply to copy their products, and place them in a position where they can sell those products at a significantly lower price than that which the petitioners require to charge, in view of their continuing commitment to research and development.

[10] In these circumstances, the petitioners seek a judicial review of regulations 5 and 8 of the 2003 Regulations. In particular, they seek interim suspension of the provisions of regulation 5 of the 2003 Regulations in its entirety and interim suspension of regulation 8(c) of the same Regulations, by deletion in the new para.19(a)(ii) of the words "with an indication", the words "of the percentage" and the words "subject to a limit of variation of ± 15% in relation to each declared percentage"; and further they also seek deletion of section 19(b) in its entirety. These detailed deletions were proposed by counsel for the Scottish Ministers, and accepted as appropriate by counsel for the petitioners. The practice of separating provisions which are challenged from the remainder of the legislation against which no exception is taken is now accepted (Germany v European Council and Parliament [2000] E.C.R. 1-8419).

[11] Counsel for the petitioners accepted that he required to establish first of all that there was a prima facie case for seeking the relief which was sought, and that thereafter, in order to obtain the interim suspension orders which he required at this time, he had to show that there was an urgency which justified the granting of the interim orders; and further that the balance of convenience in this matter favoured the petitioners.

[12] Dealing first with the claim that there was a prima facie case for interim relief by suspension of the Directive as amended, the petitioners submitted challenges to the validity of the Directive on three grounds, namely that the amended Articles 1(1)(b) and Article 1(4) now lacked a proper legal basis, that they infringed the petitioners' fundamental right of property, and likewise that they infringed the principle of proportionality. It is agreed that this is a competent request to make in this court. The issues which affect these three grounds overlap to a certain extent.

[13] The first of these submissions on the part of the petitioners therefore was that the contested provisions of the Directive lack any sound or proper legal basis. The appropriate tests to be considered in applications of this sort are found in the cases of Zuckerfabrik Suderdithmarschen A.G. v Hauptzollamt Itsehoe [1991] E.C.R. 1-415, and Atlanta Fruchthandel GmbH v Bundesamt für Emührung und Forstwirtschaft [1995] E.C.R. 1-3761. In essence the first hurdle that has to be overcome is that the court must have serious doubts about the validity of the legislation in question. As counsel for the Scottish Ministers pointed out, this is a significant obstacle. The Directive is ex facie valid, and has been duly passed by the appropriate Community institutions. Counsel also described in detail the passage of the legislation through the complexities of those institutions and there can be no doubt that the effect of the contested provisions has already been fully considered and debated. There is always a compelling need for the uniform application of Community law. However, while accepting all this, the petitioners' submissions that the court should find that there were serious doubts about the validity of the relevant measures were as follows.

[14] The Directive was adopted by the European Parliament and Council pursuant to Article 152.4(b), which is part of Title X111 of the EC Treaty, and is titled "Public Health". This subsection provides:

"The Council, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee and the Committee of the Regions, shall contribute to the achievement of the objectives referred to in this article through adopting:- ....

(a) ........

(b) by way of derogation from Article 37, measures in the veterinary and the phytosanitary fields which have as their direct objective the protection of public health.

.............."

The first argument in the petition in support of the general contention that the contested provisions lack a proper legal basis was that the legislation now challenged cannot properly be described as measures "in the veterinary field" in terms of the sub-section. However, this point was not substantially founded upon by counsel for the petitioners and would appear to have little merit.

[15] More significantly, however, the petitioners argue that Article 1(1)(b) and 1(4) as now amended do not have as their direct objective the protection of public health as Article 152.4(b) requires. There is no direct connection between the percentage declarations required by the Directives and any of the issues, such as traceability and product safety, which could reasonably be said to be contemplated by the terms of Article 152.4(b). In particular, there is no discernible connection between the requirement to provide detailed percentage weights in animal food stuffs and any issue of public health. The amendments contained in the Directive were prompted by the concerns occasioned by the BSE crisis in cattle, and the dioxin scares in Belgium. These crises were commonly attributed to the ingredients of animal feedstuffs, and it was regarded as important that accurate descriptions of these ingredients and their source should be readily available. Petitioners' counsel argued that the chosen remedy would not address the problem which had been identified.

[16] I agree with counsel for the petitioners in the concerns which he expressed about the validity of these changes proposed by the Directive. It is accepted by the petitioners that it is important that detailed information is provided of the feedstuffs they produce, for a variety of purposes. However, nothing in the comprehensive information produced by counsel about the deliberations and conclusions of the various Community institutions indicates in any way that the contamination of such feedstuffs which caused the concern can be said to have depended upon the detailed percentage composition of the ingredients of any of the products. Nor can it be said that any issue of traceability arises that can only be solved by the indications of the percentage ingredients. Even if there were problems in those respects, they could easily be addressed by the confidential disclosure of the necessary information directly to the state institutions involved. Accordingly, on this issue, and taking due account of the Community interest in the matter, I have no difficulty in concluding that there must be serious doubts about the validity of the legislation. The measures proposed do not appear in any way to be related to any issue of public health. They are not therefore properly introduced in terms of Article 152.4(b) of Title XIII of the Treaty. If that is so then the petitioners can properly ask that the effect of the contested provisions should be suspended. I refer to the case of Zuckerfabrik (para.23).

[17] I am considerably fortified in this conclusion by the clear and helpful decision of Davies J. in the identical case to this heard recently in the High Court in England (Abna Ltd and Others v The Secretary of State for Health (unreported) 6 October 2003), which, as I have indicted earlier, has been remitted to the European Court of Justice. It is true, as counsel for the Scottish Ministers pointed out, that there are certain countervailing considerations. For example, the legislation is an attempt to consider public health issues; there are a number of competing interests which contributed to a wide-ranging debate, reflecting many diverse opinions on the matter, and due regard has to be had to the discretion of the Community legislative process, which must be assumed to have considered all relevant issues, including the question of proportionality, and the other issues raised by the petitioners. Nonetheless, I am convinced that the principle relied upon by the petitioners, that there is no discernible link between the Directive as now amended and its overarching purpose, is correct and justifies the conclusion that there must be serious doubts about the validity of the legislation.

[18] The second submission by the petitioners in support of their argument that the legislation was of doubtful validity was that the Directive as amended infringed the petitioners' right to property. Counsel submitted that fundamental property rights are a part of European law and that trade secrets and confidential commercial knowledge are recognised forms of property which would be protected by the national law. Interference with such property rights in the pursuit of what were described (erroneously in his submission) or as animal health issues, could not be accepted, particularly where, as here, those rights had not been sufficiently addressed by the Directive. Interference with property rights can only be tolerated if they take place in pursuit of a legitimate aim. I accept this argument also and am prepared to conclude that the damage to the petitioners' property rights also suggest that there may be serious doubts at to the validity of these provisions of the Directive.

[19] Finally, the petitioners submitted that the contested provisions of the Directive infringe the principle of proportionality. Any measure, it was submitted, was subject as a matter of law to a requirement that it must be appropriate in order to obtain a legitimate objective; that the means employed were limited to what is necessary to obtain that objective, so that where there is a choice between several appropriate measures recourse must be had to the least onerous of them; and that the disadvantages caused by the legislation must not be disproportionate to the objective pursued. Counsel submitted that the contested provisions of the Directive were not appropriate, necessary or proportionate to their stated objective, which was the protection of public health through the traceability of material potentially contaminated. The requirement to declare exact percentages could not assist traceability nor would it provide an indication as to whether or not the feedstuffs were contaminated. It would have been possible for the measures to be less restrictive; ingredients could be listed in order of weight without specifying exact percentages, or be defined in banded amounts, or the exact percentages could be declared in confidence to national authorities. Again I am satisfied that on this basis it can be argued that the contested provisions are invalid. It is true, as counsel for the Scottish Ministers submitted, that the Directive does not specifically require that trade secrets be revealed, and that the permitted tolerances afford limited security to the petitioners. However, the net effect of the amended legislation will clearly result in the disclosure of the petitioners' trade secrets, and it is arguable that such a result is quite disproportionate to the objectives which the legislation seeks to achieve. Further, there appears to be no reason why the legislature could not have arranged matters in a manner less onerous to the petitioners by allowing confidential disclosure to the state authorities (U.K. v Commission and Council [1988] E.C.R. 1-2265 para.96).

[20] In all the circumstances therefore I consider that it can properly be said that serious doubts exist about the validity of the contested provisions. That is sufficient to satisfy the first of the conditions necessary to establish a prima facie case, as described in the case of Zuckerfabrik.

[21] The next issue which requires to be considered is whether or not the petitioners have established that as a result of the contested provisions they have suffered serious and irreparable damage, and that therefore for them the matter is one of considerable urgency. Having considered carefully all of the affidavits produced, I have no doubt that this is the case. It is clear that the damage which the petitioners apprehend must not only be serious, but truly irreparable, and that damage which is purely financial only cannot, in these circumstances, meet the necessary test. (Zuckerfabrik (paras.28 and 29); Atlanta (para.41)). In R v H.M. Treasury, ex.p. British Telecommunications Plc [1995] COD 1-87, interim relief was not granted when the financial loss apprehended would not threaten the survival of the company, but would merely dent its profits (para.(4)). However, it is clear that there are significant issues which face each of the petitioners in the present application in terms of the amended legislation. First, the information which they would be required to disclose in terms of the contested provisions is the result of many years of carefully guarded research and development. It is not difficult to accept that, in the highly competitive world of animal feedstuffs, specialised markets are identified by producers, and considerable efforts are made to service the interests so identified. Equally, it is not difficult to understand that the disclosure of the exact ingredients in any particular compound will allow competitors to reproduce exactly the recipes which the petitioners are anxious to protect and which those competitors would soon supply, in circumstances which could do lasting and irretrievable damage to the petitioners' business. The feedstuffs affected by the contested provisions are central to all of the petitioners' operations. The need to protect knowledge and technical expertise required by research and development in order to support a position in the market place is clearly of the utmost significance to each of the individual petitioners. I refer to Pfizer Animal Health SA/NV v EU Council [1999] 1 CMLR 79. I have no difficulty in accepting that, should the petitioners be required to disclose the particular ingredients on detailed percentages on their products, they would lose out not only to a significant degree in financial terms, but they would also lose that place in the market which they have acquired through their efforts and research. Such a situation would therefore cause irrepairable damage. Accordingly, I am satisfied that the present application is attended by the required degree of urgency to allow it to be granted (Atlanta para.40).

[22] The third element which has to be considered in an application of this kind is that the balance of convenience must lie in the petitioners' favour before the interim applications can be granted. What is also crucial in this respect is that the court must take account of the Community interest in coming to any decision. Reference was again made to the case of Atlanta (paras. 42-45). The first duty of the national court is to make effective these Community measures which are properly introduced, and there exists a presumption against suspending legislation democratically enacted. I have little doubt however, that having taken due account of this interest, the relief sought should still be granted. The decision depends upon an exercise of discretion by the court, weighing up all of the relevant factors in the individual case. In the present case, I have taken into account all of the material considerations referred to in the course of this judgment. I have no doubt that the particularly significant interest of the petitioners in the present case are such that the interests of the Community although, as always, important, need not prevent the granting of the interim orders sought. Accordingly, as far as the question of balance of the convenience is concerned, I have absolutely no doubt that the petitioners' position should be favoured. The reasons for this have been foreshadowed in the previous paragraphs. In the first place, there is no demonstrable damage to public health interests should this legislation be delayed. Secondly, should the legislation be enforced, the damage to the petitioners would be immediate and complete in its effect. Thirdly, I have to take into account the fact that the suspension of the English regulations, which are in identical terms to those with which I am dealing, is already in force and it would be extremely unsatisfactory if different situations existed in difference parts of the United Kingdom.

[23] Finally, it has to be considered whether there are any relevant decisions of the European Court of Justice or Court at first instance, which rule on the lawfulness of these provisions of the Directive, or in any application for the grant of interim relief at Community level by reference to this particular Directive. The only such decision which is in any way relevant is that of Davis J in Abna Ltd v Secretary of State for Health, referred to earlier, which I intend to follow.

[24] In the circumstances, I shall grant the interim suspension orders sought by the petitioners. There is no need to refer the case to the European Court of Justice, as this has already been done in the case of Abna Ltd v Secretary of State for Health. I shall reserve the question of expenses.