United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/18/250

Regina v. Secretary of State for Transport (Respondent) ex
parte Factortame Limited and others (Appellants)

JUDGMENT

Die Jovis 26° Julii 1990

Upon Further Report from the Appellate Committee to whom
was referred the Cause Secretary of State for Transport
against Factortame Limited and others, That the Committee had
heard Counsel on Monday the 17th, Tuesday the 18th, Wednesday
the 19th, Thursday the 20th, Monday the 24th, Tuesday the
25th, Wednesday the 26th and Thursday the 27th days of April
1989, upon the Petition and Appeal of Factortame Limited and
others praying that the matter of the Orders set forth in the
Schedule thereto, namely Orders of Her Majesty's Court of
Appeal of the 16th and the 22nd days of March 1989, might be
reviewed before Her Majesty the Queen in Her Court of
Parliament and that the said Orders might be reversed, varied
or altered or that the Petitioners might have such other
relief in the premises as to Her Majesty the Queen in Her
Court of Parliament might seem meet; as upon the case of the
Secretary of State for Transport lodged in answer to the said
Appeal; That by an Order of this House of the 18th day of May
1989 the following questions were referred to the Court of
Justice of the European Communities for a preliminary ruling
under Article 177 of the Treaty establishing the European
Economic Community:

1. "Where -

(i) a party before the national court claims
to be entitled to rights under Community law
having direct effect in national law ("the rights
claimed") ,

(ii) a national measure in clear terms will,
if applied, automatically deprive that party of
the rights claimed,

(iii) there are serious arguments both for and
against the existence of the rights claimed and
the national court has sought a preliminary ruling
under Article 177 as to whether or not the rights
claimed exist,

(iv) the national law presumes the national
measure in question to be compatible with
Community law unless and until it is declared
incompatible,

(v) the national court has no power to give
interim protection to the rights claimed by
suspending the application of the national measure
pending the preliminary ruling,

Oral Judgment: 26.7.90
Reasons: 11.10.90

HOUSE OF LORDS

REGINA

SECRETARY OF STATE FOR TRANSPORT
(RESPONDENT)

ex parte

FACTORTAME LIMITED
AND OTHERS
(APPELLANTS)

Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Oliver of Aylmerton
Lord Goff of Chieveley
Lord Jauncey of Tullichettle




LORD BRIDGE OF HARWICH

My Lords,

When this appeal first came before the House last year
[1990] 2 AC 85 your Lordships held that, as a matter of English
law, the courts had no jurisdiction to grant interim relief in terms
which would involve either overturning an English statute in
advance of any decision by the European Court of Justice that the
statute infringed Community law or granting an injunction against
the Crown. It then became necessary to seek a preliminary ruling
from the European Court of Justice as to whether Community law
itself invested us with such jurisdiction. In the speech I delivered
on that occasion, with which your Lordships agreed, I explained the
reasons which led us to those conclusions. It will be remembered
that, on that occasion, the House never directed its attention to
the question how, if there were jurisdiction to grant the relief
sought, discretion ought to be exercised in deciding whether or not
relief should be granted.

In June of this year we received the judgment of the
European Court of Justice (Case C-213/89) replying to the
questions we had posed and affirming that we had jurisdiction, in
the circumstances postulated, to grant interim relief for the
protection of directly enforceable rights under Community law and
that no limitation on our jurisdiction imposed by any rule of
national law could stand as the sole obstacle to preclude the grant
of such relief. In the light of this judgment we were able to
conclude the hearing of the appeal in July and unanimously decided
that relief should be granted in terms of the orders which the
House then made, indicating that we would give our reasons for
the decision later.

My noble and learned friend Lord Goff of Chieveley, whose
speech I have had the advantage of reading in draft, has given a
very full account of all the relevant circumstances arising since
our decision last year in the light of which our final disposal of
the appeal fell to be made. I gratefully adopt this account. I
also agree with his exposition of the principles applicable in
relation to the grant of interim injunctive relief where the dispute
involves a conflict between private and public interests and where
damages are not a remedy available to either party, leading, in
the circumstances of this case, to the conclusion that it was
appropriate to grant relief in terms of the orders made by the
House. But I add some observations of my own in view of the
importance of the subject matter.

Some public comments on the decision of the European
Court of Justice, affirming the jurisdiction of the courts of
member states to override national legislation if necessary to
enable interim relief to be granted in protection of rights under
Community law, have suggested that this was a novel and
dangerous invasion by a Community institution of the sovereignty
of the United Kingdom Parliament. But such comments are based
on a misconception. If the supremacy within the European
Community of Community law over the national law of member
states was not always inherent in the E.E.C. Treaty (Cmnd. 5179-
II) it was certainly well established in the jurisprudence of the
European Court of Justice long before the United Kingdom joined
the Community. Thus, whatever limitation of its sovereignty
Parliament accepted when it enacted the European Communities
Act 1972 was entirely voluntary. Under the terms of the Act of
1972 it has always been clear that it was the duty of a United
Kingdom court, when delivering final judgment, to override any
rule of national law found to be in conflict with any directly
enforceable rule of Community law. Similarly, when decisions of
the European Court of Justice have exposed areas of United
Kingdom statute law which failed to implement Council directives,
Parliament has always loyally accepted the obligation to make
appropriate and prompt amendments. Thus there is nothing in any
way novel in according supremacy to rules of Community law in
those areas to which they apply and to insist that, in the
protection of rights under Community law, national courts must
not be inhibited by rules of national law from granting interim
relief in appropriate cases is no more than a logical recognition of
that supremacy.

Although affirming our jurisdiction, the judgment of the
European Court of Justice does not fetter our discretion to
determine whether an appropriate case for the grant of interim
relief has been made out. While agreeing with Lord Goff's
exposition of the general principles by which the discretion should
be guided, I would wish to emphasise the salient features of the
present case which, at the end of the argument, left me in no
doubt that interim relief should be granted. A decision to grant
or withold interim relief in the protection of disputed rights at a
time when the merits of the dispute cannot be finally resolved
must always involve an element of risk. If, in the end, the
claimant succeeds in a case where interim relief has been refused,
he will have suffered an injustice. If, in the end, he fails in a
case where interim relief has been granted, injustice will have
been done to the other party. The objective which underlies the



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principles by which the discretion is to be guided must always be
to ensure that the court shall choose the course which, in all the
circumstances, appears to offer the best prospect that eventual
injustice will be avoided or minimised. Questions as to the
adequacy of an alternative remedy in damages to the party
claiming injunctive relief and of a cross-undertaking in damages to
the party against whom the relief is sought play a primary role in
assisting the court to determine which course offers the best
prospect that injustice may be avoided or minimised. But where,
as here, no alternative remedy will be available to either party if
the final decision does not accord with the interim decision,
choosing the course which will minimise the risk presents
exceptional difficulty.

If the applicants were to succeed after a refusal of interim
relief, the irreparable damage they would have suffered would be
very great. That is now beyond dispute. On the other hand, if
they failed after a grant of interim relief, there would have been
a substantial detriment to the public interest resulting from the
diversion of a very significant part of the British quota of
controlled stocks of fish from those who ought in law to enjoy it
to others having no right to it. In either case, if the final
decision did not accord with the interim decision, there would have
been an undoubted injustice. But the injustices are so different in
kind that I find it very difficult to weigh the one against the
other.

If the matter rested there, I should be inclined to say, for
the reasons indicated by Lord Goff of Chieveley, that the public
interest should prevail and interim relief be refused. But the
matter does not rest there. Unlike the ordinary case in which the
court must decide whether or not to grant interlocutory relief at a
time when disputed issues of fact remain unresolved, here the
relevant facts are all ascertained and the only unresolved issues
are issues of law, albeit of Community law. Now, although the
final decision of such issues is the exclusive prerogative of the
European Court of Justice, that does not mean that an English
court may not reach an informed opinion as to how such issues are
likely to be resolved. In this case we are now in a position to
derive much assistance in that task from the decisions of the
European Court of Justice in Reg. v. Ministry of Agriculture,
Fisheries and Food, Ex parte Agegate Ltd. (Case C-3/87) [1990] 3
W.L.R. 226 and Reg. v. Ministry of Agriculture, Fisheries and
Food, Ex parte Jaderow Ltd. (Case C-216/87) [1990] 3 W.L.R. 265
and the interim decision of the President in the proceedings
brought by the European Commission against the United Kingdom
(Commission of the European Communities v. United Kingdom
(Case 246/89 R)) to which Lord Goff of Chieveley has referred.
In the circumstances I believe that the most logical course in
seeking a decision least likely to occasion injustice is to make the
best prediction we can of the final outcome and to give to that
prediction decisive weight in resolving the interlocutory issue.

It is now, I think, common ground that the quota system
operated under the common fisheries policy, in order to be
effective and to ensure that the quota of a member state enures
to the benefit of its local fishing industry, entitles the member
state to derogate from rights otherwise exerciseable under
Community law to the extent necessary to ensure that only fishing



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vessels having a genuine economic link with that industry may fish
against its quota. The narrow ground on which the Secretary of
State resists the applicants' claim is that the requirements of
section 14 of the Merchant Shipping Act 1988 that at least 75 per
cent. of the beneficial ownership of a British fishing vessel must
be vested in persons resident and domiciled in the United Kingdom
is necessary to ensure that the vessel has a genuine economic link
with the British fishing industry. Before the decision of the
European Court of Justice in Agegate that would have seemed to
me a contention of some cogency. But in Agegate it was held
that a licensing condition requiring 75 per cent. of the crew of a
vessel fishing against the quota of a member state to be resident
within the member state could not be justified on the ground that
it was "irrelevant to the aim of the quota system" (p. 261). I
confess that I find some difficulty in understanding the reasoning
in the judgment which leads to this conclusion. But if a residence
requirement relating to crew members cannot be justified as
necessary to the maintenance of a genuine economic link with the
local industry, it is difficult to see how residence or domicile
requirements relating to beneficial owners could possibly fare any
better.

The broader contention on behalf of the Secretary of State
that member states have an unfettered right to determine what
ships may fly their flag raises more difficult issues. It would not
be appropriate in the context of the present interlocutory decision
to enter upon a detailed examination of the wide-ranging
arguments bearing upon those issues. I believe the best indication
that we have of the prospect of success of that contention is
found in the interlocutory judgment of President Due in the case
brought by the Commission against the United Kingdom. He
concluded that the contention was of insufficient weight to
preclude him from granting an interim order suspending the
application of the nationality requirements of section 14 of the
Act of 1988 to nationals of other member states. His reasoning
persuaded me that we should reach the same conclusion in relation
to the residence and domicile requirements.

LORD BRANDON OF OAKBROOK

My Lords,

I have had the advantage of reading in draft the speech
produced by my noble and learned friend, Lord Goff of Chieveley,
and agree with it entirely.

LORD OLIVER OF AYLMERTON

My Lords,

have had the advantage of reading in draft the speech of
my noble and learned friend, Lord Goff of Chieveley. I agree
with it and, for the reasons given by my noble friend, I, too,
would allow this appeal.

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LORD GOFF OF CHIEVELEY

My Lords,

This appeal was last before your Lordships' House in May
1989. The subject matter of the proceedings is an application by
the applicants for judicial review, challenging the legality of
certain provisions of the Merchant Shipping Act 1988, and the
Merchant Shipping (Registration of Fishing Vessels) Regulations
1988 (S.I. 1988 No. 1926), on the ground that they contravene
provisions of European law. The matter came before a Divisional
Court (Neill L.J. and Hodgson J.), who requested a preliminary
ruling from the European Court of Justice under article 177 of the
E.E.C. Treaty on the questions necessary to enable them finally to
determine the application. They then made an order for interim
relief in the form of an order that in the meanwhile Part II of
the Act of 1988 and the Regulations be disapplied and the
Secretary of State for Transport be restrained from enforcing the
same in respect of any of the applicants and any vessel now
owned (in whole or in part), managed, operated or chartered by
any of them so as to enable registration of any such vessel under
the Merchant Shipping Act 1894 and/or the Sea Fishing Boats
(Scotland) Act 1886 to continue in being. The Court of Appeal
allowed an appeal by the Secretary of State from the interim
order of the Divisional Court. On appeal by the applicants to
your Lordships' House [1990] 2 AC 85, it was held by your
Lordships that, as a matter of English law, the English courts had
no power to make such an order as that made by the Divisional
Court. My noble and learned friend, Lord Bridge of Harwich, said
of the order for interim relief, at pp. 142-143

"Any such order, unlike any form of order for interim relief
known to the law, would irreversibly determine in the
applicants' favour for a period of some two years rights
which are necessarily uncertain until the preliminary ruling
of the E.C.J. has been given. If the applicants fail to
establish the rights they claim before the E.C.J., the effect
of the interim relief granted will be to have conferred upon
them rights directly contrary to Parliament's sovereign will
and correspondingly to have deprived British fishing vessels,
as defined by Parliament, of the enjoyment of a substantial
proportion of the United Kingdom quota of stocks of fish
protected by the common fisheries policy. I am clearly of
the opinion that, as a matter of English law, the court has
no power to make an order which has these consequences."

Your Lordships' House further held that, in any event, there was
no jurisdiction in English law to grant an interim injunction against
the Crown; this provided an additional reason why the order made
by the Divisional Court could not be supported. Your Lordships'
House however sought the guidance of the European Court of
Justice on the question whether, in a case such as the present,
European law overrides English law. Accordingly the following
questions were referred to the court:

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"1. Where - (i) a party before the national court claims to
be entitled to rights under Community law having direct
effect in national law ('the rights claimed'), (ii) a national
measure in clear terms will, if applied, automatically
deprive that party of the rights claimed, (iii) there are
serious arguments both for and against the existence of the
rights claimed and the national court has sought a
preliminary ruling under article 177 as to whether or not
the rights claimed exist, (iv) the national law presumes the
national measure in question to be compatible with
Community law unless and until it is declared incompatible,
(v) the national court has no power to give interim
protection to the rights claimed by suspending the
application of the national measure pending the preliminary
ruling, (vi) if the preliminary ruling is in the event in favour
of the rights claimed, the party entitled to those rights is
likely to have suffered irremediable damage unless given
such interim protection, does Community law either (a)
oblige the national court to grant such interim protection of
the rights claimed; or (b) give the court power to grant
such interim protection of the rights claimed? 2. If
question l(a) is answered in the negative and question 1(b)
in the affirmative, what are the criteria to be applied in
deciding whether or not to grant such interim protection of
the rights claimed?"

On 19 June 1990, in answer to the questions so referred to it, the
Court ruled as follows (Case C-213/89):

"Community law must be interpreted as meaning that a
national court which, in a case before it concerning
Community law, considers that the sole obstacle which
precludes it from granting interim relief is a rule of
national law must set aside that rule."

Following receipt of that ruling, the applicants returned to
your Lordships' House on 25 June 1990 in order to pursue further
their appeal from the decision of the Court of Appeal and to seek
interim relief pending the determination by the European Court of
Justice of the matters referred to it by the Divisional Court.
However, for reasons which will appear, they sought interim relief
in a form different from that ordered by the Divisional Court. On
9 July, shortly after the conclusion of the hearing, your Lordships
announced the House's decision to grant interim relief, and an
order was made by your Lordships for an interim injuction in the
following terms:

"Pending final judgment or further order herein the
Secretary of State whether by himself his servants or agents
or otherwise howsoever be restrained from withholding or
withdrawing registration in the register of british fishing
vessels maintained by him pursuant to the Merchant Shipping
(Registration of Fishing Vessels) Regulations 1988 in respect
of any of the vessels specified in the first column of the
schedule hereto by reason only of the following: (a) legal
title or beneficial ownership of such vessel is vested in
whole or in part in the person or persons listed against its
name in the second column of the said schedule; and (b) (i)
in the case of any natural person so listed, that person is



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resident or domiciled in a member state of the European
Economic Community other than the United Kingdom; or (ii)
in the case of any company so listed, (aa) 25 per cent. or
more of the shares or of any class of the shares of that
company, or of any company owning shares in that company,
are legally or beneficially owned by a person or persons
resident or domiciled in a member state of the European
Economic Community other than the United Kingdom or (bb)
25 per cent. or more of the directors of that company, or
of any company holding shares in that company, are resident
or domiciled in a member state of the European Economic
Community other than the United Kingdom."

Provision was made for liberty to apply. It was indicated that
your Lordships would publish at a later date your reasons for
granting such interim relief. I now set out the reasons which
caused me to agree that such relief should be granted.

When your Lordships decided to make the reference to the
European Court of Justice in this matter in May 1989, my noble
and learned friend Lord Bridge of Harwich delivered a speech with
which the remainder of your Lordships, including myself, agreed.
In his speech on that occasion, my noble and learned friend was
concerned primarily with the jurisdiction of the English courts to
grant an interim injunction in a case such as the present as a
matter of English law. Even so, he gave a full account of the
background to the present appeal (including a reference to, and
extensive quotation from, the judgment of Neill L.J. in the
Divisional Court, and in particular his account of the common
fisheries policy); and his consideration of the question whether, as
a matter of English law, the court had jurisdiction in the present
case to grant interim relief inevitably touched upon the question
which your Lordships now have to address in the light of the
ruling of the European Court of Justice. In these circumstances,
it would be repetitious if I once again set out the background to
present appeal: I shall only do so to the extent necessary to set
in their context certain decisions of the European Court of
Justice. Furthermore I wish to stress that, in expressing my
reasons why in my opinion your Lordships should grant interim
relief, I have no intention of departing from anything contained in
the speech of my noble and learned friend, with which I have
expressed my complete agreement.

The question which arose for consideration by your
Lordships, following the ruling of the European Court of Justice,
concerned the appropriateness of an order for an interim injuction
in a case such as the present, which is concerned with a challenge
to the lawfulness of an Act of Parliament as being incompatible
with European law. This inevitably raised for consideration the
principles to be applied in the case of an application for such an
interim injunction, and in particular the extent to which the
principles stated by your Lordships' House in American Cyanamid
Co. v. Ethicon Ltd. [1975] AC 396 are applicable in such a case,
a matter upon which my noble and learned friend made some
observations in his speech upon the first hearing of the appeal. I
have however to say at once that your Lordships were not
concerned with the simple question whether to interfere with the
exercise of discretion by the Divisional Court in favour of granting
an injunction. This is for three reasons. First, after the



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Divisional Court made its order, as I have already indicated,
circumstances occurred which rendered an order in that form
inappropriate. The purpose of the order was to continue in being
the registration of the applicants' fishing vessels under the Act of
1894 and/or the Act of 1886. However, during the period which
elapsed since the Divisional Court made its order, the register
maintained under the Act of 1894 was closed. It was for this
reason that the applicants sought an injunction in a different form,
directed towards restraining the Secretary of State from
withholding or withdrawing registration of their vessels in the
register maintained under the Act of 1988 on certain grounds
which, in the applicants' submission, were incompatible with
European law - an injunction which your Lordships decided to
grant. Second, important legal developments had taken place since
the Divisional Court's order. Two judgments were delivered by the
European Court of Justice concerning the validity of certain
conditions imposed by the Secretary of State on the grant of
licences to fishing vessels Reg. v. Ministry of Agriculture,
Fisheries and Food, Ex parte Agegate Ltd. (Case C-3/87) [1990] 3
W.L.R. 226 and Reg. v. Ministry of Agriculture, Fisheries and
Food, Ex parte Jaderow Ltd. (Case C-216/87) [1990] 3 W.L.R. 265,
and an interim order was made by the President of the European
Court of Justice, on an application by the European Commission,
regarding certain nationality provisions in section 14 of the Act of
1988. The latter order was of particular relevance to the
applicants' application for an interim injunction in the present
case. Third, there had been certain factual developments since
the last hearing before your Lordships, which were the subject of
evidence. In these circumstances, it was inevitable that your
Lordships' House should consider the applicants' application de
novo, and that it should, for that purpose, consider in some depth
the applicable principles.

Before turning to those applicable principles, I shall briefly
summarise the effect of the intervening decisions of the European
Court and of its President. The present appeal is, of course,
concerned with the question whether certain provisions of the Act
of 1988 are compatible with European law. The same is true of
the interim order of the President, but not of the two decisions of
the court. Those decisions, which I shall refer to as the Agegate
and Jaderow cases, were concerned with the validity of certain
conditions imposed upon the grant of licences for British fishing
vessels. They are not, therefore, of such direct relevance to the
present appeal as the President's interim order. They have,
however, some bearing upon the present appeal, and I think it
desirable to refer to them; and I propose to set them in their
context, even though this may involve some repetition of matters
already recorded in the speech of my noble and learned friend,
Lord Bridge of Harwich.

Under the Sea Fish (Conservation) Act 1967, as subsequently
amended, fishing vessels registered in the United Kingdom are
required to have a licence. That Act was supplemented by certain
legislation in 1983 - the British Fishing Boats Act 1983, and the
British Fishing Boats Order (S.I. 1983 No. 482) and the Sea Fish
Licensing Order (S.I. 1983 No. 1206) of the same year. This
legislation was passed in an attempt to meet the situation created
during the previous two or three years by the registration of
Spanish fishing vessels as British fishing vessels, with a view to



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acquiring the same rights to fish in Community waters as those to
which British fishing vessels beneficially owned by British nationals
were entitled. Such registration was perceived as having the
effect of circumventing restrictions imposed on Spanish registered
vessels under the reciprocal fishing agreement concluded by the
European Community with Spain in 1980 (following the Hague
resolution of 1976 (Council Regulation of 3 November 1976;
Official Journal 1981 No. C 105/1), whereby certain member states
of the Community extended their fishing limits in the Atlantic
Ocean 200 miles from the coast); under the reciprocal fishing
agreement of 1980, a limited number of Spanish fishing vessels
were permitted to fish only for specified quantities of hake in
specified waters of member states. It seems that the Spanish
fishing vessels saw this as a substantial exclusion from fishing
grounds in deep waters previously fished by them, and sought to
circumvent the restriction by registering their vessels as British.
It was in response to that move that the legislation of 1983 was
introduced, under which a British registered fishing boat fishing
within British fishing limits was required to have a crew consisting
of at least 75 per cent. of European Community nationals.

In January 1983, the system of national fish quotas was
introduced by Council Regulations (E.E.C.) Nos. 170/83 and
172/83. The British authorities experienced difficulty in monitoring
the catches of ex-Spanish registered vessels, and concern about
their activities was being expressed by British fishermen, especially
those based in the western parts of the United Kingdom. This
concern was being expressed against a background of continued
activity by British registered fishing vessels with a largely Spanish
beneficial ownership operating under British registration but mainly
from Spain and with only tenuous links with the United Kingdom,
which were believed to be making substantial inroads into the
fishing opportunities allocated to the United Kingdom under the
common fisheries policy in the light of this country's traditional
fishing activities.

Accordingly, in December 1985, new licensing conditions for
British fishing vessels were announced, taking effect as from 1
January 1986. These related to crewing, social security
contributions and operations. The crewing conditions required that
at least 75 per cent. of the crew must be British citizens, or
E.E.C. nationals (excluding, subject to certain limited exceptions,
Greek nationals until 1 January 1988, and Spanish or Portuguese
nationals until 1 January 1993) ordinarily resident in the United
Kingdom, the Isle of Man or the Channel Islands. The social
security conditions required the skipper and all the crew to make
contributions to United Kingdom national insurance, or equivalent
Isle of Man or Channel Islands schemes. The operating conditions
provided as follows:

"The vessel must operate from the United Kingdom, Isle of
Man or Channel Islands; without prejudice to the generality
of this requirement a vessel will be deemed to have been so
operating if, for each six-months period in each calendar
year (i.e. January to June and July to December) either:
(a) at least 50 per cent. by weight of the vessel's landings
or trans-shipment of stocks to which this or any other
licence in force at the relevant time relates have been
landed and sold in the United Kingdom, Isle of Man or the



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Channel Islands or trans-shipped by way of sale within
British fishery limits; or (b) other evidence is provided of
the vessel's presence in a United Kingdom, Isle of Man or
Channel Islands port on at least four occasions at intervals
of at least 15 days."

The validity of the crewing and social security conditions was
challenged in the Agegate case, and in addition the validity of the
operating conditions was challenged in the Jaderow case. The
Advocate-General's opinion in both cases was published in
November 1988, and so was available at the time of the hearing
before the Divisional Court; but the judgment of the European
Court of Justice in the two cases was not delivered until 14
December 1989, and differed in certain important respects from
the opinion of the Advocate-General. In the Agegate case, the
court upheld the validity of the social security condition; but in
respect of the crewing condition, while upholding the condition in
so far as it required 75 per cent. of the crew to be nationals of
member states, the court held that Community law precluded a
condition requiring 75 per cent. of the crew to reside ashore in
the United Kingdom. In the Jaderow case, the court held that
Community law did not preclude a member state, in authorising
one of its vessels to fish against national quotas, from laying down
conditions designed to ensure that the vessel had a real economic
link with that state if that link concerned only the relation
between that vessel's fishing operations and the population
dependent on fisheries and related industries; and, on that basis,
the court broadly upheld the validity of the operating conditions
imposed by the United Kingdom. These two decisions are
significant in the context of the present appeal, in that they
provide an indication of the nature of the economic link which the
court is prepared to recognise for these purposes, a link which
does not extend to include a residence requirement imposed upon
75 per cent. of the vessel's crew.

Meanwhile the United Kingdom Government had come to the
conclusion that there was substantial non-compliance with these
conditions. Furthermore, the number of largely foreign beneficially
owned vessels on the United Kingdom register continued to grow,
mainly through the acquisition by Spanish interests of British
fishing vessels; Spanish interests were also able to increase the
number of licences held by them by acquiring vessels already
holding United Kingdom licences. As a result, the problem was
considered at a more fundamental level, by looking at the
arrangements for registration of United Kingdom fishing vessels;
and it was decided to introduce fresh legislation which, it was
thought, would bring United Kingdom fishing vessel registration
requirements "broadly into line with arrangements in a number of
other member states" (see the first affidavit of Mr. Noble of the
Ministry of Agriculture, Fisheries and Food) and to require fishing
vessels on the United Kingdom register to be substantially owned
by British interests. Hence the provisions of Part II of the Act of
1988.

The interim order of the President (Case 246/89 R) related
to certain provisions of section 14 of the Act of 1988. Other
provisions of that section formed the basis of the applicants'
application for interim relief before your Lordships' House, and I
think, it desirable that I should set out the relevant parts of the
section. Section 14(0(2) and (7) provide as follows:

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. . .

"(1) Subject to subsections (3) and (4), a fishing vessel shall
only be eligible to be registered as a British fishing vessel
if -

(a) the vessel is British-owned;

(b) the vessel is managed, and its operations are
directed and controlled, from within the United
Kingdom; and

(c) any charterer, manager or operator of the vessel
is a qualified person or company.

"(2) For the purposes of subsection (l)(a) a fishing vessel is
British owned if -

(a) the legal title to the vessel is vested wholly in
one or more qualified persons or companies; and

(b) the vessel is beneficially owned -

(i) as to not less than the relevant percentage
of the property in the vessel, by one or more
qualified persons, or

(ii) wholly by a qualified company or
companies, or

(iii) by one or more qualified companies and,
as to not less than the relevant percentage of
the remainder of the property in the vessel, by
one or more qualified persons.

"(7) In this section -

"qualified company' means a company which satisfies the
following conditions, namely -

(a) it is incorporated in the United Kingdom and has
its principal place of business there;

(b) at least the relevant percentage of its shares
(taken as a whole), and of each class of its shares, is
legally and beneficially owned by one or more
qualified persons or companies; and

(c) at least the relevant percentage of its directors
are qualified persons;

'qualified person' means -

(a) a person who is a British citizen resident and
domiciled in the United Kingdom, or

(b) a local authority in the United Kingdom; and

- 11 -

'the relevant percentage' means 75 per cent. or such greater
percentage (which may be 100 per cent.) as may for the
time being be prescribed."

The interim order of the President (Case 246/89 R) was
made upon an application to him by the European Commission.
The Commission brought an action under article 169 of the Treaty
for a declaration that, by imposing the nationality requirements
enshrined in section 13 and 14 of the Act of 1988, the United
Kingdom had failed to fulfil its obligations under articles 7, 52 and
221 of the Treaty. The Commission further applied under article
186 of the Treaty and article 83 of the Rules of Procedure for an
order requiring the United Kingdom to suspend the application of
the nationality requirements enshrined in section 14(l)(a) and (c) of
the Act, read in conjunction with paragraphs (2) and (7) of the
section, as regards the nationals of other member states and in
respect of fishing vessels which until 31 March 1989 were pursuing
a fishing activity under the British flag and under a British fishing
licence. Under article 83(2) of the Rules of Procedure, interim
measures such as those requested may not be ordered unless there
are circumstances giving rise to urgency and factual and legal
grounds establishing a prima facie case for the measures applied
for.

The President granted the interim order asked for by the
Commission. With regard to the issue whether a prima facie case
had been established, he said:

"25. The United Kingdom further considers that the
nationality requirements introduced by the Act of 1988 are
justified by the present Community legislation on fisheries;
that legislation, although it establishes a common system, is
based on a principle of nationality for the purposes of the
distribution of fishing quotas. Under article 5(2) of Council
Regulation 170/83 it is for the member states to determine
the detailed rules for the utilisation of the quotas allocated
to them and thus to lay down the conditions which the
vessels authorised to fish from these quotas must satisfy.
26. It must be observed that the system of national quotas
established by Council Regulation 170/83 constitutes, as the
United Kingdom contends, a derogation from the principle of
equal access for Community fishermen to fishing grounds
and the exploitation thereof in waters coming within the
jurisdiction of the member states, which is itself a specific
expression of the principle of non-discrimination laid down in
article 40(3) of the E.E.C. Treaty. 27. That derogation is
justified, according to the recitals in the preamble to
Regulation No. 170/83, by the need, in a situation where
there is a dearth of fishery resources, to ensure a relative
stability in regard to fishing activities in order to safeguard
the particular need of regions where local populations are
especially dependent on fisheries and related industries. 28.
The possibility cannot therefore be excluded that in their
legislation concerning in particular the registration of fishing
vessels and access to fishing activities the member states
may be led to introduce requirements whose compatibility
with Community law can be justified only by the necessity
to attain the objectives of the Community system of fishing
quotas. As the Commission itself has admitted in these



- 12 -

proceedings, such requirements may be necessary in order to
ensure that there is a genuine link with the fishing industry
of the member state against whose quota the vessel may
fish. 29, However there is nothing which would prima
facie warrant the conclusion that such requirements may
derogate from the prohibition of discrimination on grounds
of nationality contained in articles 52 and 221 of the E.E.C.
Treaty regarding, respectively, the right of establishment
and the right to participate in the capital of companies or
firms within the meaning of article 58. 30. The rights
deriving from the above-mentioned provisions of the Treaty
include not only the rights of establishment and of
participation in the capital of companies or firms but also
the right to pursue an economic activity, as the case may
be through a company, under the conditions laid down by
the legislation of the country of establishment for its own
nationals. 31. These rights prima facie also include the
right to incorporate and manage a company whose object is
to operate a fishing vessel registered in the state of
establishment under the same conditions as a company
controlled by nationals of that state. 32. As regards the
United Kingdom's first submission based on its obligations
under international law, it is sufficient to note, at this
stage, that in this respect nothing has been put forward
which at first sight could necessitate any derogation from
the above-mentioned rights under Community law in order to
ensure the effective exercise of British jurisdiction and
control over the vessels in question. 33. It must therefore
be held that, at the stage of these proceedings for the
grant on interim relief, the application of the main
proceedings does not appear to be without foundation and
that the requirement of a prima facie is thus satisfied."

The President went on to hold that sufficient urgency had also
been established; in particular, for fishing vessels hitherto flying
the British flag, cessation of their activities could cause serious
damage. As regards the balance of interests he had this to say:

"39. Finally, as regards the balance of interests, it is not
established that the interim measures applied for may
jeopardise the objective pursued by the British legislation at
issue, namely to ensure the existence of a genuine link
between the vessels fishing against the British quotas and
the British fishing industry. 40. It appears prima facie
that the registration requirements laid down by the new
legislation, other than those relating to nationality, and the
measures adopted by the United Kingdom authorities in 1983
and 1986 would be sufficient to ensure the existence of such
a link. The United Kingdom itself considers that the
'Anglo-Spanish vessels', which do not have that link with the
United Kingdom, will not be able to satisfy the aforesaid
requirements."

Following the President's order, section 14 of the Act of
1988 was amended (by the Merchant Shipping Act 1988
(Amendment) Order 1989 (S.I. 1989 No. 2006) with effect from 2
November 1989 to give effect to his order until after the final
determination of the issue which was the subject of the
Commission's substantive application. In section 14(l)(a) and (2),



- 13 -

the expression "Community-owned" was substituted for "British-
owned"; in section 14(7)(a), the words "or another state of the
European Community" were added after the words "United
Kingdom," and in (7)(c) the words "or a citizen of a Community
State" were added after the words "British citizen." These
changes have the effect that the nationality issue ceases to be
relevant for the purposes of the present appeal, though the issue
is, your Lordships were told, still being vigorously contested by the
United Kingdom before the European Court of Justice on the
substantive reference by the Divisional Court.

The applicants nevertheless pursued their application for an
interim injunction before your Lordships' House, but their
complaint was restricted to other matters in section 14. They did
not object, for the purposes of the present application, to the
requirement, in section 14(l)(b), that a vessel should be managed
and its operations directed and controlled from within the United
Kingdom; they stated that they were able to comply with these
requirements. Their complaint was directed towards the

requirements for domicile and residence in the United Kingdom
contained in the definition of "qualified person" in section 14(7),
which apply both to beneficial owners of vessels and, in the case
of vessels beneficially owned by companies, both to shareholders
and to directors (under section 14(7)(b) and (c) respectively), with
the effect that 75 per cent. of the relevant shareholders and
directors are required to be resident and domiciled in the United
Kingdom. This, they submitted, is contrary to the right of
establishment under article 52 of the Treaty, and the right to
participate in capital under article 221. In answer, the Secretary
of State submitted that articles 52 and 221 of the Treaty cannot
be taken to apply in their full rigour to the fisheries sector. If
these articles, and article 7, were so to apply, it would be
impossible to prevent fishing interests in one member state
registering vessels in another member state in which event it
would be impossible (inter alia) to prevent such vessels fishing
against the quotas of the latter member state, to the detriment of
that member state's fishing community and allied industries (who
were intended to be protected by the quota system), and also to
prevent Spanish vessels avoiding provisions of the Act of Accession
of 1985 (Act of Accession of Spain and Portugal, Official Journal
1985 No. L. 302).

It was further submitted by the applicants that the effect
of the provisions relating to residence and domicile in section 14,
whether or not coupled with the nationality provisions, was to
render it impossible for many of the applicants' vessels to register
as British fishing vessels on the register now maintained under the
Act of 1988, with possibly catastrophic financial results for their
owners. They relied upon the conclusion of Neill L.J. in the
Divisional Court that he was not persuaded on the evidence before
him that there were identifiable persons or communities whose
activities or livelihood were being so seriously damaged, or would
be so seriously damaged, as to outweigh the very obvious and
immediate damage which would be caused by these new provisions
if no interim relief were granted to the applicants. They
submitted fresh evidence to your Lordships as showing that such
damage was already being suffered; and they referred to the fact
that, on the law as it stands at present (Bourgoin S.A. v. Ministry
of Agriculture Fisheries and Food [1986] Q.B. 716), the applicants



- 14 -

would have no remedy in damages for Joss or damage suffered by
them by reason of the enforcement against them of provisions of
the Act of 1988 if subsequently held to be incompatible with
European law. Finally, it was stated that the judgment of the
European Court of Justice on the substantive reference from the
Divisional Court was expected in about a year's time, and that it
would therefore be for no longer than that period that interim
relief was required.

I turn now to the applicable principles in cases in which an
interim injunction is sought, with particular reference to a case
such as the present, in which the public interest is involved.

The jurisdiction of courts to grant interim injunctions is to
be found in section 37 of the Supreme Court Act of 1981, under
which the court has power to grant an injunction in all cases in
which it appears to it to be just or convenient so to do, and has
power to do so on such terms and conditions as it thinks fit.
Guidelines for the exercise of the court's jurisdiction to grant
interim injunctions were laid down by your Lordships' House in
American Cyanamid Co. v. Ethicon Ltd. [1975] AC 396, in the
speech of Lord Diplock in that case, with which. the remainder of
their Lordships concurred. I use the word "guidelines" advisedly,
because I do not read Lord Diplock's speech as intended to fetter
the broad discretion conferred on the courts by section 37 of the
Supreme Court Act 1981; on the contrary, a prime purpose of the
guidelines established in the Cyanamid case was to remove a
fetter which appeared to have been imposed in certain previous
cases, viz. that a party seeking an interlocutory injunction had to
establish a prima facie case for substantive relief. It is now clear
that it is enough if he can show that there is a serious case to be
tried. If he can establish that, then he has, so to speak, crossed
the threshold; and the court can then address itself to the question
whether it is just or convenient to grant an injunction.

Nothing which I say is intended to qualify the guidelines laid
down in Lord Diplock's speech. But, before I turn to the question
of public interest, which lies at the heart of the rival submissions
in the present case, I must advert to the fact that Lord Diplock
approached the matter in two stages. First, he considered the
relevance of the availability of an adequate remedy in damages,
either to the plaintiff seeking the injunction, or to the defendant
in the event that an injunction is granted against him. As far as
the plaintiff is concerned, the availability to him of such a remedy
will normally preclude the grant to him of an interim injunction.
If that is not so, then the court should consider whether, if an
injunction is granted against the defendant, there will be an
adequate remedy in damages available to him under the plaintiff's
undertaking in damages; if so, there will be no reason on this
ground to refuse to grant the plaintiff an interim injunction.

At this stage of the court's consideration of the case (which
I will for convenience call the first stage) many applications for
interim injunctions can well be decided. But if there is doubt as
to the adequacy of either or both of the respective remedies in
damages, then the court proceeds to what is usually called the
balance of convenience, and for that purpose will consider all the
circumstances of the case. I will call this the second stage.
Again, I stress that I do not wish to place any gloss upon what



- 15 -

Lord Diplock said about this stage. I wish only to record his
statement that, at p. 408,

"It would be unwise to attempt even to list all the various
matters which may need to be taken into consideration in
deciding where the balance lies, let alone to suggest the
relevant weight to be attached to them. These will vary
from case to case"

and his further statement, at p. 409 (after referring to particular
factors), that "there may be many other special factors to be
taken into consideration in the particular circumstances of
individual cases."

I turn to consider the impact upon these guidelines of the
public interest, with particular reference to cases in which a
public authority is seeking to enforce the law against some person,
and either the authority seeks an interim injunction to restrain
that person from acting contrary to the law, and that person
claims that no such injunction should be granted on the ground
that the relevant law is, for some reason, invalid; or that other
person seeks an interim injunction to restrain the action of the
authority, on the same ground.

I take the first stage. This may be affected in a number
of ways. For example, where the Crown is seeking to enforce the
law, it may not be thought right to impose upon the Crown the
usual undertaking in damages as a condition of the grant of an
injunction: see F. Hoffmann-La Roche & Co. A.G. v. Secretary of
state for Trade and Industry [1975] A.C. 295. Again, in this
country there is no general right to indemnity by reason of
damage suffered through invalid administrative action; in
particular, on the law as it now stands, there would be no remedy
in damages available to the applicants in the present case for loss
suffered by them by reason of the enforcement of the Act of 1988
against them, if the relevant part of the Act should prove to be
incompatible with European law (see Bourgoin S.A. v. Ministry of
Agriculture, Fisheries and Food. Conversely, an authority acting in
the public interest cannot normally be protected by a remedy in
damages because it will itself have suffered none. It follows that,
as a general rule, in cases of this kind involving the public
interest, the problem cannot be solved at the first stage, and it
will be necessary for the court to proceed to the second stage,
concerned with the balance of convenience.

Turning then to the balance of convenience, it is necessary
in cases in which a party is a public authority performing duties
to the public that "one must look at the balance of convenience
more widely, and take into account the interests of the public in
general to whom these duties are owed": see Smith v. Inner
London Education Authority [1978] 1 All E.R. 411, 422, per Browne
L.J., and see also Sierbien v. Westminster City Council (1987) 86
L.G.R. 431. Like Browne L.J., I incline to the opinion that this
can be treated as one of the special factors referred to by Lord
Diplock in the passage from his speech which I have quoted. In
this context, particular stress should be placed upon the
importance of upholding the law of the land, in the public interest,
bearing in mind the need for stability in our society, and the duty
placed upon certain authorities to enforce the law in the public



- 16 -

interest. This is of itseif an important factor to be weighed in
the balance when assessing the balance of convenience. So if a
public authority seeks to enforce what is on its face the law of
the land, and the person against whom such action is taken
challenges the validity of that law, matters of considerable weight
have to be put into the balance to outweigh the desirability of
enforcing, in the public interest, what is on its face the law, and
so to justify the refusal of an interim injunction in favour of the
authority, or to render it just or convenient to restrain the
authority for the time being from enforcing the law. This was
expressed in a number of different ways by members of the
Appellate Committee in the Hoffmann-La Roche case. Lord Reid
said, at p. 341 that

"it is for the person against whom the interim injunction is
sought to show special reason why justice requires that the
injunction should not be granted or should only be granted
on terms."

Lord Morris of Borth-y-Gest, at pp. 352-353, stressed that all
considerations appertaining to the justice of the matter become
within the purview of the court; but he also stated that, in a case
where the defendant attacks the validity of what appears to be an
authentic law, the measure of the strength of this attack must
inevitably call for some consideration. Lord Diplock, at p. 367
asserted that prima facie the Crown is entitled as of right to an
interim injunction to enforce obedience to the law; and that

"To displace this right or to fetter it by the imposition of
conditions it is for the defendant to show a strong prima
facie case that the statutory instrument is ultra vires."

Lord Cross of Chelsea did not expressly address the point. Lord
Wilberforce, in a dissenting speech, stressed, at p. 358, that, in
the last resort, the matter is one for the discretion of the judge;
in particular, he rejected a suggestion that the presumption of
validity of subordinate legislation required the court to enforce
such legislation, by an interlocutory injunction, against the party
who was calling the validity of such legislation in question.

I myself am of the opinion that in these cases, as in others,
the discretion conferred upon the court cannot be fettered by a
rule; I respectfully doubt whether there is any rule that, in cases
such as these, a party challenging the validity of a law must - to
resist an application for an interim injunction against him, or to
obtain an interim injunction restraining the enforcement of the law
- show a strong prima facie case that the law is invalid. It is
impossible to foresee what cases may yet come before the courts;
I cannot dismiss from my mind the possibility (no doubt remote)
that such a party may suffer such serious and irreparable harm in
the event of the law being enforced against him that it may be
just or convenient to restrain its enforcement by an interim
injunction even though so heavy a burden has not been discharged
by him. In the end, the matter is one for the discretion of the
court, taking into account all the circumstances of the case. Even
so, the court should not restrain a public authority by interim
injunction from enforcing an apparently authentic law unless it is
satisfied, having regard to all the circumstances, that the
challenge to the validity of the law is, prima facie, so firmly
based as to justify so exceptional a course being taken.

- 17 -

With these principles in mind, I come to the facts of the
present case. There can be no question of the present application
being decided at the first stage of Lord Diplock's approach, and it
is necessary to proceed at once to the second stage.

Your Lordships heard submissions from both parties about
the strength of the applicants' challenge to the relevant provisions
of section 14 of the Act of 1988. It is plain that the United
Kingdom will, before the European Court of Justice, be resisting
most strongly arguments by the applicants that any provision in
section 14 is incompatible with European law, whether in respect
of nationality (despite the recent decision of the President to
grant interim relief), or in respect of domicile and residence of
beneficial owners, shareholders and directors. It is unnecessary,
and perhaps undesirable, for your Lordships now to analyse these
arguments. They are set out in detail in the written observations
already submitted by the United Kingdom and by the applicants to
the European Court of Justice on the substantive reference by the
Divisional Court, copies of which have been made available to your
Lordships. There are, however, certain reasons which persuaded
me to conclude, for present purposes, that, prima facie, the
applicants had strong grounds for challenging the validity of the
provisions relating to residence and domicile. First, a central
element in the argument of the United Kingdom, in seeking to
uphold the validity of section 14, is that articles 7, 52 and 221 of
the Treaty should not be interpreted as affecting the nationality of
vessels, or the grant of flags, in respect of which competence
remains in principle with the member states. It has to be said,
however, that an argument on these lines does not appear to have
found favour with the President on the Commission's application
for interim relief. Second, although in the Jaderow case [1990] 3
W.L.R. 265 the European Court accepted that a member state, in
authorising a vessel to fish against national quotas, might lay down
conditions designed to ensure that it had a real economic link with
the state if that link concerned only the relation between that
vessel's fishing operations and the populations dependent on
fisheries and related industries, yet in the Agegate case [1990] 3
W.L.R. 226 the court rejected as invalid a condition requiring
residence in the member state of 75 per cent. of the vessel's
crew. If such a residence qualification is rejected in respect of
the crew, as a condition of the grant of a vessel's licence, it may
well be difficult to persuade the court to adopt a residence
qualification relating to beneficial owners, or to 75 per cent. of
shareholders in or directors of a company which beneficially owns
a vessel, as a condition of registration of a fishing vessel under
the Act of 1988; a fortiori must the same be true of a condition
relating to domicile. As to the final outcome on these issues
after consideration by the court, your Lordships can of course
express no opinion; but these two points alone led me to conclude
that the applicants' challenge is, prima facie, a strong one.

It is on that basis that I turn to consider the balance of
convenience a whole. I have already referred to the view formed
by Neill L.J., when the matter was before the Divisional Court,
that serious damage may be caused to the applicants if no interim
relief is granted. Your Lordships were furnished with up to date
evidence in the form of answers to a questionnaire sent to owners
of 62 vessels during the recent hearing. None of the answers to



- 18 -

the questionnaire was on oath; and it was not in the circumstances
possible for the Secretary of State to test the answers, or indeed
to check their accuracy. However, no objection was made to this
material being placed before your Lordships.

The answers to the questionnaire were not complete.
However, from the answers received it was possible to derive the
following basic information. All 62 vessels ceased to be on the
United Kingdom register after the lapse of the old register on 1
April 1989. 24 of the vessels have not fished since their
registration lapsed; of the remainder, 33 have fished but only
outside E.E.C. waters, in some cases for very short periods and in
most cases after being laid up for a considerable time. 24 vessels
have succeeded in obtaining registration under the Act of 1988,
but always for special reasons, 14 of them because shares in the
owning company had been sold to qualified persons or companies.
30 owners have tried to sell their vessels, but none of them has
received an acceptable offer. Many owners claim to have suffered
damages to date of well over £100,000; some fear imminent
bankruptcy.

Your Lordships also had the benefit of a fourth affidavit
sworn by Mr. Noble of the Ministry of Agriculture, Fisheries and
Food. Apart from specific comments on particular vessels in the
ownership of the applicants, he placed evidence before your
Lordships to the effect that, as a result of the introduction of the
new register, a number of British fishing vessels other than those
owned by Spanish interests had been able to take up the
opportunities now available to them, taking increased catches,
employing extra crew, investing in new vessels to take advantage
of the new opportunities, and generating increased activity onshore.
He considered that, if the applicants' vessels returned to the
British fleet and resumed their previous activities, the owners of
these British fishing vessels would suffer serious losses; and he
anticipated that the reintroduction of stiff quota restrictions would
be required. However, even taking this evidence fully into
account, I have, on all the material available to your Lordships,
formed the same opinion as that formed by Neill L.J. in the
Divisional Court on the material then before him, that there was
not sufficient to outweigh the obvious and immediate damage
which would continue to be caused if no interim relief were
granted to the applicants.

It was for these reasons that, in agreement with the
remainder of your Lordships, I concluded that the appeal should be
allowed and interim relief granted in the terms of the order made.

LORD JAUNCEY OF TULLICHETTLE

My Lords,

I have had the advantage or reading in draft the speech to
be delivered by my noble and learned friend Lord Goff of
Chieveley. I agree with the conclusion at which he has arrived
and I gratefully adopt his detailed account of the circumstances
giving rise to the present appeal. It is only because of the



- 19 -

importance and novelty of the principal question to be considered
that I venture to add a few observations thereanent.

The European Court of Justice has ruled (Case C-213/89)
that

"Community law must be interpreted as meaning that a
national court which, in a case before it concerning
Community law, considers that the sole obstacle which
precludes it from granting interim relief is a rule of
national law must set aside that rule."

This House is accordingly now faced with the wholly novel
situation of determining whether in the circumstances of this
appeal interim relief against the application of primary -legislation
should be granted to the applicants, pending the decision of the
Court of Justice on the reference by the Divisional Court of 10
March 1989. In reaching a conclusion the following matters have
to be addressed, namely: (1) the threshold which must be crossed
by the applicants before this House will consider intervening, (2)
whether they have crossed that threshold, and (3) if they have,
whether the balance of convenience favours the granting of interim
relief.

(1) The threshold

When this appeal was last before your Lordships' House
[1990] 2 AC 85 my noble and learned friend Lord Bridge of
Harwich referred to the familiar situation in which a plaintiff
seeks an interim injunction to protect a right when the material
facts are in dispute and continued, at p. 139:

"In this situation the court has a discretion to grant or
withhold interim relief which it exercises in accordance with
the principles laid down by your Lordships' House in
American Cyanamid Co. v. Ethicon Ltd. [1975] AC 396. In
deciding on a balance of convenience whether or not to
make an interim injunction the court is essentially engaged
in an exercise of holding the ring."

American Cyanamid concerned a claim for alleged
infringement of patent and an application for interim injunction
was made upon contested facts. Lord Diplock referred, at p. 407,
to:

"the supposed rule that the court is not entitled to take any
account of the balance of convenience unless it has first
been satisfied that if the case went to trial upon no other
evidence than is before the court at the hearing of the
application the plaintiff would be entitled to judgment for a
permanent injunction in the same terms as the interlocutory
injuction sought"

and continued:

"Your Lordships should in my view take this opportunity of

declaring that there is no such rule. The use of such

expressions as 'a probability,' 'a prima facie case,' or 'a

. strong prima facie case' in the context of the exercise of a

- 20 -

discretionary power to grant an interlocutory injunction leads
to confusion as to the object sought to be achieved by this
form of temporary relief. The court no doubt must be
satisfied that the claim is not frivolous or vexatious; in
other words, that there is a serious question to be tried. It
is no part of the court's function at this stage of the
litigation to try to resolve conflicts of evidence on affidavit
as to facts on which the claims of either party may
ultimately depend nor to decide difficult questions of law
which call for detailed argument and mature considerations.
These are matters to be dealt with at the trial."

As I understand it Lord Diplock in that passage was saying that
the court must be satisfied that there is a serious question to be
tried before it considers the balance of convenience. Indeed this
must be so since it would be quite wrong that a plaintiff should
obtain interim relief on the basis of a claim which was groundless.
I agree that it is not the function of the court to try to resolve
conflicts of evidence at an interlocutory stage but I would demur
to any suggestion that in no circumstances would it be appropriate
to decide questions of law. If the only question at issue between
the parties is one of law it may be possible in many cases to
decide this at the stage of a contested application of an interim
injunction. For example, where an employer seeks to enforce a
restrictive covenant in a former employee's contract of
employment and the only defence is that the covenant by reason
of its wide terms is unenforceable, it would be wholly illogical to
grant to the employer an interim injunction on the basis that there
was a serious question to be tried when the question could at the
same time be resolved as matter of law in favour of the
employee.

However, while the test of a serious question to be tried is
appropriate to proceedings between private parties where no
presumption favours the position of one party as against the other
it does not follow that the same considerations apply when primary
legislation and the public interest are involved. Indeed, my noble
and learned friend Lord Bridge of Harwich (Reg. v. Secretary of
State for Transport, Ex parte Factortame Ltd). [1990] 2 A.C. 83,
140 remarked upon the fundamental distinction between the
familiar situation and that which arises in this appeal. In F.
Hoffmann-La Roche & Co. A.G. v. Secretary of State for Trade
and Industry [1975] A.C. 295, the Secretary of State having sought
by interim injuction to enforce a statutory instrument approved
by both Houses of Parliament the defenders maintained that the
instrument was ultra vires. Lord Reid said, at p. 341, that

"it is for the person against whom the interim injunction is
sought to show special reason why justice requires that the
injunction should not be granted or should only be granted
on terms"

and Lord Morris of Borth-y-Gest, at p. 353, pointed out that the
measure of the strength of the attack upon the statutory
instrument must inevitably call for some consideration. Lord
Diplock said, at p. 366:

"All that can usefully be said is that the presumption that
subordinate legislation is intra vires prevails in the absence



- 21 -

of rebuttal, and that it cannot be rebutted except by a
party to legal proceedings in a court of competent
jurisdiction who has locus standi to challenge the validity of
the subordinate legislation in question."

He said, at p. 367:

"So in this type of law enforcement action if the only
defence is an attack on the validity of the statutory
instrument sought to be enforced the ordinary position of
the parties as respects the grant of interim injunctions is
reversed. The duty of the Crown to see that the law
declared by the statutory instrument is obeyed is not
suspended by the commencement of proceedings in which the
validity of the instrument is challenged. Prima facie the
Crown is entitled as of right to an interim injunction to
enforce obedience to it. To displace this right or to fetter
it by the imposition of conditions it is for the defendant to
show a strong prima facie case that the statutory
instrument is ultra vires."

These observations, in my view, apply not only where a defendant
is seeking to resist an attempt by the Crown to enforce secondary
legislation but also where a plaintiff is seeking to restrict the
Crown in its operation of such legislation. They must be equally
appropriate to a challenge to primary legislation as they are to a
challenge to secondary legislation. Indeed, when this appeal was
last before this House Lord Bridge said, at p. 142

"In this situation the difficulty which confronts the
applicants is that the presumption that an Act of Parliament
is compatible with Community law unless and until declared
to be incompatible must be at least as strong as the
presumption that delegated legislation is valid unless and
until declared invalid."

Given this presumption it follows from the above observations of
Lord Diplock that it is for the Crown to enforce the provisions of
the Act of 1988 and that anyone, whether a plaintiff or defendant,
who seeks to challenge the validity thereof must at least show a
strong prima facie case of incompatibility with Community law. It
is the presumption in favour of the legislation being challenged
which in my view makes the American Cyanimid test of a serious
question to be tried inappropriate in a case such as the present.
In expressing this opinion I must emphasise that I am in no way
criticising the appropriateness of the American Cyanimid test for
cases where primary or secondary legislation is not being
challenged nor am I suggesting that Lord Diplock's approach to the
balance of convenience is not appropriate in this case.

My Lords, I have considered anxiously whether other factors
such as relative hardship or injustice should play any part in
determining the appropriate threshold which an applicant for relief
in circumstances such as the present should cross. Given the wide
discretion conferred upon the courts by section 45 of the
Judicature Act 1925 I would not wish to lay down any rules which
might unduly inhibit that discretion in unforeseen circumstances in
the future. Suffice it to say that as at present advised it would
only be in the most exceptional circumstances that I can foresee



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the threshold being lowered by factors not directly related to the
invalidity of the legislation under challenge. In the normal case
other factors would be considered in relation to the balance of
convenience. If an applicant seeking an injunction against primary
or secondary legislation cannot show a strong prima facie ground
of challenge it will in the absence of quite exceptional
circumstances avail him nought that a refusal of an injunction
would result in greater injustice to him should he succeed at trial
than would result to the other party if the injunction was granted
and he failed at trial.

I therefore conclude that the applicants will only cross the
threshold if they demonstrate that there is a strong prima facie
case that section 14 of the Act of 1988 is incompatible with
Community law, which failing that exceptional circumstances exist
would justify lowering the threshold.

(2) Have the applicants crossed the threshold?

Section 14(1) provides that a fishing vessel shall only be
eligible to be registered as a British fishing vessel if inter alia
"the vessel is British-owned." Section 14(2) provides that a fishing
vessel is British-owned if the legal title is vested wholly in one or
more qualified persons or companies and section 14(7) provides that
a qualified company is one which is incorporated in the United
Kingdom with 75 per cent. of the shares held by and 75 per cent.
of its directors being qualified persons. Qualified person is defined
in section 14(7) as "a person who is a British citizen resident and
domiciled in the United Kingdom." It is to this latter definition
that Mr. Vaughan confined his attack on the ground that such a
restriction in ownership was incompatible with Community law.

Since the appeal was last before this House in 1989 certain
important events have taken place in the European Court. On 4
August 1989 (Commission of the European Communities v. United
Kingdom (Case 246/89 R) the Commission sought a declaration that
the nationality requirements of section 14 of the Act of 1988
constituted a failure by the United Kingdom to fulfil certain of its
Treaty obligations. On 10 October 1989 the President of the
Court made the following Order:

"Pending delivery of the judgment in the main proceedings,
the United Kingdom shall suspend the application of the
nationality requirements laid down in section 14(1)(a) and (c)
of the Merchant Shipping Act 1988, read in conjunction with
paragraphs (2) and (7) of that section, as regards the
nationals of other member states and in respect of fishing
vessels which, until 31 March 1989, were pursuing a fishing
activity under the British flag and under a British fishing
licence; ..."

Effect was given to this order by the Merchant Shipping Act 1988
(Amendment) Order 1989 which, in relation to the fishing vessels
in question, amended section 14 by substituting "Community-owned
for British-owned" in subsection 1 and by amending the definition
of the qualified person to read a person who is a British citizen or
a national of a member state other than the United Kingdom and
in either case resident and domiciled in the United Kingdom.

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It will be noted that the Commission did not seek to challenge the
residence and domicile qualification which is now challenged by
Mr. Vaughan. On 14 December 1989 the European Court similarly
constituted gave judgment in two cases which may for convenience
be called Agegate and Jaderow [1990] 3 WLR 226 and 265).
Both cases concerned the grant to British-registered fishing vessels
with strong Spanish connections of fishing licences which contained
ere wing conditions to the effect that: (1) at least 75 per cent. of
the crew must be British citizens or E.E.C. nationals (excluding
until 1 January 1993 Spanish nationals), and (2) the skipper and all
the crew must be making contributions to United Kingdom national
insurance. In the course of the Agegate judgment the following
observations on the quota system were made, at p. 261:

"24. It follows from the foregoing that the aim of the
quotas is to assure to each member state a share of the
Community's total allowable catch, determined essentially on
the basis of the catches from which traditional fishing
activities, the local populations dependent on fisheries and
related industries of that member state benefited before the
quota system was established. 25. In that context a
residence requirement such as the one in point in this case
is irrelevant to the aim of the quota system and cannot
therefore be justified by that aim."

And the court ruled inter alia, at p. 264:

"2. Community law precludes a member state from
requiring, as a condition for authorising one of its vessels to
fish against its quotas, that 75 per cent. of the crew of the
vessel in question must reside ashore in that member state.
3. Save in those cases where Council Regulation (E.E.C.)
No. 1408/71 of the otherwise provides, Community law does
not preclude a member state from requiring, as a condition
for authorising one of its vessels to fish against its quotas,
that the skipper and all the crew of the vessel must be
making contributions to the social security scheme of that
member state."

In the Jaderow judgment the court recognised that the aim
of national quotas derived from the common fisheries policy might
justify conditions designed to ensure that there was a real
economic link between the vessel and the member state in
question if the purpose of such conditions was that the populations
dependent on fisheries and related industries should benefit from
the question. The court ruled inter alia, at p. 295 that
Community law as it now stands:

"(1) does not preclude a member state, in authorising one
of its vessels to fish against national quotas, from laying
down conditions designed to ensure that the vessel has a
real economic link with that state if that link concerns only
the relations between that vessel's fishing operations and the
populations dependent on fisheries and related industries; (2)
Does not preclude a member state, in authorising one of its
vessels to fish against national quotas, from laying down the
condition, in order to ensure that there is a real economic
link as defined above, that the vessel is to operate from
national ports, if that condition does not involve an



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obligation for the vessel to depart from a national port on
all its fishing trips; ..."

It is to my mind implicit in these two decisions that the court did
not consider that residence and domicile of a specified percentage
of the crew was justified as a condition designed to ensure the
existence of a real economic link between the vessel and the
member state. Had the court so considered Agegate must have
been decided differently. If residence of the crew is not relevant
to ensure the existent of a real economic link between vessel and
member state what is the position in relation to the residence of
shareholders and directors of an owning company? The role of
this House is not to give an answer to that question but rather to
assess the prospects of the European Court giving an answer which
is favourable to the applicants. Directors and shareholders are
further removed from any link between a vessel and a member
state than are members of the crew and the European Court
having decided that residence of the latter is not relevant to
ensure the existence of a real economic link there must at least
be a strong probability that the court will take a similar view in
relation to the former. Upon that assumption it would appear that
the applicants can show a strong prima facie ground of challenge
to the relevant statutory provision. However, there remains for
consideration the argument of the Crown that Community law does
not affect the sovereign right of a member state to lay down the
conditions for the grant of its flag to ships. Customary
international law, as expressed in article 5(1) of the Geneva
Convention on the High Seas, requires that there should be a
genuine link between a vessel and the state of her flag. Article
94 of the 1982 Convention of the Law on the Sea sets out the
important legal and international obligations incurred by a state in
relation to a vessel to whom the flag of the state has been
granted. In the absence of any express provision it should not be
presumed that the Treaty interferes with the exercise by a
member state of its sovereign powers. I was initially attracted by
these submissions and in some doubt as to whether they should not
be given effect to. However on further consideration of the
President's ruling of 10 October 1989 I have come to the
conclusion that the applicants can show that they are very likely
to be rejected by the European Court. In the context of
legislative requirements introduced by member states to obtain the
objective of the Community system of fishing quotas the President
said:

"29. However there is nothing which would prima facie
warrant the conclusion that such requirements may derogate
from the prohibition of discrimination on grounds of
nationality contained in articles 52 and 221 of the E.E.C.
Treaty regarding, respectively, the right of establishment
and the right to participate in the capital of companies or
firms within the meaning of article 58. 30. The rights
deriving from the above-mentioned provisions of the Treaty
include not only the rights of establishment and of
participation in the capital of companies or firms but also
the right to pursue an economic activity, as the case may
be through a company, under the conditions laid down by
the legislation of the country of establishment for its own
nationals. 31. These rights prima facie also include the
right to incorporate and manage a company whose object is

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to operate a fishing vessel registered in the state of
establishment under the same conditions as a company
controlled by nationals of state. 32. As regards the United
Kingdom's first submission based on its obligations under
international law, it is sufficient to note, at this stage, that
in this respect nothing has been put forward which at first
sight could necessitate any derogation from the above-
mentioned rights under Community law in order to ensure
the effective exercise of British jurisidiction and control
over the vessels in question. 33. It must therefore be held
that, at the stage of these proceedings for the grant of
interim relief, the application in the main proceedings does
not appear to be without foundation and that the
requirement of a prima facie case is thus satisfied."

Given the foregoing observations of the President it would appear
that the applicants have a strong chance of successfully arguing
before the European Court that international law does not justify
derogation from the prohibition of discrimination on grounds of
nationality contained in articles 52 and 221 of the Treaty.

In all these circumstances I consider that the applicants
have crossed the threshold in relation to section 14 of the Act of
1988. It is therefore unnecessary to consider whether such
exceptional circumstances exist as will justify lowering that
threshold.

(3) Balance of convenience

In Films Rover International Ltd, v. Cannon Film Sales Ltd.
[1987] 1 W.L.R. 670 Hoffmann J. in considering an application for
an interlocutory mandatory injunction implicitly acknowledged that
there was a serious question to be tried and said, at p. 680:

"The principal dilemma about the grant of interlocutory
injunctions, whether prohibitory or mandatory, is that there
is by definition a risk that the court may make the 'wrong'
decision, in the sense of granting an injunction to a party
who fails to establish his right at the trial (or would fail if
there was a trial) or alternatively, in failing to grant an
injunction to a party who succeeds (or would succeed) at
trial. A fundamental principle is therefore that the court
should take whichever course appears to carry the lower risk
of injustice if it should turn out to have been 'wrong' in the
sense I have described. The guidelines for the grant of both
kinds of interlocutory injunctions are derived from this
principle."

I find this approach of assistance in the present case.

If the applicants are successful in the end of the day but
are afforded no interim relief they will, standing the law as laid
down in Bourgoin S.A. v. Ministry of Agriculture and Fisheries and
Food [1986] Q.B. 716, suffer very severe and irrecoverable damage.
If they are ultimately unsuccessful but are afforded interim relief
the loss suffered by the British fishing industry as a whole and by
individual members thereof during the period of interim relief will
be relatively minor. Beyond this I cannot usefully add anything to
what has already been said on this matter by my noble and



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learned friend Lord Goff of Chieveley. It follows that, the
applicants having crossed the threshold, the balance of convenience
favours the granting to them of interim relief.

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