PREFERENCE FOR A REFERENCE? Owain Thomas
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1 1 PREFERENCE FOR A REFERENCE? Owain Thomas Introduction 1. The subject of this short talk will be the interrelationship between the test for whether a question should be referred to the Court of Justice and procedural hurdles which apply in cases of second tier appeals to the Court of Appeal. The issue is self-contained but of general application. It has arisen in two recent cases which have come before the Court of Appeal in 2008, both of which were in the taxation field. The first was Epson Telford Ltd v- HMRC 1 in which the Court gave judgment on 22 May The second is Tomy UK Ltd v- HMRC in which judgment is awaited. Both cases concerned questions of interpretation of EU law and in particular challenges to the validity of Commission Regulations. Background to decision to make a reference 2. The circumstances in which a domestic court is entitled to make a reference are now well established. The Court of Justice is given jurisdiction over matter of interpretation of EU law including as to the validity of acts of the Community institutions by Article 234. The second paragraph provides a discretion for courts of member states to refer such questions to the ECJ where [they] consider that a decision on the question is necessary to enable it to give judgment. 3. The circumstances in which a domestic court is obliged to make a reference are also reasonably clearly defined. 4. Article 234 EC paragraph 3 provides that Where any such question is raised in a case pending before a court or tribunal of a Member State against whose 1 [2008] EWCA Civ 567
2 2 decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court of Justice. 5. That obligation has its basis in the cooperation established between the court of member states and the ECJ for the purpose of ensuring the uniform application and interpretation of EU law thus preventing the development of contrary lines of authority within individual member states (Case 107/76 Hoffman-La Roche at paragraph 5) Where the court is a court of last resort then unless the matter is acte clair then the court must make a reference. The way in which the ECJ has expressed this is that the obligations arises unless the national court has established that the correct application of community law is so obvious as to leave no scope for any reasonable doubt (see Case 283/81 Srl CILFIT at paragraph 16 3 ). This includes coming to the conclusion that the conclusion is equally obvious to the courts of other member states. 7. Despite the bold terms in which the obligation to refer is stated in the Treaty and despite the apparently narrow exception to the rule provided by the acte clair doctrine there has been an increasing tendency to adopt a more critical approach before making a reference. Part of the initiative for this has come from the ECJ itself. The Advocate General in Case 338/95 Wiener called for a greater measure of self restraint in the courts of the Member States (paragraph 18-21). His cautionary approach has since been taken up domestically (see R (Professional Contractor s Group) v- Commissioners of Inland Revenue 4 and Trinity Mirror v- Commissioners of Customs & Excise 5 ). 2 [1977] ECR [1982] ECR I [2002] EWCA Civ 1945 [2002] STC 165 at paragraph 91 5 [2001] EWCA Civ 65 [2001] 2 CMLR 759 paragraphs 48-55
3 3 Background to the provisions governing second tier appeals 8. Formerly there were extensive rights of appeal in civil litigation. Following the Bowman report it was decided to institute a general requirement for permission to appeal as a filter even for first tier appeals in most cases and further that more than one appeal could not normally be justified except where some important point of principle was at issue. The right of an appeal on a point of law from the VAT and Duties Tribunal pursuant to section 11 of the Tribunals and Inquiries Act 1992 was preserved, presumably on the basis that the requirement that the error be one of law was in itself a sufficient filter. That is the first appeal for the purposes of the CPR. However, in the circumstances of a further appeal to the Court of Appeal, the broad policy of limiting such appeals applies with full force. 9. Accordingly section 55(1) Access to Justice Act 1999 and CPR apply to second tier appeals. They provide that only the Court of Appeal can give permission to appeal. The test for permission set out in CPR 52.13(2) is that the Court will not give permission unless the case would raise an important point of principle or practice or there is some other compelling reason for the Court of Appeal to hear the appeal. The principle is that judges of the quality of lords justices of appeal are a scarce and valuable resource and must be used effectively. One of the primary shifts in emphasis was that it was no longer to be possible to appeal to the Court of Appeal merely because an appeal was properly arguable or had a real prospect of success (see Tanfern Ltd v- Camreron- MacDonald (Practice Note) per Brooke LJ 6 ). The Court of Appeal as a court last resort 6 [2000] 1 WLR 1311 at paras
4 4 10. In Case C-99/00 Lyckeskog 7 the ECJ was asked to consider some analogous provisions of Swedish law in a case concerning a dispute about relief from customs duty. The background to the case could not have been more pedestrian, the Swedish authorities brought proceedings against Mr Lyckesokog who was alleged to have smuggled 500 kg s of rice from Norway into Sweden. What was so special about rice in Norway is not apparent from the report of the case. He was found guilty by the District Court presumably on the basis that no-one could plausibly say that they needed 500 kg s of rice for personal reasons. 11. Undaunted, he appealed to the Court of Appeal. That Court s judgments are themselves subject to appeal to the Swedish Supreme Court but the Supreme Court will only examine the substance of an appeal if it is important for the guidance in the application of the law to be given by the Supreme Court, where there are special circumstances or where there has been manifest negligence or serious error in the decision below. The terms of the reference from the Swedish Court make it clear that this was a tightly operated filter. 12. An issue arose in the Court of Appeal as to the interpretation of the provisions governing the exemption from import duties for non-commercial imports. That Court considered that it was capable of giving a view on the interpretation of the disputed provisions but doubted whether it was to be considered as a court of last instance. 13. The ECJ decided that the obligation to refer in paragraph 3 of Article 234 applied as much to supreme courts as to any other court from whose rulings there was no judicial remedy (see Case C-337/95 Parfums Christian Dior at paragraph 25 8 and Joined cases 28/62, 29/62 and 30/62 Da Costa en Schaake 9 ). As such decisions which are in principle open to challenge before another court are not decisions of [1997] ECR I [1963] ECR 31
5 5 a court from whose decisions there is no judicial remedy. The fact that there was a filter in place before the Supreme Court would examine the merits did not serve to transform the Court of Appeal into a court of last resort. 14. However, for present purposes, the real relevance of the case rests with the comments made by the ECJ as to the role which the Supreme Court took when it considered the admissibility of an appeal concerning Community law. The Court held that a court conducting such an admissibility exercise will be under an obligation to refer pursuant to the third paragraph of Article 234 either at the admissibility stage or at a later stage. 15. There is no appeal from a final decision of the Court of Appeal that permission be refused (see Moyse v- Regal Partnerships Ltd 10 and see section 54(4) Access to Justice Act 1999 and paragraph 4.8 CPR PD 52). In that respect therefore and when sitting as a court deciding the permission issue it is subject to the provisions of Article 234 third paragraph. 16. What Lyckeskog seems to say is that there is no possibility therefore of member states seeking to rely exclusively on their own domestic law filters for weeding out appeals where those filters are the end of the road for a litigant with a necessary question of European law which needs to be determined. At the final hurdle (whenever and wherever that is) the provisions of Article 234 must be applied and that means that the doctrine of acte clair must be applied too, whatever the domestic procedural position as to the grounds upon which appeals may be heard. In other words what Lyckeskog seems to say is that the Court cannot say that although the point is arguable and has a real prospect of success and hence is not acte clair, the appeal nevertheless fails to meet the more stringent criteria in the CPR. 10 [2004] EWCA Civ 1269 at 31
6 6 The right approach 17. In both Epson and Tomy, the Court of Appeal adopted the same initial procedural approach. The Court ordered in both cases (having initially refused permission on paper in both cases) that the application for permission be adjourned to an inter partes hearing before a full Court of Appeal with the substantive hearing to follow if permission is granted. 18. The Court of Appeal in Epson dealt with the correct approach at the hearing at paragraphs 29 and It is worth setting out this guidance in full. Neither party in Tomy urged any radically different approach and it is therefore likely to be followed in that case. It is noteworthy that the Court showed a marked reluctance to abandon the domestic rules for determining permission and to hold that wherever there was an arguable case permission should follow automatically. 33. An appeal from the order of 4 May 2007 is an appeal to which at least, prima facie section 55(1) of the Access to Justice Act 1999 and CPR apply: that is to say, it is an appeal from a decision of the High Court which was itself made on appeal (in this case, an appeal under section 11 of the Tribunals and Inquiries Act 1990). CPR 52.13(2) provides that the Court of Appeal will not give permission for such an appeal unless it considers (a) that the appeal would raise an important point of principle or practice; or (b) there is some other compelling reason for the Court of Appeal to hear it. In seeking permission to appeal Epson accepts that the appeal would be a second appeal for the purposes of CPR (paragraph 30 of its skeleton argument); but submits that the stringent test for permission in CPR 52.13(2) however does not apply to a case such as this one, the outcome of which is determined by the application of EC law. It is said that (a) refusal of permission by the Court of Appeal would be the end of the road for Epson, so that in considering the application for permission to appeal this Court is a court from whose decisions there is no judicial remedy (Chiron v Murex (No 8) [1995] All ER (EC) 88 and Case C-99/00 Lyckeskog v Ǻklagarkammeren i Uddevalla [2003] 1 WLR 9); (b) the Court of Appeal is in those circumstances obliged as a consequence of article 234 of the EC Treaty to give permission to appeal unless the issue is acte clair and an issue of Community law may be considered acte clair only if (i) the answer is so obvious as to leave no scope for any reasonable doubt as to the manner in which the question that is raised is to be resolved and (ii) the matter is
7 7 equally obvious to the courts of other Member States and to the Court of Justice; so that (c) permission to appeal may thus legitimately be refused only if this Court can say with complete confidence that Epson s arguments of EC law are bound to fail. 33. As I have said, the application for permission to appeal from the order of 4 May 2007 came before this Court (Lord Justice Mummery and Lord Justice Lloyd) on 6 November The application was adjourned for hearing on notice. In his judgment, [2007] EWCA Civ 1200, with which Lord Justice Mummery agreed, Lord Justice Lloyd, after referring to the points which I have just mentioned - and to the possible perception that, if permission to appeal were granted on the basis that there was a reasonable prospect of success, that might be said to answer the question whether the issue was the subject of acte clair - said this (ibid, [7]):... Formally speaking, it may be that the grant of permission would not technically compel the answer to the question of whether a reference was necessary, because one could grant permission on the basis that, whether or not there was a reasonable prospect, there was a compelling reason for the matter to be heard. But it seems to me that there is a more satisfactory way forward, which keeps the issue open and does not, as I see it, prejudge it in any way, which is to adjourn this application to come on before a full court of three members on notice to the Commissioners and with the appeal to follow immediately if permission is granted. That would enable a full court, with the benefit of full argument on both sides, to consider the matter both at the permission stage, and, if it considers that permission should be granted, to transform itself into being not a court of last instance, to consider the appeal and rule upon it accordingly To my mind, there is no basis for the submission that this Court can, or should, treat the provisions of CPR as having no application in the present case. The true position, as it seems to me, is that the first question for the Court on this application as on any other application to which that rule applies is whether the appeal would raise some important point of principle or practice. If the answer to that question is No, then it is not open to this Court to grant permission on the ground, only, that there is a real prospect of success. If the appeal would raise no important point of principle or practice, the Court can grant permission for a second appeal only if satisfied that there is some other compelling reason for the Court of Appeal to hear it.
8 8 35. I accept, of course, that many cases indeed, probably most cases in which the determination turns on a point of Community law can properly be said to raise an important point of principle. In particular, where questions of classification under the common nomenclature arise in connection with the levy of customs duties by the United Kingdom, there are likely to be important points of principle in issue, affecting importers other than the individual directly concerned. But I am not persuaded that this is such a case. It seems to me that the question in the present case is specific to the Epson G2 and G3 ink cartridges as Epson itself is concerned to emphasise in another context and that a decision in the present case will establish no general principle which will be determinative in other cases. The principle, I think, is not in doubt: classification under GRI 3(b) requires identification of the material or component which gives the G2 and G3 cartridges their essential character. As the Court of Justice pointed out, at paragraph 24 of its decision in Turbon II, the tariff classification of ink cartridges having particular characteristics will not necessarily determine the classification of other ink cartridges having different characteristics. 36. For my part, however, I would grant permission to appeal on the basis that there is a compelling reason for the Court of Appeal to hear an appeal in a matter which is of great commercial importance to the applicant, Epson; and where, we are told, the customs classification adopted by the United Kingdom, giving effect to their understanding of the provisions of the common nomenclature, is inconsistent with the customs treatment of G2 and G3 cartridges outside the Community. Notwithstanding the full and careful judgment below, it seems to me desirable that Epson should have the decision of this Court on the point in dispute. If this Court were to reach the conclusion that it could not decide the point without further guidance from the Court of Justice, it would be appropriate to seek that guidance by way of a reference for a preliminary ruling. But, as I shall explain, I do not think that that is the course which we should adopt in this case. 19. It is clear that the Court should apply the test set out in CPR 52.13(2) set out above, notwithstanding the issues of EC law which arise (and indeed which arise in many VAT customs duties cases). 20. The point about the court appearing to decide the issue of acte clair at the permission stage is a practical rather than a jurisprudential one. If the matter is arguable and hence not acte clair, so the argument goes the Court is obliged to at least grant permission since to do otherwise would be to act in breach of Article
9 9 234 EC. However, having decided that the matter is not acte clair and granted permission the Court of Appeal is not a court of last resort for the purposes of the substantive hearing. At that stage it has a discretion to refer if it wishes to but it could equally well decide the issue adversely to the party requesting a reference and decline to make a reference, leaving that party to petition the House of Lords for permission to appeal. 21. Such a situation would however be far from satisfactory and on one view makes no practical sense since it converts the appeal process into a war of attrition using the courts resources and those of the parties to their maximum directly contrary to the whole tenor of the reforms to the appeal system. Surely it would normally be better for the Court of Appeal to grapple with the issues there and then. Conclusion 22. The practical effect of the rolled up permission and substantive hearing approach also has its disadvantages. Each side has to prepare for the appeal as if permission had been granted. Inevitably the Court asks for full (or at least fuller) argument on the issues than if there were a simple permission hearing. If this approach is continued then the reality is that the machinery of a full appeal will be invoked both by the court and by the parties every time there is contested permission application which relates to case where one party is asking for a reference. 23. Whether the Court of Appeal respects the domestic provisions of the CPR in substance or not, one of the primary objectives of the system of narrowing the opportunities for appeals especially successive appeals is jeopardised, perhaps rightly, where issues of European law predominate.
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