Report for the Hearing delivered in Case C-216/87
I — Facts and procedure
1. On 6 December 1985 the United Kingdom Minister for Agriculture, Fisheries and Food (hereinafter referred to as the Minister) announced in a press release that new conditions were to be introduced in fishing licences to be granted after 1 January 1986. The new conditions were intended to ensure that fishing vessels fishing against the quotas allocated to the United Kingdom had a real economic link with that country.
2. There are three such conditions and this case concerns the first, the so-called operating condition. The second condition (relating to the nationality and residence of crew members) and the third condition (requiring contributions to be made to the United Kingdom social security scheme) are the subject of Case C-3/87 The Queen v Ministry of Agriculture, Fisheries and Food, ex parte Agegate Ltd, now pending before the Court.
3. The condition relating to the operation of fishing vessels is as follows:
4. It appears from the documents before the Court that the United Kingdom plans to adopt legislation which will make the registration of vessels on the United Kingdom register of fishing vessels subject to conditions identical or similar to those which are at issue in Case C-3/87 Agegate.
5. The applicants in the main proceedings, which are all companies incorporated in the United Kingdom but which are substantially owned by Spanish interests, have obtained a number of new licences for their fishing vessels which are duly registered in the United Kingdom. Those licences contain the three abovementioned conditions, including the so-called operating condition.
6. The licences issued covered various zones in which there are British fishing quotas and were expressly based on the Sea Fish (Conservation) Act 1967, as amended, and the Sea Fishing Licensing Order 1983, as amended. Under that legislation, British fishing vessels must have a licence in order to be able to fish. The new conditions were introduced in the licences without that legislation being amended again.
7. By letters sent on 20 August and 9 September 1986, the Minister requested the applicants to prove that they had complied with the operating condition for the period from 1 Janury to 30 June 1986.
8. By letters of 20 and 23 October 1986, the applicants replied to the abovementioned letters and gave all the particulars which in their view showed that the condition had been complied with. They pointed out inter alia that they were registered for VAT in the United Kingdom, that they paid tax in the United Kingdom on the profits they made, that in common with all United Kingdom fishing vessels their vessels were subject to the inspections provided for by United Kingdom legislation and that they had spent a great deal of money in order to pass those inspections.
9. By a letter dated 12 December 1986, the Minister advised the applicants that he had formed the provisional view that the operating condition had not been satisfied and that if satisfactory evidence of compliance with that condition was not supplied within 21 days, their fishing licences would be revoked forthwith.
10. On 17 December 1986 the applicants commenced proceedings in the High Court of Justice of England and Wales for the judicial review of the Minister's provisional decisions as contained in the aforesaid letter of 12 December and also of any decisions which the Minister might take in confirmation of those provisional decisions. Before the national court the applicants raised a number of questions including the question of the compatibility of the operating condition with Community law.
11. On 18 February 1987 the applicants supplied the Minister with new evidence which in their view showed that they had met the operating condition.
12. By 29 letters sent on 8 May 1987, the Minister informed certain of the applicants that, without prejudice to the outcome of the proceedings pending before the national court, their fishing licences were being revoked immediately for failure to comply with the operating condition during the first six months of 1986.
13. However, by letters sent on 12 May 1987, the Minister informed seven of the applicants that, as a result of the further evidence submitted by those applicants, their licences would not be revoked. In four of those cases, it was accepted that the applicants' vessels were laid up for a very considerable time during the first six months of 1986. However, three of those four applicants were informed that if they did not supply evidence within 21 days of compliance with the operating condition during the second half of 1986 their licences would be revoked. In another two of those seven cases it was considered that the vessels in question came very close to meeting the operating condition and for that reason the licences for those vessels were not revoked. Finally, in the case of the seventh applicant, it was accepted that it had complied with the operating condition.
14. On 18 May 1987 the oral arguments of the parties to the main proceedings were heard by the national court. Considering that the dispute involved the interpretation of a a number of provisions and principles of Community law, the High Court of Justice of England and Wales, by order dated 22 May 1987, decided pursuant to Article 177 of the EEC Treaty to stay the proceedings until the Court of Justice had given a preliminary ruling on the following questions:
15. The order of the High Court of Justice of England and Wales was lodged at the Court Registry on 14 July 1987.
16. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted on 14 October 1987 by the Commission of the European Communities, represented by Peter Oliver, a member of its Legal Department, acting as Agent, on 22 October 1987 by the United Kingdom, represented by H. R. L. Purse, of the Treasury Solicitor's Department, acting as Agent, assisted by J. Laws and C. Vajda, barristers, on 23 October 1987 by Ireland, represented by Louis J. Dockery, Chief State Solicitor, acting as Agent, and assisted by James O'Reilly, barrister, and on 29 October 1987 by the Kingdom of Spain, represented by Javier Conde de Saro, Director-General of coordination in matters involving Community law and institutions and Rosario Silva de Lapuerta, abogado del Estado, acting as Agents. Written observations were also submitted on 22 October 1987 on behalf of Jaderow Ltd and the other applicants in the main proceedings by David Vaughan QC, Gerald Barling, barrister, and Stephan Swabey, solicitor.
17. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.
II — Written observations
The first question
A — The provisions of the EEC Treaty
Article 34
18. Jaderow Ltd and the other applicants in the main proceedings observe first of all that, as is clear from the Court's judgment of 28 March 1985 in Case 100/84 Commission v United Kingdom [1985] ECR 1169 and from Article 4(2)(f) of Regulation (EEC) No 802/68 of the Council of 27 June 1968 on the common definition of the concept of the origin of goods (Official Journal, English Special Edition 1968 (I), p. 165), the origin of fish caught at sea is determined by reference to the State whose flag the fishing vessel flies or in which that vessel is registered. The fish caught by the applicants' vessels are therefore British in terms of country of origin.
19. Since the requirement that 50% of a vessel's landings must be landed and sold in the United Kingdom has the effect of preventing the direct exportation of fish caught by the applicants' vessels to other Member States or at any rate makes it more costly, that requirement is contrary to Article 34 of the Treaty, as interpreted by the Court in its judgment of 13 December 1984 in Case 251/83 Haug-Adrion v Frankfurter Versicherungs-AG [1984] ECR 4277, paragraph 20). The position would be the same where the fish caught by the applicants' vessels were not considered to be of British origin since the requirement that 50% of a vessel's landings must be landed and sold in the United Kingdom prevents the export of the fish in question from the place where they are caught to Member States other than the United Kingdom.
20. The requirement that vessels must be present in a United Kingdom port on at least four occasions in each six-month period is also contrary to Article 34 and/or Article 30 because it discourages the vessel operators from putting into ports of other Member States in order to deliver fish there and from obtaining goods for use on the vessel or for resale in the United Kingdom or elsewhere.
21. The United Kingdom considers that the operating condition neither on its own nor in conjunction with the conditions at issue in Case C-3/87 infringes Article 34 of the Treaty. It does not have as its specific object or effect the restriction of patterns of export nor does it establish a difference in treatment between the domestic and export trade of the United Kingdom. The condition in question was imposed to prevent the quotas allocated to the United Kingdom from being misused, an aim worthy of protection in Community law.
22. The Commission observes first of all that, although the literal wording of the condition in question suggests that it is met whatever the manner in which the vessel carries on its activities from the United Kingdom, in practice the Minister does not regard the operating condition as having been fulfilled unless one of the two specific requirements has been met.
23. As regards the requirement to land and sell fish in the United Kingdom, the Commission starts from the premiss that a British fishing vessel is in a sense assimilated to British territory. It refers in this regards to Article 4(2)(f) of Regulation (EEC) No 802/68, cited above, and to the Court's judgment of 28 March 1985 in Case 100/84 Commission v United Kitigdom [1985] ECR 1169. It follows that, when fish on board a British ship are landed in another Member State, an export within the meaning of Article 34 of the Treaty occurs. The Commission considers that the requirement in question is contrary to Article 34 of the Treaty, as interpreted by the Court in particular in its judgment of 14 July 1981 in Case 155/80 Oebel [1981] ECR 1993, paragraph 15, because it has the effect of preventing or at any rate of delaying and increasing the costs of direct exports to another Member State of the Community of 50% of the vessel's stocks. This position is not altered by the fact that 50% of the catch may be transhipped by way of sale within British fishery limits and therefore outside British territorial waters.
24. As regards the requirement that the vessel must be physically present in British ports on at least four occasions every six months, this requirement is contrary to Article 34 because it discourages the landing of fish in another Member State.
25. In the Commission's view, the aim of the requirements in question is to promote industry and employment in the United Kingdom, notably at British ports and fish factories. They therefore have a purely economic aim, which, however, according to the case-law of the Court, cannot justify measures falling under Articles 30 or 34 (judgment of 9 June 1982 in Case 95/81 Commission v Italy [1982) ECR 2187).
26. In the Commission's view, no other provision of the Treaty is relevant in this case.
27. Ireland and the Kingdom of Spain have not submitted observations on the question of the compatibility of the contested condition with Article 34 of the Treaty.
Article 39
28. This question was not raised in the reference for a preliminary ruling. It is raised by Jaderow in the observations which it has submitted to the Court.
29. Jaderow considers that the operating condition is contrary to the aims set out in Article 39(1) of the Treaty for the following reasons:
Articles 7 and 40
30. Jaderow considers that the operating condition is contrary to Article 7 because it reinforces the discriminatory elements in the conditions at issue in Case C-3/87. Moreover, the operating condition is designed to affect only fishing boats owned by companies with Spanish shareholdings.
31. The condition in question is also contrary to Article 40(3) because the burden of compliance with the condition falls more heavily on fishermen who wish to export their catches to other Member States than on those who sell their catches on the United Kingdom market.
32. The United Kingdom states that the conditions contained in the fishing licences are imposed only on British fishing vessels and do not affect the rights of fishing vessels of other Member States to fish in the maritime waters of the United Kingdom or to enjoy equal access to the ports and first-stage marketing installations of the United Kingdom. Consequently, the question of discrimination against fishing vessels of other Member States does not arise.
33. The United Kingdom denies that there is any discrimination against British vessels operated by Spanish interests.
Articles 48 to 51
34. Jaderow submits that the operating condition is contrary to Articles 48 to 51 because, in conjunction with the conditions at issue in Case C-3/87, it infringes the rights which the crew members who may be employed persons derive from Community law. The condition also has a dissuasive effect on the employment of workers from other Member States.
35. The United Kingdom considers that the operating condition is not contrary to Articles 48 to 51 of the Treaty. That conclusion is necessary even where that condition is considered in combination with the other conditions contained in the licences. The United Kingdom refers in this regard to Appendix 6 to its observations in which it sets out its views on the interpretation of Articles 56(1) and 57(1) of the 1985 Act of Accession and the interpretation of the Joint Declaration relating to workers annexed to that Act of Accession (Official Journal 1985, L 302, p. 480) and in which it reproduces its observations regarding the social security condition which it submitted in Case C-3/87.
Articles 52 to 58
36. Jaderow considers that the fact that the fishing vessels in question fly the British flag or are registered in the United Kingdom and belong to United Kingdom companies is sufficient for there to be establishment within the meaning of Article 52. Since a permanent physical presence is not necessary in order to constitute an establishment within the meaning of the Treaty (judgment of 12 July 1984 in Case 107/83 Ordre des Avocats au Barreau de Paris v Klopp [1984] ECR 2971), the operating condition is contrary to Article 52.
37. The condition in question is also contrary to that article because it constitutes a disguised form of discrimination against United Kingdom companies owned by Spanish interests, against which the United Kingdom legislation on fishing licences is specifically directed.
38. Finally, the operating condition is contrary to Article 52 because it deters undertakings from other Member States from taking up and pursuing activities in the fishing sector in the United Kingdom.
39. The United Kingdom points out first of all that the rights conferred by Article 52 et seq. of the Treaty relate to the companies operating the fishing vessels and not to the vessels themselves. Both Community law (General Programme for the abolition of restrictions on freedom of establishment of 15 January 1962, Official Journal, English Special Edition (Second Series) IX, p. 7) and English law require as a test for establishment the existence of a real and continuous link with the economy of the State in which a natural or legal person acquires an establishment. The operating condition is designed precisely to satisfy that requirement.
40. In imposing that condition the United Kingdom merely determined the fishing vessels which, as British fishing vessels, may, in accordance with Regulation (EEC) No 2241/87 (Official Journal 1987, L 207, p. 1), charge their catches against the United Kingdom quota. In other words, in so acting, the United Kingdom was exercising its right recognized in international public law to determine who their nationals are. Article 52 of the Treaty is not intended to remove that right from a Member State. Were it otherwise, the carefully balanced mechanism for allocating quotas between Member States and linking each Member State's quota to vessels flying the flag of that Member State would be destroyed.
41. The Kingdom of Spain considers that in making the grant of fishing licences subject to the existence of a real economic link between fishing vessels, both British and from other Member States, and the United Kingdom, the United Kingdom rules discriminate against nationals from other Member States and are therefore contrary to Article 52. They cannot be justified under Articles 55 and 56 of the Treaty.
Articles 59 to 66
42. Jaderow observes that the operating condition is contrary to Articles 59 to 66 of the Treaty because it prevents the applicants in the main proceedings from providing their services in other Member States or from receiving services provided by persons established in other Member States, such as the services of share fishermen.
43. The United Kingdom states that the condition in question does not prevent the applicants in the main proceedings from providing services in other Member States by operating vessels not flying the British flag.
44. In order for a company to be able to provide its services in a Member State of the Community it must first be established in another Member State. In the present case, the United Kingdom laid down criteria for ascertaining the existence of a genuine establishment on United Kingdom territory. The applicants' interpretation according to which that requirement is contrary to Article 59 of the Treaty renders Article 52 meaningless. The need to have rules on the establishment of companies in the United Kingdom and to maintain the quota system established under the common fisheries policy justify any restriction on the provision of services which might arise from the condition in question.
45. The Kingdom of Spain considers that the operating condition is discriminatory with regard to nationals from other Member States who are prevented from providing their services in the United Kingdom. It is therefore contrary to Article 59 of the Treaty.
B — The relevant Community legislation
46. The first subparagraph of Article 5(2) of Council Regulation (EEC) No 170/83 of 25 January 1983 establishing a Community system for the conservation and management of fishery resources (Official Journal 1983, L 24, p. 1) provides that Member States shall determine, in accordance with the applicable Community provisions, the detailed rules for the utilization of the quotas allocated to them.
47. Jaderow considers that the measures which the Member States may take under Article 5(2) of Regulation No 170/83 must be in accordance with Community law. The measure adopted by the United Kingdom amounts to a redefining of the scope of the quota system and therefore goes beyond the mere administration of a fishing quota. Member States do not have the power to adopt such measures.
48. Article 11 of Council Regulation (EEC) No 2241/87 of 23 July 1987 establishing certain control measures for fishing activities (Official Journal 1987, L 207, p. 1) provides that all catches made by fishing vessels flying the flag of a Member State or registered in a Member State are to be charged against the quota applicable to that State and that the fishing vessels in question are obliged to cease fishing only when the quota of that State is exhausted. No additional condition relating to the connection which must exist between a fishing vessel and a Member State is laid down in the Community fisheries legislation.
49. The operating condition also restricts the right of British fishing vessels to have access to the waters, ports and installations of other Member States. For that reason it is contrary to Article 2(1) of Council Regulation No 101/76 of 19 January 1976 (Official Journal 1976, L 20, p. 19) and Article 27(2) of Council Regulation No 3796/81 of 29 December 1981 (Official Journal 1981, L 379, p. 1).
50. The United Kingdom points out first of all that the legislation relating to fishing licences was adopted in order to prevent the fishing quota allocated to the United Kingdom from being circumvented.
51. The United Kingdom considers that Regulations Nos 170/83 and 2241/87 are based on the premiss that Member States have the power to lay down rules relating to flags and registration in order to prevent artificial re-registrations of vessels from other Member States. That same objective might also be attained by measures, such as those in question, which relate to the operation of the fishing vessel. The imposition of the operating condition, considered in isolation or together with the conditions at issue in Case C-3/87, does not therefore go beyond the power conferred on the Member States by Article 5(2) of Regulation No 170/83.
52. Should the Court consider that the operating condition does not constitute a measure for the conservation of fishery resources, the United Kingdom submits that this condition constitutes a measure to ensure a fair standard of living for fishermen compatible as such with Article 5(2) of Regulation No 170/83 and Articles 156 to 166 of the 1985 Act of Accession.
53. The condition in question is not contrary to Article 2(1) of Regulation No 101/76 because it applies only to British fishing vessels and does not therefore prevent vessels from other Member States from having access to the fishing grounds within the jurisdiction of the United Kingdom.
54. Finally, the requirement to land and sell fish in the United Kingdom is not a condition relating to the marketing of fish, which, as is clear from the judgment of the Court of 3 October 1985 in Case 207/84 De Boer en Zonen BV v Produktschap voor Vis en Visprodukten [1985] ECR 3203, falls outside the powers of the Member States, but simply a means for checking whether or not the operating condition is fulfilled.
55. The Commission mentions a number of provisions in Community fisheries legislation which assume the existence of the right to land catches directly in any Member State. This is the case in particular with, for example: (a) Article 27(2) of Regulation No 3796/81, cited above, which authorizes the Member States to take the necessary steps to ensure that all fishing vessels flying the flag of one of the Member States enjoy equal access to ports and first-stage marketing installations together with all associated equipment and technical installations'; (b) Article 9 of Commission Regulation (EEC) No 3137/82 of 19 November 1982 (Official Journal 1982, L 335, p. 1) which lays down the procedure to be followed where a producers' organization or one of its members put products up for sale in a Member State other than the one in which it has been recognized'; (c) Article 6 of Council Regulation (EEC) No 2057/82 of 29 June 1982 (Official Journal 1982, L 220, p. 1), which provides that at the time of landing after each voyage, the skipper of each fishing vessel... flying the flag of, or registered in, a Member State or his agent shall submit to the authorities of the Member States whose landing places he uses a declaration ... .
56. The Commission also points out that the operating condition falls outside the powers conferred on Member States by Article 5(2) of Regulation No 170/83.
57. Ireland observes that the question of principle raised by this case concerns the right of a Member State to adopt the measures necessary to ensure that the fishing quota allocated to it by the Community is not circumvented. Articles 154 to 166 of the 1985 Act of Accession laid down the fishing quotas applicable to Spain. Certain Spanish interests, dissatisfied with the quota allocated to Spain, seek to avail themselves of a greater share by fishing against the quota allocated to the United Kingdom. The delicate balance achieved after years of negotiation and established by the Community fisheries legislation might therefore be put in jeopardy.
58. The United Kingdom legislation on fishing licences is not incompatible with Community law because its aim is to ensure that the distribution of TACs established by the Community is observed. Regulation No 3796/81, cited above, recognizes the need to protect local fishing communities where a national quota is at risk, as well as the need to encourage market stability by appropriate measures.
59. The Kingdom of Spain states that the United Kingdom has no power under Article 5(2) of Regulation No 170/83 to adopt measures which have the effect of restricting access to fishing areas without bearing any relation to the conservation and management of fishery resources. The regulation of access to waters and to Community fishery resources falls within the exclusive jurisdiction of the Community.
60. The Kingdom of Spain considers that the United Kingdom rules regarding fishing licences are not incompatible with Regulation No 3796/81 establishing the common organization of the markets in fishery products since the two sets of rules regulate different matters.
C — The principles of proportionality, legal certainty and legitimate expectation
61. Jaderow considers that the operating condition is excessive and disproportionate to the aim relating to the requirement of a real economic link with the United Kingdom. That aim could be ensured by less onerous means. Furthermore, noncompliance with that condition is subject to excessive penalties, such as, for example, the revocation of the fishing licence for even minimal or trivial infringements.
62. The condition in question is also vague and imprecise because the two tests for satisfying the condition are not exhaustive and consequently the applicants are entirely dependent on the changing views of the United Kingdom authorities. It is therefore contrary to the principle of legal certainty.
63. Finally, the condition is contrary to the principle of legitimate expectation. The applicants in the main proceedings legitimately expected that Spanish nationals in the United Kingdom would maintain their rights after Spain's accession to the Community. The condition in question makes it more onerous to operate British fishing vessels belonging to Spanish nationals. Moreover, the arbitrary, unreasonable and manifestly unfair manner in which the operating condition is interpreted by the United Kingdom authorities is also contrary to the principle of legitimate expectation.
64. The United Kingdom considers that the operating condition is equitable and that it is not contrary to the principle of proportionality. As it is, it was not the legitimate expectation of the applicants in the main proceedings which was infringed but the legitimate expectation of British fishermen who because of the applicants' actions have not been able to enjoy fully the quota allocated to the United Kingdom.
The second question
65. The national court submits this question only in the event that the first question is answered in the negative, that is to say in the event that the two requirements laid down in the operating condition are considered compatible with Community law.
66. By its second question the national court asks whether the fact that the United Kingdom authorities apply that condition so as to exclude consideration of other factors which may be evidence of economic, financial and fiscal links between the vessel, its owners and the Member State in question affects the compatibility of the condition with Community law.
67. Jaderow considers that it is unnecessary to answer the second question. In any event, it submits that the second question should be answered to the effect that the operating condition is incompatible with Community law when it is applied by the competent national authorities in such a way as to exclude as irrelevant all other evidence of economic, financial or fiscal links between the fishing vessels and the Member State concerned.
68. The United Kingdom points out that the fishing vessels must satisfy the requirements laid down without prejudice to the generality of the operating condition, which permits owners of vessels which do not fully meet one or other of those two requirements in a given period to provide other evidence that the vessels have indeed been operating from the United Kingdom. However, the United Kingdom states that the evidence relied on by the applicants in the main proceedings, such as the fact that they are registered in the United Kingdom for VAT purposes, pay corporation tax, and incur expenditure relating to the operation of fishing vessels registered in the United Kingdom, are not such as to prove that the companies in question have their principal place of business in the United Kingdom. Consequently, those factors are not relevant for the purpose of proving whether or not the operating condition has been fulfilled.
69. The Commission states that it will not examine the second question separately because, in the Commission's understanding, the question asks the Court to rule on the lawfulness of the two aforementioned requirements taken in isolation.
70. Ireland considers that the answer to the second question depends on the Court's answer to the first question. In this regard, Ireland supports the arguments advanced by the United Kingdom.
1 Language of the case: English.