Private Damage Suits for Breach of Community Law

Editorial Committee of the Cambridge Law Journal

Private Damage Suits for Breach of Community LawAuthor(s): Josephine ShawSource: The Cambridge Law Journal, Vol. 43, No. 2 (Nov., 1984), pp. 255-259Published by: Cambridge University Press on behalf of Editorial Committee of the Cambridge LawJournalStable URL: http://www.jstor.org/stable/4506650 .

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C.L.J. Case and Comment 255

Reliance on the Act was inapt, since it seeks only to counter claims by the American courts and seeks to regulate conduct outside the

United States, whereas the airlines operate within it. The rejection of

the "Bermuda 2" argument rests on an orthodox dualist view of

international law; an allegation of breach of treaty is a matter

between the parties to it, to be settled diplomatically or by the

methods the treaty lays down, and not by domestic courts. Nor is it

for those courts to interpret a treaty which has not been enacted into

English law.

What had caused the Court of Appeal to differ from Parker J. was

the promulgation after his judgment by the Secretary of State of an

Order and directions under the Protection of Trading Interests Act.

(An attempt by Laker to have these declared invalid failed.) These

had the effect of prohibiting BA and BC from complying with any

requirement or prohibition imposed on them under the anti-trust

laws and with any requirement for production of documents or

commercial information to the United States courts. According to the

Court of Appeal, this rendered the issues wholly untriable. Since BA

and BC disclaimed reliance upon this in the House of Lords, it was

only necessary for Lord Diplock to show convincingly (at

pp. 433-434) that the conclusion was based upon a misconstruction of

the Act and a misapprehensiofi of the effect of the directions.

Now, BA and BC might justifiably regard Laker's conduct as

"forum-shopping"; and it is not easy to see why one British company should be able to sue others in American courts when it cannot do so

here. However, the Court of Appeal's enjoining of Laker did result

in a serious confiict between the English and American courts and

because it was a consequence of British executive action, could lead

the American courts to suspect a conspiracy between our judiciary and government to interfere with the exercise of jurisdiction which

both they and our courts regard as properly theirs. But the price of

this restoration of judiciai harmony is the cacophonous sound of our

courts and government speaking in different tongues when the

interests of this country are very clearly affected. The wider issues are

evaded by treating the litigation as a purely private matter like an

action for breach of contract between Mr. X and Mr. Y. One

wonders whether this is not carrying judiciai modesty and comity too

far.

J. G. COLLIER.

C.L.J. Case and Comment 255

Reliance on the Act was inapt, since it seeks only to counter claims by the American courts and seeks to regulate conduct outside the

United States, whereas the airlines operate within it. The rejection of

the "Bermuda 2" argument rests on an orthodox dualist view of

international law; an allegation of breach of treaty is a matter

between the parties to it, to be settled diplomatically or by the

methods the treaty lays down, and not by domestic courts. Nor is it

for those courts to interpret a treaty which has not been enacted into

English law.

What had caused the Court of Appeal to differ from Parker J. was

the promulgation after his judgment by the Secretary of State of an

Order and directions under the Protection of Trading Interests Act.

(An attempt by Laker to have these declared invalid failed.) These

had the effect of prohibiting BA and BC from complying with any

requirement or prohibition imposed on them under the anti-trust

laws and with any requirement for production of documents or

commercial information to the United States courts. According to the

Court of Appeal, this rendered the issues wholly untriable. Since BA

and BC disclaimed reliance upon this in the House of Lords, it was

only necessary for Lord Diplock to show convincingly (at

pp. 433-434) that the conclusion was based upon a misconstruction of

the Act and a misapprehensiofi of the effect of the directions.

Now, BA and BC might justifiably regard Laker's conduct as

"forum-shopping"; and it is not easy to see why one British company should be able to sue others in American courts when it cannot do so

here. However, the Court of Appeal's enjoining of Laker did result

in a serious confiict between the English and American courts and

because it was a consequence of British executive action, could lead

the American courts to suspect a conspiracy between our judiciary and government to interfere with the exercise of jurisdiction which

both they and our courts regard as properly theirs. But the price of

this restoration of judiciai harmony is the cacophonous sound of our

courts and government speaking in different tongues when the

interests of this country are very clearly affected. The wider issues are

evaded by treating the litigation as a purely private matter like an

action for breach of contract between Mr. X and Mr. Y. One

wonders whether this is not carrying judiciai modesty and comity too

far.

J. G. COLLIER.

PRIVATE DAMAGE SUITS FOR BREACH OF COMMUNITY LAW

European Community law has now become embroiled in the current

English debate about the distinction between public and private law

(See the note by Dr. Cripps, above p. 214). This was probably

PRIVATE DAMAGE SUITS FOR BREACH OF COMMUNITY LAW

European Community law has now become embroiled in the current

English debate about the distinction between public and private law

(See the note by Dr. Cripps, above p. 214). This was probably



258 The Cambridge Law Journal [1984]

although that breach may relate to some public law duty or function

of the body, he is seeking to exercise private law rights and is not

reliant on the discretion of the court with regard to his remedy. Had

the IDB attempted to bring a direct challenge to the pricing policy of

the Board by seeking a declaration that its pricing decisions were

illegal since they were in breach of Community law, then it would

probably have been forced to use the procedure for judicial review; it

would then have been required to seek the leave of the court to apply and to overcome other procedural obstacles such as the three month

limitation period. However, in respect of the claim for damages, even

though both public and private law issues were undoubtedly at issue, both Neill J. and the Court of Appeal refused to distinguish between

points 3 to 6 of the claim which were based on an alleged breach of

the Regulations laying down the rules for the marketing of milk in the

United Kingdom and points 7 to 9 which relied on similar facts to

allege a breach of Article 86 of the Treaty in respect of the statutory

monopoly in the purchase of milk. That such a breach could be

alleged by way of ordinary action had already been established by

implication in Garden Cottage, in which the question of damages for

breach of Community law was considered in the context of private law only ([1984] 1 A.C. 130, 141, 144). Nevertheless it does seem

somewhat premature of Neill J. to accept (at paragraph 24 of his

judgment) that Garden Cottage is authority for the proposition that a

breach of a directly effective provision of Community law will always

give rise to a compensatory remedy; the existence of such a remedy must depend on the characteristics of the provisions in question and

cannot be a general rule.

The acceptance of a distinction between actions for damages

against statutory bodies for breach of a statutory duty (private law) and judicial review (public law) reflects a similar solution reached by the European Court in Case 4/69, Lutticke [1971] E.C.R. 325 and

Case 3/71, Zuckerfabrik Schoppenstedt [1971] E.C.R. 975. Whereas

the Court had originally accepted the contrary view in Case 25/62, Plaumanh [1963] E.C.R. 95, these cases finally established that there

are two separate routes whereby an individual can seek to gain redress for harm caused by (illegal) acts of the Community intended to have legal effects. It may be possible in an appropriate case for the

individual to evade the strict requirements of locus standi and the time limits which often make the Article 173 action for annulment so

difficult to pursue by instead proving non-contractual liability under

Articles 178 and 215. Although in many respects it would be more

convenient for the administration if actions for damages were made

dependent on successful actions for annulment (or certiorari or a

declaration), this would have the effect, at least in English law, of



C.LJ. Case and Comment 259

nullifying the effect of the Crown Proceedings Act 1947 which

originally exposed the Crown to the same rules which an ordinary citizen must observe. Irrespective of whether the public interest

decrees the granting of a diseretionary remedy in the context of

judiciai review, individuals must be allowed to enforce English (or

Community) law whenever they have suffered loss, and, through actions for damages, place moral (and financial) pressure on the

administration to alter its practices in public law.

Josephine Shaw.

C.LJ. Case and Comment 259

nullifying the effect of the Crown Proceedings Act 1947 which

originally exposed the Crown to the same rules which an ordinary citizen must observe. Irrespective of whether the public interest

decrees the granting of a diseretionary remedy in the context of

judiciai review, individuals must be allowed to enforce English (or

Community) law whenever they have suffered loss, and, through actions for damages, place moral (and financial) pressure on the

administration to alter its practices in public law.

Josephine Shaw.

THE REVENUE S TRUMP CARD AGAINST TAX AVOIDANCE

Furniss v. Dawson [1984] 2 W.L.R. 226, in the words of Lord Bridge (p. 232), "marks a further important step in the development of the court's increasingly critical approach to the manipulation of financial transactions to the advantage of the taxpayer" which first manifested itself in the House of Lords in W. T. Ramsay Ltd. v. I.R.C. [1982] A.C. 300 (though an earlier High Court harbinger was Black Nominees Ltd. v. Nicol [1975] S.T.C. 372). As Lord Scarman states

(p. 230), there is still

space in the law for the principle in I.R.C. v. Duke of Westminster [1936] A.C. 1 that every man is entitled if he can to order his affairs so as to diminish the burden of tax. The limits within which this principle is to operate remain to be probed and determined judicially. Difficult though the task may be for

judges, it is one which is beyond the power of the blunt instrument of legislation. Whatever a statute may provide, it has to be interpreted and applied by the courts; and ultimately it will

prove to be in this area of judge-made law that our elusive journey's end will be found.

Thus judiciai debate prevails over parliamentary debate. It appears that there is now a general judiciai associated operations rule, whereas formerly it was thought that there was only a statutory associated operations rule in the context of estate duty and then

capital transfer tax.

In Ramsay (noted [1982] C.L.J. 50) there was a preordained series of self-cancelling steps taken to manufacture an artificial allowable loss: disregarding the steps or looking at the composite picture there was neither a gain nor a loss for capital gains tax

purposes. Subsequently, in I.R.C. v. Burmah Oil Co. Ltd. [1982] S.T.C. 30 instead of circular transactions there were "linear"

THE REVENUE S TRUMP CARD AGAINST TAX AVOIDANCE

Furniss v. Dawson [1984] 2 W.L.R. 226, in the words of Lord Bridge (p. 232), "marks a further important step in the development of the court's increasingly critical approach to the manipulation of financial transactions to the advantage of the taxpayer" which first manifested itself in the House of Lords in W. T. Ramsay Ltd. v. I.R.C. [1982] A.C. 300 (though an earlier High Court harbinger was Black Nominees Ltd. v. Nicol [1975] S.T.C. 372). As Lord Scarman states

(p. 230), there is still

space in the law for the principle in I.R.C. v. Duke of Westminster [1936] A.C. 1 that every man is entitled if he can to order his affairs so as to diminish the burden of tax. The limits within which this principle is to operate remain to be probed and determined judicially. Difficult though the task may be for

judges, it is one which is beyond the power of the blunt instrument of legislation. Whatever a statute may provide, it has to be interpreted and applied by the courts; and ultimately it will

prove to be in this area of judge-made law that our elusive journey's end will be found.

Thus judiciai debate prevails over parliamentary debate. It appears that there is now a general judiciai associated operations rule, whereas formerly it was thought that there was only a statutory associated operations rule in the context of estate duty and then

capital transfer tax.

In Ramsay (noted [1982] C.L.J. 50) there was a preordained series of self-cancelling steps taken to manufacture an artificial allowable loss: disregarding the steps or looking at the composite picture there was neither a gain nor a loss for capital gains tax

purposes. Subsequently, in I.R.C. v. Burmah Oil Co. Ltd. [1982] S.T.C. 30 instead of circular transactions there were "linear"



Private Damage Suits for Breach of Community Law

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