Posted: 29/09/2025
As part of the bicentennial celebration of Thomas Cooper’s founding in 1825, Penningtons Manches Cooper is spotlighting a different standout case conducted by the firm across its two centuries of English legal practice for each month of 2025.
This ninth instalment focusses on the enormous Factortame litigation that spanned over a decade and was the most important constitutional case of the twentieth century. Factortame challenged parliamentary sovereignty, confirmed the principle of state liability for breaches of European Community law, and established the supremacy of EC law in areas of EC competence.
In 1977, the European Economic Community (EEC), as it was then named, declared a 200-mile exclusive economic zone around its member states, displacing Spanish-flagged vessels from their traditional fishing grounds off the coasts of Ireland and Cornwall. Simultaneously, the EEC instituted the Common Fisheries Policy (CFP) to regulate fishing within this 200-mile zone through a quota system.
Thereafter, Spanish fishermen began re-registering Spanish-flagged vessels as British vessels and acquiring other existing British vessels to use in the UK's fishing zone. In doing so, these companies gained access to British fishing quotas of 'total allowable catches', but transported their catches back to Spain: a practice known as 'quota hopping.'
Initially, this met with no official UK opposition. The increased uptake was advantageous to the UK, as the early CFP quotas were merely notional and intended to establish what the fishing fleets actually caught, with a view to determining future restrictive quotas.
However, after Spain joined the EEC in 1985 and restrictive quotas for British-registered boats fishing in UK waters were instigated, the CFP became controversial. The prevailing view among the UK political establishment was that the restrictions affecting British fishermen were incompatible with the principles on which the EEC was founded, such as free access to raw materials and protection from discrimination on grounds of nationality. There was also a strong feeling across the country, shared and colourfully articulated by Prime Minister Margaret Thatcher that the nation was losing sovereignty to Brussels, and fishing represented an example where a stand should be made.
In response, the government unveiled the Merchant Shipping Act 1988, which reserved the right to own a British fishing boat, and correspondingly to fish against British quotas, to companies whose shareholders and directors were 75% British with residence and domicile in the UK.
As pre-existing registrations of British-flagged vessels came to lapse on 31 March 1989, the new legislation had the effect of evicting Spanish-owned fishing vessels from the UK's fishing zone. Factortame Ltd, whose directors were British nationals residing in the UK who had Spanish ancestry, sought to challenge the Merchant Shipping Act 1988, arguing that it breached their directly effective EEC rights to not be discriminated against on grounds of nationality, to establish themselves in business anywhere in the EEC, and to participate in the capital of companies situated in another member state. They, along with a further 96 Anglo-Spanish companies which had been operating British-flagged fishing vessels, were represented by Thomas Cooper and Stibbard.
The Factortame claimants initially sought judicial review and an interim injunction.
On 10 March 1989, the High Court referred the matter to the European Court of Justice for a ruling on whether the 1988 act's pre-conditions as to nationality, residence and domicile were compatible with EEC law. The court also granted the injunction; a decision which the UK government appealed.
Twelve days later, the Court of Appeal, comprising Lord Donaldson MR, Lord Justice Bingham and Lord Justice Mann, overturned the injunction, citing the constitutional impropriety of suspending an act of Parliament. Apparently, the High Court was not obliged 'to override its own domestic law in favour of what is no more than an alleged or putative Community right' and had not 'acknowledged the constitutional enormity, as the law stands, of requiring a Secretary of State to act contrary to the clearly expressed will of Parliament when the unlawfulness of that expression has yet to be established.'
Then, on 18 May 1989, the House of Lords upheld the Court of Appeal’s decision, making clear that UK courts lacked the jurisdiction to disapply primary legislation, even temporarily. English law did not allow an injunction to be granted against the application of an act of Parliament, nor against the crown. However, recognising the potential conflict with EEC law, their lordships also referred the matter to the European court.
In a pivotal judgment on 19 June 1990, the ECJ held 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.'
The House of Lords followed the European court’s ruling and granted the injunction on 9 July 1990, acknowledging that EEC law had primacy in areas of EEC competence, and marking the first ever occasion that a UK court would decline to apply an act of Parliament.
On 25 July 1991, the ECJ ruled definitively that the nationality, domicile and residence requirements in the 1988 act were incompatible with community law on grounds that they were discriminatory and a breach of the freedom of establishment. The UK was however permitted to stipulate 'that the vessel in question must be managed and its operations directed and controlled from within that Member State'.
The ruling caused constitutional upheaval within the UK. For three centuries, since the Bloodless Revolution and its Bill of Rights of 1689, it had been trite law '[t]hat the pretended power of suspending of laws, or the execution of laws, …, without consent of Parliament, is illegal'. The sovereign will of the English crown had resided in Parliament as the supreme source of law, and the role of the independent judiciary had been confined to interpreting, but never challenging, the will of Parliament.
As the Merchant Shipping Act 1988 would be disapplied in favour of the European Communities Act 1972 that gave effect to EEC law in the UK, it was also apparent that the 1972 legislation had acquired a form of entrenched status. Ordinarily, the effect of a new UK statute conflicting with a pre-existing one would be to cause the implied repeal of the earlier statute, consistent with the orthodox view that no Parliament can bind its successors.
Following this landmark judgment, the Factortame claimants sought damages for their loss of income during the period while their vessels had to be laid up or redeployed elsewhere. On 18 November 1992, the High Court requested another ruling from the ECJ concerning the conditions under which a member state may become liable to individual citizens for breaching community law. The EEC Treaty did not expressly contemplate such liability, so it was for the ECJ to rule on the matter.
While that ruling was pending, the European Union was formally established by the Treaty of Maastricht in November 1993. The EEC was renamed 'the European Community' and was incorporated into the EU's structure.
In a joint ruling with the German case Brasserie du Pêcheur on 5 March 1996, the European court held that member states could be liable for breaches of EC law, and that this required that: 'the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.'
It was for national courts to decide how to characterise the breach and whether damages should be awarded, taking into account the clarity and precision of the community rule infringed, whether the damage was intentional, whether any error of law was excusable, and whether an EC institution had contributed to the outcome.
On 31 July 1997, the High Court ruled that the UK government had committed a serious breach of EC law and was liable to compensate Factortame and others. The 1988 act's restrictive entry conditions disclosed an intention to discriminate by nationality. Furthermore, the government was aware that those conditions would prevent the claimants from fishing against the British quotas, and had also sought to deny the claimants any interim relief.
The Court of Appeal affirmed that decision on 8 April 1998, observing that 'where what is relied on in support of an application for damages is a direct breach of the fundamental principle of the Treaty forbidding discrimination on grounds of nationality that will almost inevitably create a liability for damages. Whether intentional or not, such a breach is inexcusable in a case, such as this…'
The House of Lords also unanimously ruled in favour of Factortame on 28 October 1999, rejecting the government’s argument that its reliance on legal advice mitigated the seriousness of the breach. The UK government was found to have acted 'in good faith and with the intention of protecting British fishing communities rather than with the deliberate intention of harming Spanish fishermen'. However, '[t]he shortness of the transitional period, the fact that there was, it seemed, no way in domestic law of challenging the statute, and that the respondents were obliged, not merely to avoid being removed from the old register, but to apply to be put on the new register all emphasise the determination of the Government to press ahead with this scheme despite the strong opposition of the Commission …'
Liability having been established, various Factortame claimants settled £285 million worth of their claims for the sum of £55 million in March 2000, obviating the need for a trial on matters of quantum.
The High Court decided a limitation issue in respect of the remaining claims on 27 November 2000.
It was held that the claims against the government were founded in tort, and therefore subject to a six-year time-limit, which ran from when the House of Lords first granted interim relief on 9 July 1990. Accordingly, any claims not lodged by 10 July 1996 were time-barred.
The High Court also rejected the claimants' attempt to recover aggravated damages for injury to feelings. Factortame had argued that claims for discrimination under EC law were comparable to discrimination claims under the Race Relations Act 1976. However, Mr Justice Toulmin made clear that such damages were awarded only in cases where the discrimination caused harm to the claimant's self-esteem.
Factortame was a constitutional watershed for the world's oldest constitution. It redefined the relationships between the UK and the EU, between Parliament and the courts, and between the state and the individual. A generation of English law students would memorise Factortame's precedential legacy, as part of their required training in EC law.
Like the Magna Carta of 1215 and Bill of Rights of 1689, the European Communities Act 1972 came to be regarded as one of a number of constitutional statutes that formed part of the UK's unwritten constitution, and were immune to implied repeal.
Parliament could, however, expressly repeal the 1972 act, which it eventually did through the European Union (Withdrawal) Act 2018 following a national referendum on EU membership.
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