(Lord McGhie, Mr J A Smith)


(Application SLC 11/12 – Order of 7 February 2013)


The appellant appealed against a decision of Scottish Ministers in respect of his allocation of single farm payment. Because of the impact of foot and mouth disease the reference period for assessment based on his original farm was to be determined by the provisions of art 40 of the Council Regulation (EC) 1782/2003. He acquired two other farms and would have been entitled to a payment from the national reserve in respect of his operations on these farms in terms of art 22 of the Commission Regulation (EC) No 795/2004. However, the Scottish Ministers contended that his application was governed by the “best value” provisions of art 18 of these Regulations. This meant that he had to choose between the benefits of art 40 and the national reserve provisions. For the appellant it was contended that in art 18(2) the second “or” in the phrase “two or more of Articles 19 to 23 of this Regulation or Articles 37 (2), 40, 42(3) or 42(5) of the 2003 Regulations” should be read disjunctively. The best value rule only applied where an applicant fell within two provisions of the first group of provisions or two provisions of the second group. If the second “or” had a conjunctive effect an applicant covered by any two or more of all the specified provisions would be limited to the value of the highest. The Court having considered, inter alia, the purpose of the provisions and the terms of the German language version, accepted the applicant’s submission that the Court could not, with complete confidence, resolve the issue of construction. According a reference to the European Court was required in terms of art 267 of the TFEU. As there was to be such a reference it was appropriate also to ask that Court to consider the validity of the provisions in issue when their purpose was unclear and they did not appear to treat like situations alike.

The Note attached to the Court’s order is as follows:

[1] The appellant appealed against a decision of Scottish Ministers in respect of his allocation of single farm payment. Because of the impact of foot and mouth disease the reference period for assessment based on his original farm was to be determined by the provisions of art 40 of the 2003 Regulations, referred to below. He acquired two other farms and would have been entitled to a payment from the national reserve in terms of art 22 of the 2004 Regulations also referred to below. However, the Scottish Ministers applied the “best value” provisions of art 18 of these Regulations. This, they said, meant that he had to choose between the benefits of art 40 and the national reserve provisions.

[2] The substantive argument for the appellant was that in art 18(2) the second “or” in the phrase “two or more of Articles 19 to 23 of this Regulation or Articles 37 (2), 40, 42(3) or 42(5) of the 2003 Regulations should be read disjunctively. In other words, with the effect that the article be read as providing two separate lists and that it was only where a claimant fell under two heads in one or other list that the provision applied. The respondents treated the second “or” as having a conjunctive effect. If an applicant was covered by any two or more of the specified provisions he, or she, was limited to the value of the highest.

[3] The Appellant’s primary position was that the Land Court should make a reference to the Court of Justice of the European Union [ECJ], because the conflicting contentions showed there was an inherent ambiguity in art 18(2). It was also submitted that if the respondents’ construction was correct, the Regulation was outwith the power of the Commission to enact. It was further contended that the Commission had failed to give adequate reasons for the enactment of art 18(2). It was accepted that the latter issues were not within the jurisdiction of the Land Court and could only be determined by the ECJ.

[4] It was accepted that if the Court could, with complete confidence, resolve the issue of construction, a reference on that issue would not be necessary – the acte clair approach.

Procedural history

[5] We first heard parties on 14 November 2012. The appellant was represented by Sir Crispin Agnew of Lochnaw, QC and by Mr Michael Howlin QC who dealt specifically with issues of European Law. The Scottish Ministers were represented by Mr Donald Cameron. Although three days had been allowed for the debate, parties had submitted lengthy written notes of argument and the debate was concluded in course of the first morning. When the matter was at avizandum, the Court raised some specific issues and requested the respondents to provide examples of the working of the provisions of art 18 to show where it would be required to prevent cumulative claims and how it might apply to certain categories of farmer compared with others. Lists of examples were provided. A further short hearing was held on 16 January 2013.

Domestic Cases referred to

Booker Aquaculture Ltd (t/a Marine Harvest McConnell) v Secretary of State for Scotland 2009 SC 9
Abbott Laboratories v Corbridge Group Pty Ltd [2002] FCAFC 314.)
Ex parte Else (1982) Ltd. and Another; Regina v Same, Ex parte Thomas [1993] QB 534
Gladwin v Scottish Ministers, Order and Note dated 18th May 2012
HP Bulmer Ltd v J Bollinger SA (No.2) [1974] 3 WLR 202
In Re Diplock [1941] Ch 253
R (On app Gwillim) v Welsh Ministers [2010] EWCA Civ 1048
R (On app Gwillim) v Welsh Ministers [2009] EWHC 2946
R. V. International Stock Exchange of the United Kingdom [1993] Q.B. 534
Regina v Federal Steam Navigation Co. Ltd [1973] 1 W.L.R. 1373
White v Supple (1842) 2 DR & War 471

European Case Law

A, te B v. Minister van Landbouw, Natuur en Voedselkwaliteit, 3 December 2008 (AWB 07/862; LJN BG8036)
A, te B v. Minister van Landbouw, Natuur en Voedselkwaliteit, 22 September 2010 (Case AWB 07/748; LJN BO1209)
Case C-309/10 Agrana Zucker gmbh v Bundesminister fur Land-und Forestwirtschaft, Umwelt und Wasserwirtschaft (28th July 2011)
Case C 179/84 Bozzetti v Invermizzi (1985) ECR 2301
Case 283/81 CILFIT v Ministry of Health (Spain) (1982) ECR 3415
CSF and CSME v Commission [1996] ECR II-1377
Case-457/05 Diageo (2007) ECR 1-8075,
Case 18/62 Emilia Barge v. High Authority of the European Coal and Steel Community [1963] ECR 561
Case 250/84 Eridiana zuccherifici nazionali SpA v. Cassa conguaglio zucchero [1986] ECR 146
Case 314/85 Foto-Frost v Hauptzollant Lubeck-Ost
Case 461/03 Gaston Schul Douane-Expeditieur v Minister van Landbouw
Galileo Zaninotto v Ispettorato Centrale Repressione Frodi – Ufficio di Conegliano – Ministero delle risorse agricole, alimentari, e forestali [1998] ECR I-6629
Case C-72/95 Kraaijeveld BV and Ors v Gedputeerde Staten van Zuid-Holland (1996) ECR I-5403
Case C -300/86 Luc Van Landschoot v NV Mera (1988) ECR 03443
Case 203/85 Nicolet Instrument GmbH v. Hauptzollamt Frankfurt am Main-Flughafen [1986] ECR 2049
Cases 36-38 and 40/59 Präsident Ruhrkohlen-Verkaufsgesellschaft mbH et al v. High Authority of the European Coal and Steel Community [1960] ECR 885
Case C-344/04 R (on the application of IATA and ELFAA) v Department of Transport (R v Secretary of State, ex parte Omega Air) [2002] ECR I-2569
Case C-291/98 Sarrio v Commission [2000] ECR I-9991
SAM Schiffahrtand Stapf v Germany [1997] ECR I-4475
Case 2/56 Steinkohlenbergwerk Heinrich Robert AG et al and The Geitling Selling Agency for Rurh Coal v. High Authority of the European Coal and Steel Community [1957-1958] ECR 3
Cases 31/62 and 33/62 Wohermann &Sohn KG and Alfons Lutticke GmbH v Commission

European regulatory material

Council Regulation (EC) 1782/2003 (Consolidated text)
Commission Regulation (EC) No 795/2004 (Consolidated text)
French text of Article 18 of Commission Regulations (EC) No 795/2004
German text of Article 18 of Commission Regulation (EC) No 795/2004
Dutch text of Article 18 of Commission Regulation (EC) No 795/2004

Note that except where otherwise specified, subsequent references to any articles numbered from 18 to 23 are to provisions of Council Regulation (EC) No 795/2004, occasionally also referred to as the “Implementing Regulation” and references to articles numbered above 33 are to provisions of Council Regulation (EC) No 1782/2003, “the Main Provisions”.

Textbooks etc

Concise Oxford English Dictionary

Factual background

[6] There was no dispute about the essential factual background.

[7] Mr Feakins had claimed under the appropriate schemes in respect of cattle and sheep production for his farm at Sparum, Worcestershire, England. The reference year 2001 was during the foot & mouth epidemic, “FMD”, and the entire stock was slaughtered. His farm was used as a site for disposal of FMD carcasses. He was unable to restock in the reference years 2001 and 2002 because of the continuing effects of FMD.

[8] For the purposes of the single farm payment, “SFP”, the normal reference period in terms of art 38 comprised the years 2000, 2001, and 2002 and the reference amount in terms of art 37 was the average over these years. In other words, his receipts in the unaffected year 2000 would have had to be divided by three to produce the average. However, under the provisions of art 40 a claimant whose production was affected by events such as FMD was entitled to request that the reference period be changed. Mr Feakins SFP entitlement was allowed based on 546 animals, being the animals present on the holding at the time FMD was confirmed. His English reference was calculated as a hardship or force majeure allocation. It was based on 410.83 ha. This gave a total of €232,744 available for transfer from England to Scotland.

[9] In 2005, Mr Feakins’ purchased two farms, Langburnshields and Tythehouse, at Bonchester Bridge in the Scottish Borders. Both were subject to tenancies due to expire in 2006. However, by agreement he obtained vacant possession of Langburnshields farm in February 2005. He obtained vacant possession of Tythehouse on 28 November 2006. He continued to own Sparum but let it on a tenancy for arable use.

[10] In 2005, he applied to the respondents for a provisional Category 5 allocation of entitlement of SFP, under art 12 of the 2004 Regulations, to be allocated from the National Reserve for each farm. This allocation was requested to cover the additional land acquired, over and above the reference amount from England, based on his existing entitlement. Category 5 was for farmers who had purchased leased land which had been leased to a third party during the reference period.

[11] The criteria applied under category 5 arose under art 22 and were set out by Scottish Ministers in their literature Information Leaflet 11. The criteria included provisions that an award would only be allowed if the acquisition resulted in a net increase in land farmed compared with the average area farmed during the reference period. The land had to be used, or intended to be used, in part or in full for production that would attract CAP scheme subsidy payments as they existed prior to 2004.

[12] He received provisional approval for each farm. Langburnshiels was awarded SFP on the parish average of €191.08/ha: a total of €102,682.57. At that stage Scottish Ministers had not taken account of his production based subsidy scheme claims in England during the period 2000-2002.

[13] Mr Feakins declared Langburnshields in his 2005 IACS application because he had taken over the farm in February 2005. Tythehouse farm was not declared in the first year of the application of SFP, that is, 2005 because Mr Feakins did not take occupation of the farm until November 2006. It was declared on transfer in that year and in his 2007 IACS application.

[14] In May 2005, he requested that his English reference be transferred to Scotland. The respondents agreed that this would be due but determined that the Category 5 allocation would be lost because of the ‘Best Value’ test, in terms of art 18. For completeness it may be noted that, after discussion, the original calculation using the “best value” test was adjusted. There may still be some doubt about the figures but the detail of this does not matter for present purposes.

Sir Crispin’s submissions for appellant

[15] It was submitted that, on a proper understanding of the situation, when Langburnshields, which extended to 537.38 ha, was registered for SFP in 2005, Mr Feakins ought to have been allocated his English entitlement on transfer on 410.83 ha @ €232,744 and the balance of 126.55 ha @ 191.08/ha (parish average), namely €24,181, ought to have been granted as an additional entitlement from Cat 5 of the National Reserve.

[16] When Tythehouse became available at the end of 2006, Mr Feakins ought to have been awarded an additional entitlement on the whole area of 371.39 ha from Cat 5 of the National Reserve @ €191.08 ha (parish average): that is €70,965.

[17] The total for the two units would, accordingly be €327890. The precise figure had not been agreed and the Court would have to remit the matter, ultimately, to the Scottish Ministers to re-calculate the entitlement. This would leave open rights of appeal if the appellant could not accept the Scottish Ministers revised calculation.

[18] An important underlying consideration behind Mr Feakin’s challenge to the Scottish Ministers approach was his example of a comparison between two similar farms. Had his entitlement to SFP been based on his normal production and entitlements over the normal reference period, he would have been found entitled to additional entitlement in respect of his Scottish land from the national reserve. Because the reference period for his farm had to be adjusted to allow for FMD, he lost that entitlement. In his particular circumstances this was equivalent to a figure of about €95,000 per annum.

Substantive submissions on construction of Article 18(2)

Article 18 of the 2004 Regulations read at the material time:

“1. For the purposes of Article 42(4) of Regulation (EC) No 1782/2003, ‘farmers in a special situation’ shall mean the farmers referred to in Articles 19 to 23 of this Regulation.

2. In cases where a farmer in a special situation meets the condition for applying two or more of Articles 19 to 23 of this Regulation or Articles 37 (2), 40, 42(3) or 42(5) of Regulation (EC) No 1782/2003, he shall receive a number of payment entitlements not higher than the number of hectares he declares in the first year of application of the single payment scheme and whose value shall be the highest value he may obtain by applying separately each of the Articles for which he meets the conditions.”

[19] It was submitted that the second “or” in art 18(2), in other words, that linking the references to the two enumerated groups of articles from different Regulations, required to be read as being disjunctive rather than conjunctive. The article did not apply to a farmer in a special situation who qualified under one head in each category but only to a farmer who qualified under two head of the first group or two heads of the second.

[20] Community Regulations had to be read purposefully having regard to the overall scheme and the underlying policy: R (On app Gwillim) v Welsh at p24. The underlying policy was that on the introduction of the scheme the actual amount paid to farmers should be unchanged and that where farmers had made an investment they should get an additional allocation. Reference was also made to Gwillim at p 64 and to the decision of the Court of Appeal at pp 27 to 30, and to recital (24) of the preamble to the Main Regulation and to the Implementing Regulation at recital (17). The application of art 40 simply restored the appellant to the position he would have been in but for foot and mouth disease and a construction which did not penalise him would be in line with the purpose of the Regulations. Counsel stressed that the word “or” was usually and prima facie disjunctive. Reference was made to the Concise Oxford English Dictionary and In Re Diplock at p 260.

[21] No assistance could be found in the French or Dutch texts but the German text used the expression ‘oder von’ to join the two groups and this supported the disjunctive construction. Had the English text said “or of”, a disjunctive construction would, he submitted, have been quite clear.

[22] Articles 19 to 23 [and including 23a] of the 2004 Regulations and, separately, arts 37 (2), 40, 42(3) or 42(5) of the 2003 Regulations were dealing with situations which were common within each Regulation, but the types of situation were different as between these Regulations. This was because the former dealt with situations where the farmer did not have an entitlement to a reference quantity from the reference years in respect of either additional land or investment in productive capacity and therefore to ensure equal treatment he was to be given SFP from the reserve for this additional capacity. In contrast, the articles in the 2003 Regulations dealt with situations where the normal reference quantity was, for excusable reasons, adversely affected and adjustment had to be made to provide a fair equivalent figure. If a farmer qualified under two heads in either group of categories, it was entirely understandable that he should not get the benefit of both and that justified a “best value” approach.

[23] The same result followed from the requirement to comply with the obligation to provide equal treatment or non-discrimination. The general principle of equal treatment prohibited comparable situations from being treated differently, unless such difference of treatment could be objectively justified. Reference was made to Luc Van Landschoot v NV Mera at paragraph [9] and to the Gwillim case in 2009 at paragraphs 64 & 65; and the Gwillim case on appeal.

[24] Farmers who received an allocation of SFP under art 37 were in a comparable situation to farmers who received an allocation of SFP under art 40. They had both had their initial reference amount – their entitlement – calculated in accordance with the Regulations having regard to their situations at the relevant time. The express aim of the provisions was “to ensure equal treatment between farmers and to avoid market and competition distortions”. After art 40 had been applied, all farmers could be seen to be in a directly comparable situation after their initial allocation of SFP.

[25] Article 42(2) of the Main Regualtion provided that allocations from the national reserve had to be made in such a way as to ensure equal treatment between farmers. Article 18(2) should therefore be read purposefully, in a way that achieved that objective. The effect of reading “or” conjunctively was that under art 18(2) there was an immediate discrimination between farmers who received their entitlement under an initial allocation under art 37 and farmers who received their entitlement under an initial allocation under art 40. Article 37 farmers would be entitled to their initial allocation plus allocation from the national reserve if they complied with the relevant provisions whereas farmers whose entitlement was under the provisions of art 40 would not. This did not treat farmers in a comparable situation equally.

[26] Further support for a separate reading of the two categories in art 18(2) came from the fact that they are dealt with separately in art 42(4) and (5) of the 2003 Regulations and each sub-article referred to the obligation to ensure equal treatment. If the intention of arts 42(4) & (5) was that art 18(2) was to be cumulative and not disjunctive, it would have been reasonable to have expected these sub-articles to have been combined.

[27] It was further submitted that, in any event, even if “or” was to be read as conjunctive, the art 18(2) best value test did not apply to the appellant because his art 40 allocation was not from the national reserve. The heading to Section 3 of Chapter 3 of the 2004 Regulations, was “Allocation of payment entitlements within the national reserve”. This made it clear that art 18(2) related to applications for entitlements from the national reserve. These were additional payments beyond the applicant’s initial entitlements. This was to be contrasted with the heading to Section 2 “Allocation of payment entitlements outside the national reserve”. This would include, as at art 16, references to hardship cases. Article 16 made express reference to exclusion of double payment under the agri-environmental commitments. For this particular category art 18(2) was required. Articles 19 to 23 [and 23a] of the 2004 Regulations were all clearly related to applications to the national reserve and arts 37(2), 42(3) of the 2003 Regulations also provided conditions for entitlement entirely from the national reserve.

[28] In these circumstances, it was submitted that the reference to art 40, in art 18(2), related only to the situation where an application had been made to the national reserve for an allocation to compensate for the effect of art 40. This could arise in circumstances under art 40(5), agri-environment schemes, when art 16(1)(a) was applied under art 42(3) of the 2003 Regulations. Where a farmer was in an agri-environmental scheme he could apply for his whole SFP entitlement under art 16(1)b and lose the agri-environment payment or he could have a reduced SFP entitlement and claim the agri-environment payment. When that expired after 31 December 2002 he could then apply to the national reserve in terms of 16.1.a under Article 40(5) “to adjust the unit value of his payment entitlements”. The reference to art 40 in art 18(2) should only apply in circumstances where there was an application to the national reserve in this way. He stressed that Mr Feakins had never made an art 40 application to the national reserve.

Tythehouse farm

[29] It was submitted that the first declaration for SFP for Tythehouse farm was not until 2006 or 2007: in other words, after the first allocation year for SFP which was 2005. Accordingly, it was not within a year that was subject to art 18(2). That article applied only in relation to entitlements not higher than the number of hectares “declared in the first year” of application of the single payment scheme.

[30] When the Tythehouse application was first made, it was only a provisional application under art 12(1) of the 2004 Regulations. That article allowed member states to identify provisional establishment of amountsin the year preceeding the first year of application of the SFP. The provisional allocation of entitlement established under that article was not activated until the land came back in hand and was included in the IACS application for the year of application. This was in the year after the “first year of the application of the single payment scheme”. Article 12(4) provided that: “the definitive establishment of payment entitlements to be allocated in the first year of application of the single payment scheme shall be subject to application under the single payment scheme in accordance with Article 34(3) of Regulation (EC) No 1782/2003”. This made it clear that the 2005 entitlements were established by the 2005 IACS application and that it was only those entitlements that were subject to the art 18(2) “best value” rule.

[31] This construction was confirmed by recital (13) of the preamble of the Implementing Regulation which made it clear that the “best value” rule was to be applied only in the initial allocation year. It referred expressly to “allocation of payment entitlements” and allocation of payment entitlements only took place during the first year. Subsequent allocations from the national reserve could not be treated as an allocation during the initial allocation year.

[32] It was clear that art 18(2) applied only “in the first year of application of the single payment scheme”. It was related to “the number of hectares he declares” in that first year and it was this which was linked to “the highest value”. Where a leased farm was to come in hand, a provisional allocation was earmarked from the national reserve, but that allocation was not allocated until the land came back in hand and an IACS claim was made. At the time of the provisional allocation the entitlement could have no value to be applied to the highest value test. The entitlements only acquired a value in the year of actual allocation when they would have the value applicable at the time. This was admitted by the Scottish Ministers when they said: “ … the entitlement to payment from the National Reserve would have been allocated at the time of the application, although payment would be delayed to ensure the right value of the reference amount would be paid at the right time.” In other words, the respondents appeared to accept that the “right value” only arose when there was a claim on the entitlements. This could only happen after the farm came in hand and was claimed on the IACS. So, the best value rule should not be applied to the Tythehouse where the provisional allocation was not activated until 2007.

[33] It was said that, on the Scottish Minister’s approach, if a farm became available a number of years after the single farm payment scheme came into effect, there could be circumstances where, if entitlement was not allocated until that year because that produced the highest value, the original entitlement would be lost and the farmer might have no entitlement from the original holding. He might have to farm for a few years without SFP.

Mr Howlin’s submissions for appellant

[34] Mr Howlin addressed aspects of the appellant’s case which were said to turn more closely on matters of European Law although it was recognised that there was some overlap between the two submissions.

[35] Article 18(2) operated by reference to farmers in a "special situation". This term had its origin in art 42(4). The power given by that provision was exercised by the Commission in art 18(1) of the Implementing Regulation, which defined it as meaning “the farmers referred to in Articles 19 to 23a of this Regulation." Those provisions were (in summary) [1] art 19 (Dairy Farmers), [2] art 20 (Transfer of leased land), [3] art 21 (Investments), [4] art 22 (Lease and purchase of leased land), [5] art 23 (Reconversion of production) and [6] art 23a (Administrative acts and court rulings).

[36] Two points were significant. First, each of the articles was concerned with how a farmer in this or that "special situation" was to have his reference amount or his payment entitlements "established" or "calculated". Secondly, with one exception, none identified a "special situation" in such a way as to overlap with a case of "hardship" (meaning force majeure or exceptional circumstances) as envisaged by art 40(4) of the Main Regulation. In other words, but for one exception, "special situations" on the one hand and cases of "force majeure or exceptional circumstances" on the other hand were mutually exclusive.

[37] The one exception was art 19 ("Dairy farmers”) but, in order for a dairy farmer to be in a special situation, it was not enough for him to point to force majeure: he also had to show (1) that he leased all or part of his individual reference quantity and (2) that the very reason why he leased it was the force majeure.

[38] Article 18(2) operated by reference both to certain provisions of the 2004 Regulation and certain provisions of the Main Regulation. There was, within article 18(2), a contrast between, on the one hand, the "arts 19 to 23a" element and, on the other hand, the "arts 37(2), 40, 42(3) or 42(5) " element. Where one or other of arts 19 to 23a was concerned, the payment to the farmer had to come from the national reserve whereas, where one or other of the relevant provisions of the Main Regulation was engaged, either there was, in some cases, no payment from the national reserve at all or, in certain cases, payment from the national reserve was simply discretionary – because such payment was made under art 42(3) or 42(5). There was no obvious reason why art 18(2) should cut across the distinction between those cases which involve payment from the national reserve and those which do not.

[39] He referred to the French text which appeared to be to the same effect as the English - although the reference to conditions was plural. By contrast, the term used in the German text to conjoin the two sets of articles was “oder von”. This pointed more clearly to a disjunctive approach.

[40] Counsel drew attention to the decision of the Dutch appeal court, in A v. Minister van Landbouw in which that court (at paragraph 5.3) appeared to find that the effect of art 18(2) was that one proceeds on the basis of the highest amount that a farmer can get if each of the enumerated conditions is applied separately. He referred also to an earlier decision A. -v.- Minister van Landbouw where the same court, having disposed of one branch of an appellant's case which proceeded upon art 40, then refused a further branch of the appeal which sought payment from the national reserve. In so doing, the Dutch court had not stated in terms that reliance could not be placed both upon art 40 and on an entitlement from the national reserve. It described entitlements from the national reserve as "extra" entitlements and found that the appellant had failed to prove the facts which would have qualified him to receive entitlements from the national reserve

[41] Mr Howlin contended that the Commission, in enacting art 18(2), had no power to enact a provision with cumulative effect. The appellant recognised that the Court had no power to strike down a legal act of the Commission. The argument was advanced in support of the submission that the case should be referred to the ECJ.

[42] The starting point for this chapter of the submissions was art 42(4) empowering the Commission to define "special situation". That power was to be exercised "in accordance with the procedure referred to in art 144(2)". Article 144(2), in turn, incorporated the procedure laid down in paragraphs 4 and 7 of Decision 199/468/EC. However, those paragraphs were concerned with matters of procedure, not of substance, and did not require further consideration. It was submitted that where implementing powers were conferred upon the Commission, the case-law of the Court established that: "within the framework of those powers, the limits of which must be determined by reference amongst other things to the essential general aims of the legislation in question, the Commission is authorised to adopt all the measures which are necessary or appropriate for the implementation of the basic legislation, provided that they are not contrary to it". Counsel referred to the Joined Cases C-14/06 and C-295-06 European Parliament and Denmark v. Commission, and the authorities mentioned therein at paragraph 52. It was submitted that the provisions of art 18(2) went beyond what was "necessary" or "appropriate" for the implementation of the Main Regulation. The only candidate for a provision conferring power on the Commission to enact anti-cumulation provisions was that in art 35. This did not confer upon the Commission carte blanche to exclude the availability of single farm payments within the SFP scheme itself. Rather, they allowed the Commission to restrict the extent to which a claim under the SFP scheme might be combined with (i) any other direct payment and/or (ii) any aid not covered by the Main Regulation. The true ambit could be understood by reference, in the first place, to art 1 of the Main Regulation.

[43] In the Main Regulation, "direct payment" was defined, in art 2(d), as meaning "a payment granted directly to farmers under an income support scheme listed in Annex I". Annex I was entitled "List of support schemes fulfilling the criteria set out in Article 1”. It set out 27 "Sectors" to which support schemes applied and indicated, in the case of each, the "Legal basis" and certain "Notes". The single payment scheme was but one of the 27 Sectors. Its legal basis was Title III of the Main Regulation. In Annex I, the other sectors, whilst falling within the scope of the Main Regulation in terms of art 1, did not form part of the single payment scheme.

[44] It followed, he submitted, that the definition of a "direct payment" as "a payment granted directly to farmers under an income support scheme listed in Annex I", embraced, on the one hand, the single payment scheme itself and on the other – and, indeed, in contradistinction to the single payment scheme – the 26 other "Sectors" set out in Schedule I. This being so, what art 35 empowered the Commission to do was to "provide otherwise" for the purpose of ensuring that if, in respect of a particular number of eligible hectares, an application was made for single farm payment, no claim could be made for certain other payments falling within the remaining "Sectors" listed in Schedule I. This was quite different from a power to prevent double claims within the confines of the single payment scheme itself.

[45] He contended that, if art 35 did not have this restricted meaning and effect, its wording was ambiguous and that was, itself, a ground for making a reference to the ECJ.

[46] Counsel also contended that, in enacting the Implementing Regulation, the Commission was obliged to state the reasons upon which that Regulation was based: art 296, second paragraph, of the Treaty on the Functioning of the European Union,”TFEU" (formerly art 253 TEC, formerly art 190 EC). He referred to various general rules as to reasons. The general rule was that the stated reasons for a legal act must set out the principal legal and factual considerations which underlay the adoption of that act: see, for example, Case 2/56 Geitling. He accepted that the general rule did not require all of the relevant considerations to be set out: see Case 203/85 Nicolet Instrument GmbH v Hauptzollamt Frankfurt am Main-Flughafen at p. 2059. There was a distinction between individual decisions and acts of general application. In the case of decisions, detailed reasons were required but in the case of regulations and directives, detailed reasons were not required: it was sufficient to state the general situation: see for example Case 250/84 Eridiana at p. 146. The individual provisions of a regulation, did not require to have specific reasons set out "to the extent that they are self-evident and are consistent with the regulation as a whole": see Case 18/62 Emilia Barge at p 613.

[47] He suggested that it followed that there were two tests to be applied: self-evidence and consistency. But the reasons for the enactment of art 18(2) were not self evident, not least because that article cut across the distinction between those payments which came from the national reserve and those payments which did not come from the national reserve and the reasons for this were unintelligible. The article also cut across the distinction between cases which did, and cases which did not, involve force majeure in a manner, which was unintelligible. Precisely because those distinctions were cut across by the article, the requirement of consistency was also not satisfied. In such circumstances, the Implementing Regulation required to give at least some intelligible indication of the reasoning behind art 18(2). The only hint of any such reasoning was to be found in the preamble at recital (13). The first sentence of that recital was unexceptionable but an inadequacy lay in the second sentence, and particularly in the use of the word "therefore". This suggested that the ensuing consideration followed, as a matter of necessity, from that which preceded. But far from following as a matter of necessity from the Commission's power to define special situations, the introduction of anti-cumulation provisions was simply a non sequitur.

[48] The appellant's challenge was competent and not out of time. References to the Court by the national courts of Member States proceeded upon art 277 of the Treaty but it was necessary first to have in mind the provisions of art 263 TFEU. It was self-evident that the appellant was not one of the institutions mentioned in the second indent of art 263. However, art 277 TFEU covered the situation. The appellant had title to challenge the validity of art 18(2). The application was competent. Although there was a potential time limit in terms of the final paragraph of art 263, it was submitted that this was not a bar to the Land Court's making the reference which the appellant sought. Article 277 of the Treaty, conferred a right of challenge and did so notwithstanding the expiry of the period set out in art 263.

[49] There was real doubt as to: (i) the meaning of art 18(2); (ii) the Commission's power to enact art 18(2); and (iii) whether the Commission has complied with its obligation to state its reasons for enacting art 18(2). In any event, as the Land Court itself had no power to deal with points (ii) and (iii), a reference to the Court was necessary.

[50] We raised with counsel the need for construction of art 18 to be consistent with the provisions of art 13 which were in similar terms. The appellants provided a written submission in response. They pointed out that art 13 came within Section 2 “Allocation of payment entitlements outside the national reserve” and was therefore different from Section 3 “Allocation of payment entitlements within the national reserve”. Article 13(3) was important in that it recognised that there was to be taken into account not only hectares inherited but also the hectares relating to the original holding. Article 13(4) only applied the best value rule to the hectares inherited but not to the hectares of the original holding. It was an example of the Commission accepting that holdings can be added together. But it was not identical to art 18. In particular, it avoided the situation of a farmer in a special situation, who has already triggered at least one of arts 19 to 23, then only having to trigger one more, whereas in art 13(4) the farmer in paragraph 1 had to trigger two of the articles. In any event, the appellant submitted that art 13 should also be construed in disjunctive way. It did not support either party’s submission anent the proper construction of art 18(2).

Submission by Mr Cameron for the respondents

[51] The respondents submitted that the word “or” where it linked the articles specified in art 18(2) should be construed conjunctively not disjunctively, and as a result that the various provisions therein read as a single list, with the consequence that if two or more of any of those provisions applied (as in the appellant’s case: art 22 and art 40) then the “best value” rule also applied and the appellant was thus unable to accumulate the benefits from each allocation.

[52] The word “or”, whilst predominantly a “disjunctive” conjunction could be used as a “conjunctive” conjunction both in terms of English usage and jurisprudence. He cited White v Supple; Regina v Federal Steam Navigation Co. Ltd and the Federal Court of Australia in Abbott Laboratories v Corbridge Group Pty Ltd.

[53] Any distinction between the two sets of articles in art 18(2) was nothing more than a reflection that they came from two separate legislative sources. The article did not draw any further distinctions. That was the intention. It did not distinguish between any of the articles listed therein except with regard to their legislative origin. He pointed out that the effects of allocation under any of the provisions listed in art 18(2) was the same. They all provided the quantity or reference amount necessary to work out an entitlement value. The aim was to deal with situation where something had occurred which required specific provision to allow the farmer to claim or be reinstated to the situation he would have been in under the old system. If the intention had been to create two distinct “lists”, the provision would say so expressly.

[54] The use of the word “condition” in the singular was, he said, of central importance. The reference in art 18(2) to a situation where “meets the condition… [in the singular]” for applying two or more of the relevant provisions could be contrasted with “conditions” [in the plural] in relation to each article applied (found in the last line of art 18(2)). The “condition” of applying two or more articles is contrasted with the “conditions” in relation to each individual article.

[55] Likewise, the phrase “by applying separately each of the Articles” in the last line of art 18(2) implied general application to each individual article in the entire list as a whole. A “comparative exercise” was envisaged: a farmer in a special situation would obtain the benefit of the highest value of payment he would be entitled to under any one of the enumerated articles.

[56] Article 18(1) defined farmers in a “special situation” as being “the farmers referred to in Articles 19 to 23a” of the 2004 Regulations. Thus, when art 18(2) spoke of farmers “in a special situation” meeting the condition for applying two or more of the relevant provisions, such farmers by definition would already fall within one of the articles. In that sense, art 18(2) would always apply to farmers who were in a “special situation” anyway. He submitted that this fact removed the emphasis from there being two distinct lists or categories. He suggested that if the disjunctive approach was correct, a farmer might “qualify” for best value as a farmer who was classed only under two or more of the provisions of the Main Regulation. He suggested that this could not be correct. Linked to this, it would follow that art 18(2) would apply where a farmer, being in a special situation by virtue of art 18(1), qualified, separately, under two or more of the “special situation” provisions (arts 19 to 23a of the 2004 Regulations) alone but not under any of the 2003 Regulations provisions. It was submitted that art 18 as a whole pertained to farmers in a “special situation” and it would not follow the logical content of the article then to include a category of special situation farmers as one which should only be evaluated against itself. In short, there would be no point in including reference to the 2003 Regulations articles in art 18: those articles would instead merit their own provision.

[57] In addition, the use of the word “or” (rather than “and”) before the last article listed, namely “42(5)”, was significant because it demonstrated the importance of each individual, stand-alone article rather than suggesting a second “list” as distinct from the first “list”. Also, the reference to “value” and “highest value” strongly suggested one payment with payment entitlements of the highest value. The wording did fit the situation of a person who qualified for payment adjustment due to a 2003 Regulations provision also receiving an additional payment as a special situation farmer. On its face, the provision did not allow for two streams of payment at different values.

[58] He referred to A v Minister van Landbouw where the appeal court of the Netherlands had held that the benefits should not accumulate. This decision from an appeal court in a member state supported the respondents. No real assistance was provided, either way, by a comparison of the various language translations. He cited cases dealing with the issue of divergence in language: CILFIT at paragraphs 18 to 20 and Kraaijeveld at paragraphs 28 to 31. He suggested that comparison of alternative language versions was just as likely to reveal an inconsistency as it to resolve an ambiguity.

[59] Using standard tools of interpretation, the provision at issue had to be interpreted by reference to the purpose of the general scheme of the rules of which it formed part: Diageo, paragraph (18). The respondents accepted that a purposive approach should be taken to construction of art 18(2). The intention of the reforms introduced by the 2003 and 2004 Regulations was to ensure a fair standard of living whereby the shift from production based schemes to producer support was to achieve the effect of leaving the amounts unchanged, with payments under the new regime being broadly equivalent to those under the old schemes, which also encompassed the national reserve and the reasons for its institution and use. The respondents submitted that the previous regime had to be considered when applying the new scheme. The scheme was not to give the farmer everything he could get. The national reserve was a limited fund and its use was both specific and restricted: recital (29) of the 2003 Regulations. It could not be the intention of the provision to leave farmers in a better position than they would otherwise have been under the previous regime by over-compensating them through multiple payments: Recitals 21 and 24 of the 2003 Regulations and R (on the application of Gwillim) v Welsh Ministers. Farmers such as the appellant should not benefit from the national reserve beyond that which would adjust their payment to reflect the situation they would have been in under the previous regime. Lastly, recital (13) of the 2003 Regulations expressly provided for rules against accumulation of benefits in relation to special situations.

[60] In relation to the concept of equal treatment, it was a basic proposition of EU law that the principle of equality required that comparable situations were to be treated in the same manner unless there were objective grounds which justified a difference in treatment. In the context of the common agricultural policy, this was to avoid distortion of competition. The requirement of neutrality was not absolute. The aim was to ensure “as far as possible” that neutrality applied. Article 37 farmers and art 40 farmers, arguably were are not in a comparable situation on account of the fact that the latter had experienced adversity through force majeure or other exceptional circumstances. There is no explicit provision that there must be equal treatment between an art 37 farmer and an art 40 farmer. He contrasted the express reference to the principle in art 42 in relation to the national reserve.

[61] The conjunctive interpretation of art 18(2) supported the purposes of the legislation. It also ensured “equal treatment”. He said that there was a multitude of combinations that might arise. A farmer might fall into a special situation on several, or even all, of the bases provided for in arts 19 to 23a and thus potentially qualify for multiple awards. It could well be that where a common set of rules was applied different effects could be produced depending on the factual circumstances of each case. That was not the same as legislative provisions themselves treating comparable situations differently. Even if the rules here produced different effects, the principle of equal treatment was not breached. But, in any event, as long as these effects could be objectively justified the principle of equal treatment would not render art 18(2) invalid. He referred as an example to SAM Schiffahrtand Stapf v Germany. In this context, it was trite law that justification depended on the particular circumstances of each case and the objectives of the measure in issue. The Commission had a wide discretion: Bozzetti v Invermizzi at paragraph 30. The purpose of art 18(2) was eminently sensible and capable of objective justification. “Best value” provided a mechanism which allowed a farmer to retain the result of an adjustment to their entitlement (either via the national reserve or via “hardship”) but without being over-compensated. It would be highly impractical and unduly complex to devise a calculation which catered for individual circumstances or which required the respondent to look in detail at the specific, financial awards the system yielded for each applicant as a means of assessing equality. The system would inevitably produce some farmers who benefited and others who did not. The system had to cater for the majority of farmers (as a class) not individual farmers. Provided that the same rules applied to all and were applied similarly to each applicant in the same situation that was sufficient in terms of equal treatment. There is no inconsistency between different results and equality of treatment.

[62] Article 18(2) plainly envisaged scenarios where farmers met the conditions external to the “national reserve”. Allocation under art 37(2) was totally outwith the national reserve. There was an apparent contradiction in the appellant’s contentions. He understood him to accept that where one of the 2003 Regulations provisions was engaged there was, in some cases, no payment from the national reserve, or in some cases, a payment from the national reserve which was discretionary. There was no justification for reading the reference to art 40 in art 18(2) in the limited way contended for suggested by the appellant. If a farmer came within the “hardship” provisions of art 40 in any way, and not simply under art 40(5), then art 40 would apply in terms of art 18(2). If the Commission had intended a restrictive interpretation the reference would have been expressly to art 40(5) rather art 40 without qualification. This could be contrasted with the specific references to the various sub-paragraphs in arts 37 and 42.

[63] In relation to the power of the Commission to enact art 18(2), it was agreed that it was not open to the Land Court to resolve such a question. There were issues of competency and time-bar in addition to the substantive point. In respect of the substance, he submitted that the Commission was entitled to lay down detailed rules for the implementation of the single payment scheme provided for in the Main regulation. Article 18(2) was within the competence and vires of the Commission. Recital 13 expressly referred to art 42(4) of the 2003 Regulations in allowing the Commission to define special situations giving the right to establish reference amounts. The Commission had ample power to enact art 18(2). The Commission had a wide discretionary power when legislating in the context of the Common Agricultural Policy: see, inter alia, Galileo Zaninotto v Ispettorato Centrale Repressione Frodi – Ufficio di Conegliano – Ministero delle risorse agricole, alimentari, e forestali at paragraph 64: and more recently, Agrana Zucker gmbh. Article 18(2) could not, on any view, be said to be “manifestly inappropriate” when regard was had to the purposes of the legislation. It plainly was appropriate given the objectives of the legislation. Article 35 of the 2003 Regulations was agreed to be irrelevant to the matter.

[64] The general case law of the EU and the terms of art 296 TFEU required legal acts of the EU to provide an adequate statement of reasons on which they were based. But the amount of detail depended on the nature of the act and the context in which it was to operate: R v Secretary of State, ex parte Omega Air. It was unnecessary for the details of all relevant and factual aspects to be given It was sufficient to disclose the essential objective. Article 18(2) itself contained the reasons for its enactment. A statement of reasons for the Commission’s measures may lie is in the actual measure itself: Sarrio v Commission and Commission v European Parliament and Council. In any event, reference should be made to the recitals generally in the 2003 Regulations, and specifically to recitals (5), (6), (13), and (18). Recital (13), gave an express and definitive summary of the reasoning behind art 18(2) . These recitals, when read with the provisions of art 18(2) itself read with art 42(4) of the 2004 Regulations, showed there was no basis for the argument that the Commission had given inadequate reasons.

Timebar and competency

[65] Counsel dealt in some detail with the provisions relating to the issues of competency and timebar. However, it was not disputed that if the Court was to make a reference to the ECJ in relation to construction of art 18, the validity of an Regulation as an act of the Commission could also be referred.

[66] The grounds of review found in art 263(2) TFEU, originally derived from French administrative law, provided the basis upon which an applicant might establish that a measure was unlawful and thus able to be annulled under what were known as the “direct action” or “annulment” provisions of art 263. However, the respondents contended that these provisions did not apply to the appellant’s circumstances. Whether or not the appellant, as a private citizen, would have had standing to make a challenge under art 263 , that article imposed a time limit of two months from the date of publication or notification of the measure. The present challenge was well outwith that time limit. Article 277 TFEU would allow the appellant to defeat the time limit but it allowed art 263 to be invoked only before the ECJ and not in national courts: Wohrmann v Commission. Article 277 did not constitute an independent cause of action. It was incidental and ancillary in nature: CSF and CSME v Commission. The appellant would require to bring substantive proceedings before the ECJ under some other provisions of the European treaties in order to invoke art 277: Wohrmann v Commission.

[67] Counsel submitted that the proper construction of art 18(2) was clear. The situation was within the scope of the concept of an acte clair. In any event, the Court should not exercise its discretion to refer the matter of the interpretation of Article 18(2) to the ECJ because it could properly resolve the issue for itself: HP Bulmer Ltd v J Bollinger SA (No.2); Regina v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd., Ex parte Else (1982) Ltd. and Another; Regina v Same, Ex parte Thomas and Booker Aquaculture Ltd (t/a Marine Harvest McConnell) v Secretary of State for Scotland. It was submitted that the Land Court could have complete confidence in resolving the issues themselves and should have no “real doubt” in the matter. Reference was made to Gladwin v Scottish Ministers.

[68] The challenge to the validity of art 18(2) could also be dealt with by the Court with complete confidence. Whilst the Land Court could not resolve the question of validity on either basis argued for by the appellant, it could competently consider it and conclude that it was valid: Foto-Frost v Hauptzollant Lubeck-Ost. There was no real room for doubt that the Commission had power to enact art 18(2) and had given adequate reasons. The Court should only conclude that a question has been raised within the meaning of art 267 if it considered the argument well-founded: R (on the application of IATA and ELFAA) v Department of Transport. The appellant’s arguments did not meet that test. Accordingly, reference to the ECJ on any of these matters was unnecessary.

[69] In relation to the delay in the appellant obtaining vacant possession of Tythehouse Farm, it was contended that there was only one application to the national reserve. That was the application of 14 March 2005 which covered both farms. Allocation of entitlement from the national reserve would have been made at the time of the application. It was only payment which would be delayed. This would ensure that the right value of reference amount was paid at the proper time. The only difference would be in timing of the actual payments. Article 18(4) applied. As the whole relevant areas of the two farms was declared in 2005, it was all within the first year and art 18 appplied. The use of the word “declared” in art 18 did not mean “claimed in an IACS application”. It clearly had a wider meaning.


[70] We have little doubt that the conjunctive approach to art 18 is the one which would naturally follow from the language used in the English version of the Implementing Regulation. We have found nothing of assistance in the domestic authorities cited in relation to proper construction of the word “or”. While dicta stressing the normal disjunctive meaning must be kept in mind, it is clear that it can have a conjunctive effect and that, essentially, it is all a matter of context. We are satisfied that if an English author had intended to treat the two groups of provisions separately, the provision would have been expressed in a different way.

[71] The submissions of counsel on behalf of the appellant inevitably overlapped to some extent and, in the circumstances, it would be wrong to read too much into matters of emphasis. However, we think it is fair to say that they proceeded on the basis of an assumption that the construction which would appeal to this court would be the conjunctive one. Their primary submission was that the matter was not sufficiently clear for us to reach a confident view. It was contended that we would have to make the reference because a decision on proper construction of a European Regulation was plainly necessary to enable us to reach a decision and it was submitted that the question could not be treated as acte clair.

[72] With some hesitation we have come to the view that this is correct. We have not found this a particularly easy matter. The further question of whether we have a reasonable doubt about construction, creates a range of doubt of its own. It is sufficient to say that, in the present case, we have not been able to be satisfied that the appellant’s submissions have no prospect of success. There are two aspects to this: the language of the provision and the underlying purpose.

[73] In relation to the first, it was conceded on behalf of the respondents that the position would have been different if the connecting term had been “or of” instead of a simple “or”. We understood Mr Cameron to accept that this might tip the matter in favour of a disjunctive construction. However, even if he did not mean to go so far, we think it would have created a real ambiguity. We were advised that the German version was expressed as “oder von” and it was not disputed that this could properly be seen as equivalent to “or of”.

[74] We did not find persuasive the respondents’ contention that the use of the word “condition” in the singular at the start of art 18(2) was of central importance. We think this could apply whichever approach was taken to the second ”or”. However, we observe that the French version uses a plural term and if this is indeed of central importance, it would be a further pointer to a need for reference. It is plainly important to have a decision from a court capable of giving proper consideration to different language versions.

[75] Mr Cameron also referred to the implications of the third “or” before the reference to “42(5)”. However, this seems to us as consistent with two separate lists as with a single list. We did not find persuasive the submission that the provision had only one payment in mind. Where the provision applied, that would indeed be the outcome but that outcome, in itself, could cast no light on when provision should be applied.

[76] We have considered the weight to be given to the headings of the various provisions. It is clear that art 18 is found under the broad heading of “Allocation of payment entitlements within the national reserve”. It was contended that this meant that reference to art 40 should be construed narrowly as Mr Feakins’ adjusted reference period under art 40 did not involve the national reserve. We are not persuaded that this is a factor of any weight. The effect of art 18 relates to payment from the national reserve and it seems to us irrelevant that some condition is referred to which would not, on its own, involve the national reserve.

[77] The second concern arises from the fact that we have not been persuaded by any examples provided by the respondents that there is a sensible explanation for the so-called “best value” rule, at least in its application to cases involving the main provisions of art 40. We have found it hard to see why eligibility under art 40 should exclude farmers in special situations or force them to a choice. A construction which avoided that effect would seem preferable. We recognise that art 40(5) raises separate questions and in the following discussion we use “art 40” as referring to the main provisions of that article. They are capable of working without paragraph (5).

[78] It appears to us that the aim of art 40 can properly be said to be to do no more than “normalise” the position in relation to other farmers not affected by exceptional circumstances. The aim was to allow the single farm payment to be based on an applicant’s established patterns of entitlement so that he, or she, would be no worse off under the new system. The main effect of art 40 would be to put affected farmers as closely as possible back into the same position as they would normally have been, but for the adverse affects of special circumstances. In other words to put them in the same position as other farmers. On the other hand, provisions allowing an allocation from national reserve can be regarded as allowing something “extra”. A person who qualified for entitlement from the national reserve did so because his circumstances were not the same as before. He was doing something which could not be directly compared with other farms. The conditions under which he should be found entitled to an extra were matters of policy. Provided the provisions applied to all farmers in the same way, no issues of equality of treatment or proportionality might be expected to arise. In no case was it demonstrated to our satisfaction that there would be any element of unfairness if a claimant had benefit of both a normalising provision and an extra allowance. Accordingly, it seemed hard to justify setting “normalising” provisions against “extra” provisions. They seemed to raise separate issues.

[79] If art 40 could properly be taken as the paradigm for the second group, it is hard to see why there should be any need to choose between the normalising of figures under that provision and the right to additional entitlement from the national reserve.

[80] We invited Scottish Ministers, if they could, to provide examples art 18 being necessary to prevent a farmer who qualified under art 40 and also under the special provisions from gaining an unfair advantage over a farmer who only qualified under the latter. Their first attempts to do so were set out in somewhat cryptic terms and did not seem to address the problem of comparison. Our attempts to analyse the tabulated examples provided us with little illumination. We refer to our Note of 27 December 2012 for our comments on the examples and for completeness attach as an appendix to the present note a copy of the tabulated material on which these comments were based. When our difficulties were drawn to the respondents’ attention, an explicit comparative example was provided. It dealt with circumstances broadly similar to those of the appellant but it relied on an assumption of a very erratic pattern of “normal” farming and we were not persuaded that this was a realistic example of any typical situation – even accepting the figures used, there was no obvious unfairness as the figure for 2002 showed that in normal circumstances the potential of the applicant farmer in question was greater than that of the supposed comparative neighbour. We fixed the second hearing with a view to discussing this further. We recognised that the respondents’ records would not be expected to provide actual examples of comparisons with other farmers. Mr Cameron said that no clearer examples could be found.

[81] It is, of course, plain that the provisions in the second group of articles listed in art 18 are not limited to the normalising provisions of art 40; the group is not limited to provisions which seek to “normalise” the reference period. It is also important to keep firmly in mind that these regulations apply over a vast number of holdings and a wide variety of circumstances. There will inevitably be some apparently unfair results. Putting the matter in the broadest terms, we recognise that a provision will not be invalid simply because it can produce apparently unfair results in some cases if, in the main, it addresses a real problem and provides a workable response.

[82] We are satisfied that doubts about the purpose to be served by art 18 can properly be used as a guide to construction. A disjunctive approach would be expected to avoid the problem in relation to the general provisions of art 40. However, that might create its own problems in relation to some of the other provisions. We do not find the doubts as to purpose to be a clear guide. However, it cannot be said with complete confidence that the ECJ would not find this a relevant factor. We are of the view that it would not tip the balance of a construction if we were concerned only with the English version but if the provision had been expressed in terms of “or of”, a purposive construction to avoid an apparently unfair result might well have added weight to a disjunctive reading. Such a construction might be preferred by a court seized of all the language versions including German.

[83] We recognise, that the Dutch Court in A, te B v. Minister van Landbouw, Natuur en Voedselkwaliteit expressed no doubt in expressing a cumulative construction of art 18. But we do not know whether they had been made aware of the German version. The discussion in the case was principally about the effect of Dutch domestic provisions. The report does not reveal what submissions they heard in relation to art 18.

[84] We have previously expressed the view that the best course for us to follow will normally be simply to decide the case on the basis of our own view of construction and leave it to the Court of Session to decide whether a reference is necessary. Their perception of the strength of an opposing argument and the merits of an issue of construction may be different from our own. The ECJ should not normally be troubled where a matter might reasonably be expected to be determined beyond doubt by the senior domestic court. However, the domestic authorities cited by Mr Cameron on this issue of acte clair make it clear that there are circumstances in which a lower court ought itself to make the reference. In the present case, the appellant urged us to make a direct reference rather than prolong what has already been a lengthy process for him. Although this issue is one for exercise of our own discretion we accept that it is proper in exercising that discretion to give modest weight to an appellants wishes. In all the circumstances of the present case, we are satisfied that it is appropriate to make a reference to the European Court in terms of art 267 of the TFEU.

[85] The proposed challenge to the validity of the provisions of art 18 raises quite distinct questions from those of construction although it involves consideration of the same material. We confess to some confusion in relation to the issue of the competency of a reference seeking to challenge the validity of the provision.We heard submissions in relation to arts 263 and 277 of the TFEU. However, Mr Cameron accepted that if we made a reference under reference to art 267, it would be competent for the ECJ also to hear the substantive challenge. It is unnecessary for us to say more.

[86] On the substantive issue, we start with an assumption that it is indeed a sound and enforceable provision. In R (on the application of IATA and ELFAA) v Department of Transport, the ECJ was asked whether the relevant article, now art 263 of TFEU was to be interpreted as requiring a national court to make a reference on a question as to the validity of a Community Act only if there was more than a certain degree of doubt concerning its validity. The Court said that where national courts considered that the arguments in support of invalidity were “ill-founded” they were entitled to reject them and conclude that the provision in question was completely valid. The Court went on to contrast that with the situation where the national court considered the arguments “well-founded”. In such a case, the national court had to make a reference: see paragraphs 28 – 32. We recognise that the term “well-founded” can carry the meaning that it is an argument which will succeed. However, we are satisfied that it is a word which must take its meaning from the context and in particular the contrast with “ill-founded”. The latter means an argument which cannot succeed. We take “well-founded” to mean an argument with some prospects of success rather than one which is demonstrably correct. We have no doubt that in the normal course we would ourselves only remit to the European Court to consider validity where the grounds for challenge seemed to us to have reasonable prospects of success. Where there is to be a remit on the issue of construction which will require investigation of the same material we think it proper to make such a remit without ourselves requiring to come to a view as to whether the challenge is well-founded in the sense of being more likely to be successful than not.

[87] The appellant placed weight on the principle that “similar situations should not be treated differently unless differentiation is objectively justified”. For the reasons set out above they contended that the difference in the consequences for an applicant who had to rely on art 40 compared with the ordinary applicant could not be objectively justified. For the Ministers it was contended that applicants who required to rely on art 40 could not be regarded as in a similar situation to those who did not. Our view is that this is not a relevant distinction. In the context of provisions designed to ensure that the new scheme was fairly based on established patterns of entitlement – to put it broadly – it seems clear that art 40 should be viewed as intended to put affected farmers back into the same situation as they would have been had they not been affected. We heard no good reason for distinguishing between the so called “article 37” and “article 40” farmers. The greater difficulty arises over the question of whether a difference in treatment is “objectively justified”. We have not been satisfied that the difference is justified as necessary to prevent unfair accumulation of benefit. But we recognise that this is an issue better addressed by a court cognisant of policy objectives and their application over a wide range of schemes and the circumstances of different countries.

[88] We have had regard to the possibility that some results which might seem unfair or unbalanced on paper may not be so in practice. For example, there may well be cases where a farmer was able to use his compensation for FMD to branch out in a new direction and thus qualify for what might be described as “extra” entitlement, when no such possibility would have been open to the ordinary farmer comparator. However, nothing was made by Scottish Ministers of this as a relevant example. More broadly, we recognise that it may be misleading simply to assume that the appellant’s situation is typical of cases expected to arise under art 40 or that a clear distinction can be drawn between normalising provisions and extra entitlement provisions. However, there is no doubt about the appellant’s situation. It is not a contrived example. We think it reasonable to proceed on the basis that it demonstrates that in a typical situation a person who has had to rely on art 40 to provide what is ex hypothesi a fair comparison with his, or her, unaffected neighbour is then significantly disadvantaged, by comparison with that neighbour, if that person seeks to expand the business in ways which would normally give an entitlement to benefit from the national reserve.

[89] Although the second group of articles referred to in art 18(2) is not limited to provisions which seek to normalise the reference period, and art 40(5) raises its own questions, we have felt it reasonable to proceed on the view that the main art 40 cases were likely to be an important group both in terms of numbers and value of claims. The respondents did not suggest otherwise. Mr Feakins’ own case was a clear example of the potential inequality of treatment between farmers who had been able to farm normally and those who had either suffered unexpected harm or had deliberately chosen a course which had the effect of reducing their grant income in the normal reference period.

[90] We also heard submissions as to the proportionality of art 18 in the context of measures properly intended to prevent unfair duplication of entitlement. Issues of proportionality are notoriously complex. The concept will apply in different ways, at different levels and in different contexts. A wide discretion is to be accorded to the Commission in the enactment of Regulations. A national court should be slow to find grounds for criticism. We have not found it possible to reach a clear view as to the strength of this argument. If Mr Feakin’s example was to be taken as typical it would be seen that the provisions under challenge produced a clear loss to him when their intention was to prevent him having an unfair gain. We heard no convincing answer to Mr Howlin’s general submissions on this issue. However, we are very conscious that the Regulations are to apply in a wide range of circumstances. The inability of Scottish Ministers to provide good examples from their own experience does not mean that clear examples do not exist of the risk of double gain from application of art 40 and the special situations. We stop short of any conclusion that this is an argument likely to succeed but clearly it is a stateable argument and as it is an issue which also arises out of the material discussed above we see no good reason to limit the scope of submissions available to the applicant by excluding this from the reference. The separate question of adequacy of reasons is intimately connected with the main argument. If that argument fails we would not expect the appellant to succeed on the issue of reasons. We do not now think this needs to be advanced as a separate question.

[91] If the appellant’s main submissions are upheld by ECJ, no separate issue will be left in relation to Tythehouse Farm. However, it is necessary to deal with the alternative submission that art 18 does not apply because the applicant did not “declare” this farm in the first year of the single payment scheme. We prefer the argument for the respondents. We see no justification for treating the word “declare” as limited to declaration seeking payment. We accept that the word appears to be used in that sense in, for example art 2 of the 2004 Regualtions and art 44 of the Main Regulations. But it is not given a technical definition. In the present context we accept that the appellant can be taken to have declared the area at Tythehouse in 2005. Entitlement will depend on the success or failure of his main arguments.


[92] We have come to the view that the issue of construction of art 18(2) is not entirely free from doubt and as it is clearly necessary to have a decision as to construction of that provision we should refer the matter to the ECJ in terms of art 267 of TFEU.

[93] We consider that there are reasonably stated grounds for challenge to the challenge to the validity of art 18, in particular in relation to the inclusion of the reference to the whole provisions of art 40 and we think it proper to refer that issue to the ECJ along with the reference under art 267.

[94] At an earlier stage we intimated the draft of a reference. Sir Crispin proposed certain revision but parties then reserved their positions, intimating that they wished to wait until the Court issued its decision on whether to make a reference before attempting to revise a draft. We have prepared a fresh draft taking account of our above decision and Sir Crispin’s proposals but also cutting some potentially extraneous material from the original. This gives parties a chance to consider, for themselves, what material should be added to give adequate notice of the essential features of their respective contentions.

[95] Note in particular that we see no reason why more detailed figures should not be inserted if agreed: see for example at para [9]. But, for the purposes of ECJ the figures are not critical and some matters can be left quite broad. At [17] we specifically invite parties to identify the salient authorities we should insert.

[96] Regard should be had to the Information Note which appears in the Official Journal of 28 May 2011. The aim is to be succinct but to provide a sufficiently complete summary of the relevant information needed to allow the Court and parties responding, a clear understanding of the factual and legal context of the main proceedings. This does not appear to us to require a full narrative of all supporting arguments prayed in aid by the parties. The Note contemplates a maximum of about 10 pages. Although Sir Crispin proposed that certain material be appended as an annex and, helpfully, was able to provide an example of an English Upper Tribunal case where this had been done, we think this maximum size target would be lost sight of, if reference was also made to an appendix. In the present case where the factual background is simple and the legislative provisions are in a narrow compass, we would not expect an adequate reference in this case to take as many pages as it might in some others. If parties wish to propose any material which could properly be omitted, they should feel free to do so.