THE COURT

(Lord McGhie, Mr D J Houston)

GLADWIN v SCOTTISH MINISTERS

(Application RN SLC 81/10 – Order of 18 May 2012)

AGRICULTURE – AGRICULTURAL SUBSIDIES APPEALS – REFERENCE PERIOD – EFFECTS OF AN ESA – DIFFERENT SCHEMES – WHETHER DIFFERENT REFERENCE PERIODS PERMITTED – CONSTRUCTION OF EUROPEAN LEGISLATION – WHETHER REFERENCE TO EUROPEAN COURT OF JUSTICE NECESSARY – ACTE CLAIR – REASONABLY CLEAR VIEW OF CONSTRUCTION – PRACTICAL CONSIDERATIONS – COUNCIL REGULATION (EC) NO 1782/2003 ART 40 – COMMISSION REGULATION (EC) 1974/2004 ART 16.3 – TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION – TFEU, ART 267.

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

[1] The appellant asked us to make a reference to the European Court of Justice in relation to the proper construction of art 40 of Council Regulation (EC) No 1782/2003 as read with art 16.3 of Commission Regulation (EC) 1974/2004. It was contended by the appellant that as the Scottish Ministers had accepted that the appellant’s production was adversely affected by the ESA Scheme for the years 2000 to 2002 in relation to sheep and that the reference period for sheep should, accordingly, be the years 1997 to 1999, the reference period for cattle should be the same because any change in reference period had to affect all calculations. The Ministers, on the other hand, contended that the effect of art 16.3 was to require them to apply art 40 by determining a reference period for each individual type of direct payment, so that the BSPS or SCPS and SAPS had each to be dealt with as entirely separate elements in the calculation.

[2] In our Note of 5 May 2011 we set out our reasons for concluding that the respondents’ construction was to be preferred. The case was sent to proof on the question of whether the ESA scheme had had an adverse impact on the appellant’s entitlements under the cattle schemes. After proof the Court held that it had not. Accordingly there was no justification for any change to the reference year for cattle based schemes on their own. That aspect of the appellant’s enterprise could only be properly reflected in his single farm payment if the reference period for cattle based schemes was tied to the change in relation to sheep. It was not disputed that on the facts as established after proof, the proper construction of the said articles was critical to the disposal of the case.

[3] In terms of art 267 of the Treaty on the Functioning of the European Union (“the TFEU”), we have a discretion to make a reference asking for a ruling on construction. It is unnecessary for us to consider all the circumstances which might properly be taken into account by this Court in the exercise of this discretion. It was accepted that in the circumstance of this case we should make a reference unless we were completely confident as to our view of construction. In other words, if we had any reasonable doubt as to that construction, we should refer the matter to the European Court of Justice. That was the approach set out by the Master of the Rolls in Reg v Stock Exchange, Ex p. Else Ltd 1993 QB 534 at 545D, and accepted by Lord President, Lord Rodger, in Booker Aquaculture Ltd v Secretary of State for Scotland 1999 SC 9 at 27A-B.

[4] It is difficult for a first instance court ever to be entirely confident that its decision is correct. We prefer to address the matter by considering whether we had, or have, any reasonable doubt about our conclusion. However, in adopting that expression we proceed on the view that the Master of the Rolls did not intend to use it as a term of art, borrowed from criminal law. Taken in context, he must have intended to reflect the idea of the matter being reasonably clear and free from any real doubt as the matter was discussed by Lord Denning in Bulmer Ltd v Bollinger S.A. under theheading “acte claire”.

[5] We recognise that we have previously used expressions which might be thought to fall short of a test expressed in terms of “reasonable doubt”. In our Note of 1 March 2011 setting out the background to our concern about the possible implications of the different constructions, we said we had a “tolerably clear view” as to the proper construction but were anxious to be sure that it was workable. However, in our Note of 5 May 2011 we discussed in detail the implications of two possible constructions of the provisions in question and said: “Had we had any real doubt about the issue we would have invited further submissions”[45, last sentence]. We are satisfied that this fairly expressed our view at that time and that this met the test as expressed in the Stock Exchange case. We have reconsidered the matter in light of the recent submissions but have found no reason to change that view.

[6] As discussed in that Note we considered that there was an obvious, straightforward construction. At [31] of the Note we said that it was not easy to read art 16.3 as intended to do anything short of requiring the whole provisions of art 40 to be applied to each individual scheme rather than requiring any change of reference period to be applied to all the schemes in a particular farmer’s operation. We remain of that view.

[7] Sir Crispin made much of the uncertainties we expressed as to the proper construction of related articles if the reference years were to be changed on the basis of individual schemes. It now appears that the discussion of the proper approach to other provisions casts no real doubt on the straightforward construction of the critical articles. It may be observed that there had been no attempt at the first debate to suggest that the meaning of arts 16.3 and 40 depended on proper construction of other provisions. However, we confess to considerable sympathy for persons such as the appellant whose continuing entitlements under the SPS have come to depend on the accidental impact of other business activities within the primary reference period. We were anxious to ensure that no stone was left unturned. However, we refer to the full text of our note for our views as to why such uncertainties do not themselves justify a departure from the straightforward construction of the provision itself. For completeness it may be added that we indicated at the recent hearing that our discussion at para [45] could properly be disregarded as a complete red-herring. Sir Crispin strongly submitted that such doubts and fears could not be dismissed as red-herrings but were a proper aspect of the problem of construction. However, we proceed on the view that problems of applying one construction as opposed to another are only relevant to the issue of construction if they help clarify the assumed intention of the legislators. We did not find that to be the case here.

[8] It may be added that we recognise that the appellants intend to take the issue further and we have given some consideration to the question of whether we should allow practical procedural issues to influence the decision. A reference would produce a final decision and we were told this would be likely to be completed within two years. We were told that an appeal to the Court of Session might take some fifteen months to reach a conclusion. If that Court took the same view as us, that would be the quickest and simplest method of disposal. If it did not, the route of appeal and then reference would double the time and expense involved. However, although there may be cases where we would consider it appropriate to give weight to such practical issues, we have decided, in the present case, that our view that the issue of construction is free from any real doubt and that reference is accordingly unnecessary, is the view which should prevail.

For the appellant: Sir Crispin Agnew of Lochnaw Q.C.; Leyshons, Solicitors, Peebles

For the respondents: Donald Cameron, Advocate; Scottish Government Legal Directorate