Low & Ors, R (on the application of) v Secretary of State for the Home Department

This is the judgment of the Court. The fourth appellant, Rising Sun Catering Services Company Limited, a company incorporated in the Republic of Ireland (the “Irish company”) employs or has sought to employ the first, second and third appellants, Ms Low, Ms Leong and Ms Yang (the “employees”), as restaurant workers allegedly “posted” to the United Kingdom for the purpose of the Irish company’s business as consultants and suppliers of staff to the fifth appellant, Hot Hot Grill and Bar Limited, a United Kingdom company which operates a restaurant in Norwich (“the UK company”). Under arrangements between the Irish company and the UK company, the latter paid the employees’ wages on behalf of the Irish company. The contracts of employment, however, are between the Irish company and each of the employees respectively.

The Irish company relies on article 49 of the EC Treaty as giving to it, and thus to the UK company and the employees, the right respectively to employ or to engage the employees, or to be employed, in the United Kingdom, despite the fact which is common ground that, subject to the right allegedly to be found in article 49, the employees are unlawfully in this country and cannot lawfully work here. Indeed, each of the employees is potentially subject to prosecution and removal. (The reference is to the number of the article in the Treaty as it stood at the time when the appeal was argued. The equivalent article in the Treaty on the Functioning of the European Union (following the Lisbon Treaty) now in force is article 56.)

Article 49 states –

“Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended.

The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Community.”

The philosophy of article 49 is that a company established in one member state of the European Union (to which I will refer as the country of establishment) should be entitled to employ its workers in its business in any other state of the EU (to which I will refer as the host country), on a temporary basis, so that that company can compete on a level playing field with other companies doing business in the host country. It could not do so if it were not permitted to bring its own workers to the host country. European Court of Justice (ECJ) jurisprudence has established that this right extends to the foreign establishment’s workers from third countries not within the EU. Such workers are commonly referred to as “third country nationals” or “TCNs”.

Because each member state of the EU is entitled to its own national laws regulating immigration, it has become necessary for the ECJ to find in article 49 the means to place limits on the extent to which such national laws can be allowed to impinge on the fundamental right of the undertaking from the country of establishment to operate in other member states by bringing its employees to work there. Thus the ECJ has been called upon in a series of cases to mediate between the fundamental article 49 freedom in European law and the legitimate interests of each member state to control immigration by means of its own domestic laws.

Also relevant in this context, although of more recent date and not directly in issue, is the Directive 96/71/EC, the Posted Workers Directive (the “Directive”). The purpose of the Directive is to ensure that posted workers are not exploited in the host country. It is not the source of the fundamental right relied on by the appellants, that is article 49, which of course is of an earlier date, and it does not purport to regulate that right but rather the consequences of it, but it is nevertheless relevant as illustrating the posted worker context and the underlying interests and purposes of the Treaty.

Thus the following provisions of the Directive may be referred to:

“(1)

Whereas, pursuant to Article 3(c) of the Treaty, the abolition, as between Member States, of obstacles to the free movement of persons and services constitutes one of the objectives of the Community;…

(3)

Whereas the completion of the internal market offers a dynamic environment for the transnational provision of services, prompting a growing number of undertakings to post employees abroad temporarily to perform work in the territory of a Member State other than the State in which they are habitually employed;…

(5)

Whereas any such promotion of transnational provision of services requires a climate of fair competition and measures guaranteeing respect for the rights of workers;…

(20)

Whereas this Directive does not affect either the agreements concluded by the Community with third countries or the laws of Member States concerning the access to their territory of third-country providers of services; whereas this Directive is also without prejudice to national laws relating to entry, residence and access to employment of third-country workers;…

Mr Padraig Ferrell, a director of the Irish company, provides in his witness statement the factual background concerning the Irish company’s business and aspirations. His statement is accepted by the respondent Secretary of State for the Home Department for present purposes only. He states that the Irish company was incorporated on 16 January 2008. Its principal objectives are to provide catering services and staff to Chinese cuisine restaurants and other catering outlets within the EU. He ascribes to recent changes in immigration policy in the UK a growing difficulty for such operations to recruit suitable staff with skill in the preparation and service of Chinese food. There are not enough such staff within the available work force legitimately within the UK or the EU. He has attempted to find suitable staff in China but has so far failed to do so. The company has therefore entered into employment contracts with TCNs unlawfully present and without any authority to remain in the UK. (It is accepted that such workers do not have lawful residence and have never lawfully resided or worked in Ireland, or in any other member state, either.) The details of the employment contracts are set out in order to show that they are properly protective of the workers’ employment rights and are for a limited (18 month) period only, after which the employees undertake to return to their country of origin. The company also enters into a “consultancy” contract with UK companies, typically a Chinese restaurant or similar catering business, in order to provide consultancy and staff recruitment services to such businesses. The restaurant businesses pay the staff supplied by the Irish company, but as agents for the Irish company, which remains their employer.

The TCN remains in the UK at all relevant times. However, the Irish company through its solicitors writes on behalf of its employees to the Secretary of State to regularise the TCNs’ otherwise unlawful status here. It seeks to do so by requesting a temporary residence permit for the duration of the employment contract, on the basis that the employee is a “posted worker” under EU law and derives rights of residence and entitlement to work based upon the Irish company’s freedom to provide services within the UK pursuant to article 49.

Mr Ferrell is anxious to demonstrate that this modus operandi fulfils a real and useful economic need in the UK and that his company’s solution is the only practical way of meeting that economic need.

The Irish company’s activities in this connection can be viewed through the cases of the appellant employees, Ms Low, Ms Leong and Ms Yang. Ms Low, who comes from Malaysia, entered the UK in April 2005 as a visitor intending to stay for up to 6 months. She was subsequently detained as an overstayer and removed from the United Kingdom in July 2006. She was again encountered in the United Kingdom in May 2008 and arrangements were made to remove her. Ms Leong, who also comes from Malaysia, came to the United Kingdom as a visitor in 2003. She was encountered working at the UK company’s restaurant in May 2008 and arrangements have been made to remove her too. Ms Yang is a Chinese national who first came to the UK in May 2006 and claimed asylum. All three are prohibited from working in the UK.

Applications to the Secretary of State were made by the Irish company’s English solicitors on behalf of these three appellants (among other applications) in February 2008. The applications are headed “Re: Application for Temporary Permits for Employees of Company duly incorporated & registered in an EU Member State to perform services in the United Kingdom for a limited period of time pursuant to Article 49 EC Law”. They typically refer to the law as established in ECJ jurisprudence as entitling the Irish company “to bring employees of the Company into the EU member state (where services are to be provided)”. They go on to state that “In order to perform this contract [the consultancy contract with the UK company], the Company will have to move the Applicants…to the UK restaurant premises for the duration of the contract…”; and that the applicants “are presently in the United Kingdom for the purpose of fulfilling the services which the Company has agreed with its client. As employees of a Company incorporated in an EU member state, they are entitled, pursuant to Article 49 EC Law, to validly enter and reside in the United Kingdom for the duration of the contract”. The applications ended “Given that the Applicants will accordingly be considered ‘posted workers’ validly working in the United Kingdom for the due performance of services on behalf of the Company, the Applicants are entitled to make the present application to be issued with temporary residence permits under EC law” (emphasis added). The Irish company thus sought to give the impression that the applicants were posted workers whom the Irish company was moving from Ireland to the UK in order to fulfil its contract in the UK.

It is now admitted, however, that the three employees have never been in Ireland, nor have they ever lawfully resided or been employed in Ireland – and that their status residing or working in the UK, subject to this litigation, is also unlawful.

The Secretary of State’s refusal letters are headed “Re: Spurious applications…”. They consider the ECJ jurisprudence referred to in the applications, but reject the applications on the basis that article 49 has no relevance to the employees as they are not EU nationals nor legally resident in the country of establishment.

This appeal comes with the permission of Laws LJ from the failure before HHJ David Pearl, sitting as a deputy judge of the High Court, of a claim for judicial review of the Secretary of State’s refusal letters. In his order dated 31October 2008 Plender J had stated that there should be a “rolled up” hearing to determine whether the claimants should be granted the relief they claim. Judge Pearl considered that they should not. He formally granted permission to apply for judicial review, only to dismiss the substantive application.

On behalf of the appellants Mr Richard Drabble QC submits that, although there is no case precisely in point, nevertheless the jurisprudence relied on demonstrates that: (1) lawful residence or employment in the country of establishment is not a necessary condition of the derivative right of a posted worker to reside temporarily in a host country for the purpose of being employed there in the establishment’s business, nor is there correspondingly any need for a posted worker to move from country of establishment to host country; (2) that right is fundamental and thus cannot be refused and can only be regulated by requirements which can at best be justified, if possible, by the host member state as appropriate and proportionate to the public interests involved; (3) the extension of this right even to employee TCNs otherwise unlawfully present and without any right to work in the host country, which is the ultimate issue in the appeal, is inherent in the jurisprudence; and (4) on the facts, it is impossible to justify the Secretary of State’s refusals nor had the Secretary of State sought to do so.

Mr Drabble relies in particular on five cases in the ECJ to test his propositions. The jurisprudence to be derived from these cases is the essence of his appeal.

Rush Portuguesa Lda v. Office National d’Immigration Case C-113/89 [1990] ECR I-01417, [1991] 2 CMLR 818 concerned a Portuguese building and public works undertaking which had entered into a subcontract with a French company to perform work on several sites in France. To carry out that work the Portuguese company brought its Portuguese workforce from Portugal to France. A preliminary ruling was requested which raised the question of the relationship between the freedom to provide services guaranteed by article 49 (then numbered as article 59) and the derogations from the freedom of movement for workers provided in Portugal’s act of accession. No TCNs were involved in that case. The ECJ distinguished between the temporary movement of Portuguese employees of a Portuguese company to France to carry out that company’s work there, and Portuguese workers seeking general access to the French labour market. In the former case articles 49 and 50 preclude –

“12…a Member State from prohibiting a person providing services established in another Member State from moving freely on its territory with all his staff and preclude that Member State from making the movement of staff in question subject to restrictions such as a condition as to engagement in situ or an obligation to obtain a work permit. To impose such conditions on the person providing services established in another Member State discriminates against that person in relation to his competitors established in the host country who are able to use their own staff without restrictions, and moreover affects his ability to provide the service…”

In the latter case, however, there is a risk that the employment market of the host country may be disrupted (para 14). But that did not apply in Rush Portuguesa in circumstances –

“15…where there is a temporary movement of workers who are sent to another Member State to carry out construction work or public works as part of a provision of services by their employer. In fact, such workers return to their country of origin after the completion of their work without at any time gaining access to the labour market of the host Member State…”

The “right…to move with his own labour force from Portugal for the duration of the work undertaken” was the critical thing (para 17). Even so,

“17…Member States must in such a case be able to ascertain whether a Portuguese undertaking engaged in construction or public works is not availing itself of the freedom to provide services for another purpose, for example that of bringing his workers for the purposes of placing workers or making them available in breach of article 216 of the Act of Accession. However such checks must observe the limits imposed by Community law and in particular those stemming from the freedom to provide services which cannot be rendered illusory and whose exercise may not be made subject to the discretion of the authorities.”

In this leading case one can detect a number of recurrent themes, viz that the right or freedom in question is the right to move the establishment’s workers from the country of establishment to the host country; that for the purpose of providing its services in the host country, the establishment from another member state cannot be discriminated against in terms of the regulations facing its workers; that the right in question is to be distinguished from a freedom simply to enter the labour market in the host country; and that the host country may use appropriate methods to check that a company from a member state of establishment is not abusing its right (by providing services “for another purpose”).

Raymond Vander Elst v. Office des Migrations Internationales Case C-43/93 [1994] ECR I-3803, [1995] 1 CMLR 513 concerned TCNs, for in that case the Belgian service provider brought its Moroccan workforce to France to carry out a demolition contract. The French employment inspectors considered that Mr Vander Elst had infringed the French Labour Code by employing TCNs who lacked certain French work permits. Such work permits could involve a considerable financial burden for the employer. The ECJ said that, irrespective of discrimination, article 49 required the “abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, when it is liable to prohibit or otherwise impede the activities of a provider of services established in another Member State where he lawfully provides similar services” (at para 14). It seems that the ECJ was here nevertheless talking of what might be called indirect discrimination, because foreign employers might be called upon to pay French as well as domestic fees for the same period of employment so that they “in fact have to bear a heavier burden than those established within the national territory” (at para 15). The ECJ continued:

“16.

Finally, as one of the fundamental principles of the Treaty, freedom to provide services may be restricted only by rules which are justified by overriding reasons in the general interest and are applied to all persons and undertakings operating in the territory of the State where the service is provided, in so far as that interest is not safeguarded by the rules to which the provider of such a service is subject in the Member State where he is established…

18.

In all the circumstances, it is important to note, first, that the Moroccan workers employed by Mr Vander Elst were lawfully resident in Belgium, the State in which their employer was established and where they had been issued with work permits.

19.

Secondly, it is apparent from the documents and hearings before the Court that the short-stay visas held by the persons concerned, issued by the French Consulate at their request, constituted valid documents permitting them to remain in France for as long as was necessary to enable them to carry out the work. Consequently the national legislation applicable in the host State concerning the immigration and residence of aliens had been complied with…

21.

Workers employed by an undertaking established in one Member State who are temporarily sent to another Member State to provide services do not in any way seek access to the labour market in that second State, if they return to their country of origin or residence after completion of their work…Those conditions were fulfilled in the present case…

26.

The answer to the questions referred to the Court must therefore be that Articles 59 and 60 of the Treaty are to be interpreted as precluding a Member State from requiring undertakings which are established in another Member State and enter the first Member State in order to provide services, and which lawfully and habitually employ nationals of non-member countries, to obtain work permits for those workers from a national immigration authority and to pay the attendant costs, with the imposition of an administrative fine as the penalty for infringement.”

Thus the ECJ in Vander Elst laid down that where the residence and employment of the posted workers in the country of establishment was lawful and habitual, and their temporary stay in France had been regularised by short-stay visas, their employer’s freedom to provide services by employing them in France could not be restricted by requiring work permits which had the effect of imposing, by way of indirect discrimination, an unnecessary and considerable financial burden on the employer from the country of establishment, in circumstances where the public interest in the workers’ welfare and in their lack of access to the general labour market had been otherwise addressed.

Mr Drabble submits that the language of the judgment simply records the underlying facts of the case, and that the factor of the workers’ lawful residence in Belgium (paras 18 and 25), while stressed as “important”, was not stated to be a necessary condition for the exercise of the article 49 right. In my judgment, however, the lawfulness of the workers’ residence in the EU, achieved by their lawful residence as employees with work permits in Belgium and on that basis vindicated by France’s short-term visas, was the critical factual background of the case. If it were not so, the Belgium employer would have achieved an advantage over every other employer in France, who could not employ workers not lawfully resident in any country in the EU. What the case was concerned with was whether France could impose further, and unnecessary, regulation to prevent exploitation and the like, the effect of which was achieved by parallel regulation in Belgium.

Mr Drabble’s third case is Commission v. Luxembourg C- 445/03, [2004] ECR I-10191, [2005] 1 CMLR 22. There the deployment of EU nationals or TCNs from one EU country to another, in this case Luxembourg, had been made subject to a system of work permits. The ultimate vice of the system was that it required the workers to have a contract of indefinite employment with the foreign EU employer entered into at least six months prior to their deployment into the host country. Although Luxembourg sought to justify its system by reasons of social welfare or stability in the labour market, it failed in its attempt to do so since the system went beyond what was necessary and proportionate to monitor the circumstances in which the foreign employer availed itself of its article 49 right. The ECJ explained the limits of such permissible monitoring in the following passages cited below. It is to be noted, however, that it is inherent in such passages that the whole premise of the case was the deployment of nationals or TCNs from one member state, which was the state of their origin (in the case of nationals) or residence (in the case of TCNs), to another.

Thus the Court stated:

“31.

A measure which would be just as effective whilst being less restrictive than the measure at issue here would be an obligation imposed on a service-providing undertaking to report beforehand to the local authorities on the presence of one or more of the deployed workers, the anticipated duration of their presence and the provision or provisions of services justifying the deployment. It would enable those authorities to monitor compliance with the Luxembourg social welfare legislation during the deployment whilst at the same time taking account of the obligations whereby the undertaking is already bound under the social welfare legislation applicable in the Member State of origin…

38.

It should in this regard be borne in mind that, although the desire to avoid disturbances on the labour market is undoubtedly an overriding reason of general interest (see, to that effect C-113/89 Rush Portuguesa [1990] ECR I-1417, paragraph 13), workers employed by an undertaking established in a Member State and who are deployed to another Member State for the purpose of providing services there do not purport to gain access to the labour market of that second State, as they return to their country of origin or residence after the completion of their work…

46.

An obligation imposed on a service-providing undertaking to provide the local authorities with information showing that the situation of the workers concerned is lawful as regards matters such as residence, work permit and social coverage in the Member State in which that undertaking employs them would give those authorities, in a less restrictive but just as effective a manner as the requirements in issue here, a guarantee that the situation of those workers is lawful and that they are carrying on their main activity in the Member State in which the service providing undertaking is established…”

It is clear from that last paragraph 46 that the “situation of the workers” must be “lawful” in the EU country of establishment “as regards matters, such as residence, work permit and social coverage” and that the host country is entitled to monitor that that is so, albeit in a manner which is least intrusive to the freedom to “deploy” such workers from the country of establishment to the host country.

Mr Drabble’s fourth authority is Commission of the European Communities v. Germany C-244/04 [2006] ECR I-885, [2006] 2 CMLR 23. This case was similar to the previous two. German law required TCNs posted by an EU establishment to obtain a residence visa prior to commencing their posting. Such a visa was available only to workers who could demonstrate in advance of the posting that they were lawfully and habitually employed in the country of establishment by proving that they had been employed by the posting undertaking for at least twelve months. The German government maintained that such a system was necessary to monitor that the posting undertaking was not using its freedom for a purpose other than that for which it was instituted, for instance for the purpose of placing them on the general labour market, and that the posted workers were protected from exploitation. Nevertheless, the visa system was held to constitute a disproportionate interference with the article 49 freedom, especially where speed of action was required, and to be discriminatory. That said, the essential background to the case and its reasoning was that the host country was entitled to monitor, by proportionate and not inappropriately restrictive means, the lawful and habitual employment of the posted workers in the country of establishment.

Thus the opinion of Advocate General Geelhoed contained the following passage (which was approved by the ECJ at para 50 of its judgment):

“28.

I would add that, in general, undertakings intending to operate temporarily on the territory of another Member State with workers from third countries must bear responsibility for ensuring that these employees are legally resident in the Member State of establishment and that their employment conditions are in line with the relevant social legislation. To the extent that legal certainty may be invoked as a separate ground of general interest, which I doubt, it cannot be used to justify the fact that these prior controls provide service providers from other Member States with clarity beforehand. It must be presumed that bona fide undertakings operate in compliance with the applicable immigration and social legislation of the Member State of establishment. The host Member State may apply its own social legislation to service providers from other Member States to the extent that it provides further protection than that of the Member State of establishment of the service provider. In these circumstances, it is more appropriate that the host Member State restrict its intervention to verifying the requisite information provided by the service provider on commencing activities in the host Member State and to take repressive action where this proves necessary.”

The ECJ judgment contained the following:

“35.

However, as the Advocate General observed in point 27 of his Opinion, a requirement that the service provider furnishes a simple prior declaration certifying that the situation of the workers concerned is lawful, particularly in the light of the requirements of residence, work visas and social security cover in the Member State where that provider employs them, would give the national authorities, in a less restrictive but as effective a manner as checks in advance of posting, a guarantee that those workers situation is lawful and that they are carrying on their main activity in the Member State where the service provider is established…

49.

It is certainly in the interest of both the host Member State and the service provider to have, prior to the posting, the assurance that workers who are nationals of a non-member State are posted lawfully.

50.

However, as the Advocate General noted in point 28 of his Opinion, it is for undertakings which do not comply with that legislation to bear the responsibility for a posting effected unlawfully.

51.

Accordingly, the check in advance practised by the German authorities in respect of the posting of workers who are nationals of a non-member state cannot be justified by the necessity of ensuring that the posting is effected lawfully, and, therefore, it is a disproportionate means having regard to the objectives pursued by the Federal Republic of Germany…

55…In that regard [the Vander Elst requirement of lawful and habitual employment], it must be observed that the Court did not couple the concept of ‘lawful and habitual employment’ with a requirement of residence or employment for a certain period in the State of establishment of the service provider.”

Finally, Mr Drabble nominally relies on Commission v. Austria C-168/04 [2006] ECR I-09041, but without taking the court to it. It repeats the themes of the earlier cases, but without expanding on them.

Mr Drabble relies on these cases as emphasising the need for any restrictions of the host country on the article 49 freedom to be proportionate. He submits that the applications to the Secretary of State, the employment contracts, and the economic value and needs of Chinese caterers in this country in the present case, combine to demonstrate that the Irish company and its employees meet all the possible public interests of the United Kingdom, whether in terms of notification of the presence of the posted employees, their welfare, or the protection of the general labour market. In such circumstances it would be a discriminatory and unjustified restriction on the Irish company’s article 49 freedom to prevent its employees from residing and working here temporally to fulfil their employment contracts.

It is true that these cases consider the limits of a host country’s right to interfere with or restrict, by work permits or similar systems of regulation designed to monitor the entry and presence of posted workers, the article 49 freedom which is guaranteed to an undertaking in an EU country of establishment to bring its employees, whether nationals of its own country or TCNs, to work for it in the host country. However, such regulation and monitoring as were considered in those cases all took place against the background of the bringing or “posting” from one EU member state to another of the employees of an undertaking established in the first state. It was a presumption and requirement of all the cases that such employees should have lawfully resided and worked for the undertaking concerned in the country of establishment. The cases are replete with a reference to such conditions.

Of course, undertakings from a country of establishment are in any event free to set up a branch in another member state of the European Union and there recruit and employ workers who are lawfully present in and entitled to work in that country. Such workers may be nationals of any country in the world, as long as they are entitled to be present in and to work in the host country. It may also be likely that for these purposes an undertaking from another EU member state would be entitled, equally with any home undertaking, to recruit its employees for temporary work in this country from any country of the world, provided of course that, as in the case of any home undertaking, such recruits may lawfully be entitled to enter, be present and work here. In such respects, the Irish company could compete on a wholly level playing field with any undertaking of the host country. However, as Mr Ferrell’s own evidence showed, this would be difficult to achieve and at best expensive.

Mr Drabble sought to support his argument by praying in aid an unmet economic need: but in the course of argument he conceded that this was irrelevant. If article 49 was engaged, the Irish company was not obliged to pray in aid any objective economic need other than its own need to service its enterprise. If article 49 was not engaged, then an objective economic need could not save the scheme.

What, however, the ECJ jurisprudence gives no support whatsoever to is the proposition that article 49 gives to an undertaking in an EU country of establishment a novel and unique right, not enjoyed by such an undertaking in its own country and lacked by any and all undertakings in a host country, to employ workers who have no lawful presence or right to work either in the country of establishment itself, or in the host country, or indeed anywhere in the European Union. That would not be to allow the foreign undertaking to compete with national undertakings on a level playing field, but to give it a wholly new and unprecedented advantage. In effect, Mr Drabble submits that because the Irish company cannot perform its business strategy lawfully, it should be permitted to do so unlawfully. In this connection it is the lawful right to reside and work in the country of establishment that is, correctly in our judgment, considered to be critical in the context of the true case of the posted worker, that is a worker brought or posted by his or her employer from one member state of the EU to another so as to work for that employer temporally in its projects in the host country. Although the Directive is not critical to the application of article 49, it nevertheless illustrates clearly by its provisions the relevant context.

For these reasons, in agreement with Judge Pearl, we would conclude that these claims for judicial review must fail and this appeal must be dismissed. None of the appellants have any right to rely on article 49. The United Kingdom would in any event be justified under EC law in taking proportionate measures to check, as it has done in this case, that TCNs are legally resident and employed by the Irish company in Ireland, and if they are not, in applying its national immigration laws to exclude those present and working illegally in this country. As therefore the first three appellants were neither legally resident nor legally employed in Ireland, nor legally present nor legally employed in the United Kingdom, the Secretary of State’s decisions not to regularise their illegal status here, but to detain and remove them were undoubtedly lawful and not in breach of article 49.

An alternative argument was considered by Judge Pearl to the effect that EC law cannot be relied on by the claimants for abusive or fraudulent ends. Judge Pearl concluded that the Irish company’s reliance on article 49 was abusive. He quoted Professor Planiol’s dictum (cited by Advocate General La Pergola at para 20 of his Opinion in Centros Limited v. Erhvervs-og Selskabsstyreisen C-212/97 [2000] Ch 446 at 469) that “law ceases where abuse begins” (“le droit cesse là ou l’abus commence”). Judge Pearl said:

“75.

There is, in my view, no genuine posting of workers in these cases, there has been an improper attempt to invoke community rights, and there has been, in particular, an attempt by the Irish company to wrongfully secure an advantage over companies in UK. This case is an example of the abusive practices as explained by the court [the ECJ] in Halifax [plc v. Commissioners of Customs and Excise Case C-255/02 [2006] 2 CMLR 36] at para 69 of the judgment in particular: “The application of community legislation cannot be extended to cover abusive practices by economic operators, that is to say transactions carried out not in the context of normal commercial operations, but solely for the purpose of wrongfully obtaining advantages provided for by Community law…

80.

For the reasons which I have set out above, there is no European authority that supports [the claimants’ counsel’s] proposition. Article 49 is not engaged, but even if it were to be, it is my finding that the scheme is an abuse of European community law, and the [Secretary of State] has made no error of law in calling the scheme in the decision letter “spurious”.”

Mr Drabble submitted that if he was right on the article 49 point, then the doctrine of abuse added nothing: there could be no abuse in bringing this case within the Irish company’s article 49 rights. If, on the other hand, he were wrong on the article 49 point, then the doctrine of abuse could neither aid him nor hinder him further. He therefore took the matter relatively swiftly. He accepted that if he failed on the article 49 point, he failed. On the basis, however, that he was right on the article 49 point, he submitted that there was no abuse. He asked rhetorically, where is the abuse? To answer his own question in the negative, that there is no abuse, he relied on the following ECJ authorities, which were also considered (among others) by Judge Pearl below in coming to his conclusions on this issue: Van Binsbergen v. Bedrifsvereniging Metaalnijverheid [1974] ECR 1299; TV 10 SA v. Commissariaat voor de Media [1994] ECR I-4795; Centros Limited v. Erhvervs-og Selskabsstyreisen Case C-212/97 [2000] Ch 446; Mary Carpenter v. SSHD C-60/00 [2003] QB 416; and Chen v.Secretary of State [2005] 1 QB 325.

In our judgment, in agreement with Judge Pearl, none of these authorities are of any assistance to the appellants. In the circumstances we can deal with the matter briefly. In Vans Binsbergen the ECJ upheld a Dutch requirement that a professional legal representative who sought to appear before the Dutch court, but who had moved his office from Holland to Belgium and relied on article 49 in order to provide his services in Holland, had to be permanently established within the jurisdiction of that court and therefore could no longer represent his client. The Court’s conclusion was founded on the basis that the requirement was necessary for the administration of justice and to uphold professional ethics. In that context it stated:

“13.

Likewise, a Member State cannot be denied the right to take measures to prevent the exercise by a person providing services whose activity is entirely or principally directed towards its territory of the freedom guaranteed by Article 59 [49] for the purpose of avoiding the professional rules of conduct which would be applicable to him if he were established within that state...” (emphasis added).

In TV 10 the ECJ applied the same rationale (see para 17) in permitting the Dutch broadcasting regulator to treat a Luxembourg broadcaster as a domestic one: because that undertaking had been established in Luxembourg in order to avoid the rules adopted by Holland as part of a cultural policy intended to establish a pluralist and non-commercial radio and television broadcasting system and yet directed its activities wholly or principally towards the territory of Holland. This was another case where the undertaking in the country of establishment sought to rely on article 49, but was prevented from doing so by its abusive purpose.

In Centros the decision went the other way. An English company applied to register a branch in Denmark but was refused permission on the ground that the use of a mere branch was an attempt to avoid national rules on the paying up of minimum share capital on the incorporation of a Danish company. The ECJ held that this was an unlawful interference with the right of establishment. Mr Drabble submits that this supports the Irish company in the present case. The purpose of setting up the Centros company in England but with a branch in Denmark was to avoid the Danish capital requirements. However, this is beside the point. The Irish company could of course set up a branch in the UK, rather than incorporate here. But in either event, it could not properly seek to evade the UK immigration law in relation to TCNs who have no lawful presence here or elsewhere in the EU.

Carpenter concerned the Philippine wife of a UK national. She was an overstayer in the UK. Her husband travelled to other member states of the EU for the purposes of his business. Her application to remain in the UK was refused and a decision made to deport her. She argued a derivative right to remain in the UK as her husband’s spouse and the carer of his children by his first marriage, relying on his article 49 rights. The ECJ accepted that argument, fortified by further reliance on the fundamental respect to be accorded to family life (article 8 of the ECHR). However, that is a long way from the present case, and in any event, whatever the answer given there, has nothing to do with abuse.

In Chen a Chinese national entered the UK when six months pregnant. She went to Northern Ireland to have her baby. At the material time the Republic of Ireland recognised anyone born in the island of Ireland as entitled to Irish nationality. Thus the child became a citizen of the EU. When the mother applied for long term residence in the UK for herself and her child, she was refused. It was suggested that her trip to Northern Ireland to have her baby there was an abusive attempt to bring herself within Community law. However, the ECJ thought otherwise, ruling that “it is not permissible to restrict the grant of nationality of another member state by imposing an additional condition for recognition of that nationality with a view to the exercise of fundamental freedoms provided for in the Treaty” (at para 39). That case is again far from the present. The daughter was an Irish and thus an EU citizen, and her mother obtained a derivative right as her carer.

Of greater assistance is Halifax plc v. Commissioners of Customs and Excise Case C-255/02 [2006] 2 CMLR 36, on which the Secretary of State relies, which deals directly with the subject of abuse, particularly in the context of economic transactions. The ECJ stated:

“68.

…it must be borne in mind that, according to settled case-law, Community law cannot be relied on for abusive or fraudulent ends (see, in particular Case C-367/96 Kefalas and Others [1998] ECR I-2843, paragraph 20; Case C-373/97 Diamantis [2000] ECR I-1705, paragraph 33; and Case C-32/03 Fini H [2005] ECR I-1599, paragraph 32).

“69.

The application of Community legislation cannot be extended to cover abusive practices by economic operators, that is to say transactions carried out not in the context of normal commercial operations, but solely for the purpose of wrongly obtaining advantages provided by Community law (see, to that effect, Case 125/76 Cremer [1977] ECR 1593, paragraph 21; Case C-8/92 General Milk Products [1993] ECR I-779, paragraph 21; and Emsland-Stärke, paragraph 51).”

The latter paragraph seems to me to be particularly apt in the present case.

In that connection the Opinion of Advocate General Maduro in Halifax produces a useful rationale of a topic about which it is difficult to formulate precise rules to cover every contingency. Judge Pearl encapsulated the essence well when he said:

“The Advocate General summarises the case law of the Court on “abuse”. He says that the case law shows that “improper circumvention of a member state’s rules by the exploitation of [fundamental] freedoms is not permissible”. He refers to the Centros decision as illustrating the two main contexts in which the notion of abuse has been analysed by the court; first when community law provisions are abusively invoked in order to evade national law, and secondly when community law provisions are abusively relied upon in order to gain advantagesin a manner that conflicts with the purposes and aims of those same provisions. The Advocate General states that the assessment of the abuse must be based on the objective evidence. But also, and most importantly, the assessment must be made in conformity with the purpose and objectives of the provision of community law allegedly relied on in an abusive way.”

The application of the concept of abuse has been applied directly by the ECJ to the context of article 49 in Van Binsbergen and TV 10, and has also been referred to more obliquely in the same context in the cases starting with Rush Portuguesa, for instance where that authority refers (at para 17) to “availing itself of the freedom to provide services for another purpose, for example that of bringing his workers for the purpose of placing workers…”.

In our judgment, and in agreement with Judge Pearl, that is what the Irish company has done in this case. When it commenced its operations it had no business in Ireland or the UK involving employees who were lawfully present or employed in either country. On its own evidence it has targeted the UK because of recent immigration law changes which have made it harder for Chinese restaurants here to comply with the law in their employment practices. It has therefore sought to put between the UK restaurant and its staff the fiction of an undertaking established in another EU member state of establishment purportedly using its article 49 freedom to bring or “post” its lawful employees to the UK for the purpose of its operations here. This is solely in order to attempt to translate those unlawfully present and illegally working in the UK into workers protected under Community law. The truth, however, is that the Irish company has no employees lawfully present as such in Ireland and has posted none to the UK. The whole thing is a charade, and the applications to the Secretary of State, as Judge Pearl observed, were rightly referred to as spurious.

Recent judicial review cases such as The Queen on the application of Gransian Limited v. SSHD [2008] EWHC 3431 (Admin) (Blake J, unreported, 16 December 2008) and Yaus Catering Services (Ireland) v. SSHD [2009] EWHC 2534 (Admin) (Ouseley J, unreported, 12 August 2009) rightly castigate similar albeit not identical schemes.

These are our reasons for the decision which we announced at the conclusion of the hearing, that these appeals should be dismissed. We were asked by Mr Drabble QC to refer the case to the ECJ, but have declined to do so, on the basis that the matter is acte clair.