The Queen v Secretary of State for Transport, ex parte Factortame Ltd and others.
Date: 1991-07-25
13 It must be observed in the first place that, as Community law stands at present, competence to determine the conditions for the registration of vessels is vested in the Member States. As far as fishing vessels in particular are concerned, the Court held in the judgment in Case 223/86 (Pesca Valentia v Minister for Fisheries and Forestry [1988] ECR 83, at paragraph 13) that the provisions of Council Regulation No 101/76 of 19 January 1976 laying down a common structural policy for the fishing industry (Official Journal 1976 L 20, p. 19) referred to fishing vessels "flying the flag" of a Member State or "registered" there but left those terms to be defined in the legislation of the Member States.
14 Nevertheless, powers which are retained by the Member States must be exercised consistently with Community law (see most recently the judgments in Case 57/86 Hellenic Republic v Commission [1988] ECR 2855, at paragraph 9, and in Case 127/87 Commission v Hellenic Republic [1988] ECR 3333, at paragraph 7).
17 Consequently, the answer to the first question must be that, as Community law stands at present, it is for the Member States to determine, in accordance with the general rules of international law, the conditions which must be fulfilled in order for a vessel to be registered in their registers and granted the right to fly their flag, but, in exercising that power, the Member States must comply with the rules of Community law.
The second question
20 It must be observed in that regard that the concept of establishment within the meaning of Article 52 et seq. of the Treaty involves the actual pursuit of an economic activity through a fixed establishment in another Member State for an indefinite period.
21 Consequently, the registration of a vessel does not necessarily involve establishment within the meaning of the Treaty, in particular where the vessel is not used to pursue an economic activity or where the application for registration is made by or on behalf of a person who is not established, and has no intention of becoming established, in the State concerned.
22 However, where the vessel constitutes an instrument for pursuing an economic activity which involves a fixed establishment in the Member State concerned, the registration of that vessel cannot be dissociated from the exercise of the freedom of establishment.
23 It follows that the conditions laid down for the registration of vessels must not form an obstacle to freedom of establishment within the meaning of Article 52 et seq. of the Treaty.
25 That argument cannot be upheld. According to the second paragraph of Article 52 of the Treaty, freedom of establishment includes, in the case of nationals of a Member State, "the right to take up and pursue activities as self-employed persons ... under the conditions laid down for its own nationals by the law of the country where such establishment is effected ...".
29 Consequently, in exercising its powers for the purposes of defining the conditions for the grant of its "nationality" to a ship, each Member State must comply with the prohibition of discrimination against nationals of Member States on grounds of their nationality.
30 It follows from the foregoing that a condition of the type at issue in the main proceedings which stipulates that where a vessel is owned or chartered by natural persons they must be of a particular nationality and where it is owned or chartered by a company the shareholders and directors must be of that nationality is contrary to Article 52 of the Treaty.
31 Such a condition is also contrary to Article 221 of the Treaty, under which Member States must accord nationals of the other Member States the same treatment as their own nationals as regards participation in the capital of companies or firms within the meaning of Article 58.
32 As for the requirement for the owners, charterers, managers and operators of the vessel and, in the case of a company, the shareholders and directors to be resident and domiciled in the Member State in which the vessel is to be registered, it must be held that such a requirement, which is not justified by the rights and obligations created by the grant of a national flag to a vessel, results in discrimination on grounds of nationality. The great majority of nationals of the Member State in question are resident and domiciled in that State and therefore meet that requirement automatically, whereas nationals of other Member States would, in most cases, have to move their residence and domicile to that State in order to comply with the requirements of its legislation. It follows that such a requirement is contrary to Article 52.
33 It follows from the foregoing that it is contrary to the provisions of Community law and, in particular, to Article 52 of the EEC Treaty for a Member State to stipulate as conditions for the registration of a fishing vessel in its national register: (a) that the legal owners and beneficial owners and the charterers, managers and operators of the vessel must be nationals of that Member State or companies incorporated in that Member State, and that, in the latter case, at least 75% of the shares in the company must be owned by nationals of that Member State or by companies fulfilling the same requirements and 75% of the directors of the company must be nationals of that Member State; and (b) that the said legal owners and beneficial owners, charterers, managers, operators, shareholders and directors, as the case may be, must be resident and domiciled in that Member State.
The condition relating to the place of operation, direction and control of the vessel (point I(c) of the second question, as reformulated)
34 In this regard, it is sufficient to point out that a requirement for the registration of a vessel to the effect that it must be managed and its operations directed and controlled from within the Member State in which it is to be registered essentially coincides with the actual concept of establishment within the meaning of Article 52 et seq. of the Treaty, which implies a fixed establishment. It follows that those articles, which enshrine the very concept of freedom of establishment, cannot be interpreted as precluding such a requirement.
35 Such a requirement, however, would not be compatible with those provisions if it had to be interpreted as precluding registration in the event that a secondary establishment or the centre for directing the operations of the vessel in the Member State in which the vessel was to be registered acted on instructions from a decision-taking centre located in the Member State of the principal establishment.