The Judgement in full
Case No: CO/4354/2001 & CO/911/2002
Neutral Citation Number: [2002] EWHC 1630 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 31st July 2002
Before:
LORD JUSTICE BROOKE
and
Mr. JUSTICE BELL
THE QUEEN on the application of:
(1) HOVERSPEED LIMITED
(2) ALAN CHARLES ANDREWS
(3) PAULINE ANDREWS
(4) LYNNE ANDREWS
(5) GEORGE WILKINSON
Claimants
- and -
COMMISSIONERS of HM Revenue & Customs
Defendants
Rhodri Thompson QC & Rabinder Singh QC (instructed by Richards Butler) for the Claimants
David Anderson QC & Thomas De La Mare (instructed by Solicitor for HM Revenue & Customs) for the Defendants
Hearing dates: 8-12th July 2002
SUMMARY
(This Summary forms no part of the judgment)
This case is concerned with applications for judicial review of aspects of the policies and procedures adopted by HM Customs and Excise at the Dover Hoverport in relation to the importation of alcohol, cigarettes and hand rolling tobacco bought in shops in France and Belgium. The four individual claimants challenged the lawfulness of the procedures by which the excise goods being carried by Mr. and Mrs. Andrews and Mr. Wilkinson were seized, and their car, which belonged to Miss Andrews, was also seized because Customs officers considered that Mr. Wilkinson's cigarettes and hand rolling tobacco had not been purchased in Belgium for his own use (for the facts see paras 48-62). Hoverspeed Ltd, for its part, made a general challenge to different aspects of Customs' policies in relation to their passengers when they landed at the Hoverport (for the nature of these complaints, see paras 32-47).
In this case reliance was placed for the first time on an English Court on the terms of Council Directive 92/112/EEC ("the Excise Directive"), as opposed to the U.K. statutory instrument, the Excise Duty (Personal Reliefs) Order 1992 ("the PRO") by which this country set out to implement the requirements of European Community law (for the Excise Directive, see paras 99-116, and for the PRO, see paras 120-124).
The Court held:
(i) That excise duty is only chargeable on alcohol, cigarettes and tobacco purchased by an individual in another member state of the European Union when they are held in this country for commercial purposes, as opposed to being held by the individual for his own use (para 164);
(ii) That the PRO wrongly reverses the burden of proof by requiring the individual to prove that he is not holding excise goods over the minimum indicative level ("MIL": see para 7) for a commercial purpose (para 170);
(iii) That if an individual holds goods in excess of the MIL, this fact must be used solely as a form of evidence and not as a persuasive presumption that he holds the goods for a commercial purpose, although except in a borderline case this may not make much difference in practice (para 173);
(iv) That there must be reasonable grounds for suspecting an individual of holding goods bought in another member state for commercial purposes before he may lawfully be stopped and searched (para 180);
(v) That prima facie individuals and their excise goods must be free to travel across internal frontiers of the European Community without being impeded and delayed by checks for excise duty purposes, although such checks may be made where grounds of reasonable suspicion exist on an individualised basis (para 183);
(vi) That Customs officers must follow principles of proportionality when determining whether or not to restore goods and vehicles they have seized to their owners (paras 189-190);
(vii) that because Customs and Excise did not explain to the Court the reasons why they stopped Mr. and Mrs. Andrews and Mr. Wilkinson in their car, and because they suggested in their evidence that they might stop passengers for legally inadmissible reasons (paras 192-3), they did not prove to the Court that there were reasonable grounds for stopping the car and questioning the occupants. The goods in it should therefore not have been seized. Nor should the car. In any event Customs' refusal to return the car to Miss Andrews without even considering whether it might be restored to her on payment of an appropriately proportionate sum represented a disproportionate response (para 194).
INDEX
Part No Para No
1 Introduction 1
2 The reasons for Customs and Excise policies on tobacco and alcohol 4
3 The Commissioners' strategies and policy guidance 9
4 Recent events at Dover Hoverport 22
5 Checks and lock-ins 33
6 Seizure of innocent travellers' goods and travel bans 44
7 Mr. and Mrs. Andrews: the facts 48
8 Publicity for the Commissioners' vehicle seizure policy 63
9 The effect of Customs activity on Hoverspeed's business 68
10 Relevant principles of EC law up to 199272
11 Relevant principles of U.K. law up to 199278
12 EC exemptions on imports of excise goods up to 199280
13 Relevant provisions of the Customs and Excise Management Act 197983
14 Freedom of movement of E.U. nationals and goods within the Community 95
15 The Excise Directive: the meaning of Articles 8 and 999
16 The effect of the transitional provisions for three Scandinavian countries 116
17 The Personal Reliefs Order and other changes in U.K. law since 1992120
18 Mortimer, Goldsmith and Lindsay 130
19 Some ECHR arguments 145
20 Reasonable grounds for suspicion 159
21 Hoverspeed's six claims: our conclusions 162
22 The four individual claims: our conclusions 191
JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS)
Lord Justice Brooke: This is the judgment of the Court, to which both its members have made substantial contributions.
1 Introduction
1. In these applications for judicial review Hoverspeed Limited ("Hoverspeed"), Mr. Alan Charles Andrews, his wife Mrs. Pauline Andrews, his sister Miss Lynne Andrews and Mr. George Wilkinson challenge the lawfulness of the procedures adopted by the Commissioners for Customs and Excise (whom we will call "the Commissioners" or "Customs") in checking and detaining Hoverspeed passengers arriving at Dover, and in seizing and refusing to return not only the goods they have bought in France or Belgium, and in particular cigarettes and hand rolling tobacco ("HRT"), but also the vehicles in which they are carried. The challenge is made by Hoverspeed in general terms and by the other four claimants in respect of a particular incident which occurred on 22nd August 2001 and the conduct of Customs thereafter.
2. These procedures, the Excise Duty (Personal Reliefs) Order 1992 ("the PRO") and the policies under which Customs officers are conducting themselves at Dover, are alleged to give rise to unlawful restrictions on the rights of individuals to import to this country goods bought in other member states of the European Community, on their rights to receive services and to move freely within the Community, and on the right of Hoverspeed to provide services to their customers free from the inconveniences caused by these unlawful actions.
3. Although the main thrust of the claimants' case is that the Commissioners' policies and procedures violate their rights under EC law, they also rely on the European Convention on Human Rights (which we will call "ECHR" or "the Convention") both through the vehicle of EC law, which includes the protection of Convention rights as a general principle, and through domestic law by virtue of section 6 of the Human Rights Act 1998.
2 The reasons for Customs and Excise policies on tobacco and alcohol
4. Successive U.K. Governments have adopted a policy of high rates of excise duty on tobacco products. The purpose of the policy is to protect public health, and in particular the health of the young, for whom the likelihood of establishing a smoking habit is particularly dependent on price. Our rates of excise duty are among the highest in the Community, and they are significantly higher than those imposed in France and Belgium. For example, in April 2002, U.K. excise duty and VAT on premium brand cigarettes constituted 78.9% of the recommended retail selling price: £3. 46 on a typical price of £4. 39 for a pack of 20. A similar pack could be bought in France for about £2. 25, and for about £1. 85 in Belgium. Yet cigarettes and tobacco in those countries are readily available to those who care to cross the Channel in order to purchase them from retail outlets on the European mainland or on the cross-Channel carriers themselves.
5. The price difference did not only benefit those who wished to travel in order to buy cigarettes for their own use. It also offered the opportunities of profit to those who wished to import them for clandestine commercial purposes. Even assuming a street price for smuggled premium cigarettes of as little as £2. 50 for a pack of 20, a carton of 200 smuggled cigarettes would command a mark up of £2. 50, if from France, or £6.50, if from Belgium, on the basis of the orthodox retail selling prices we have mentioned.
6. Smuggling (an expression Customs uses to embrace both large scale importing of goods for resale without paying U.K. duty and also smaller scale imports by individuals, which go beyond what is required for the individual importers own, personal use), grew rapidly through the 1990s until 2000.
7. According to the Commissioners' estimates, revenue lost through freight and non-freight smuggling of cigarettes and HRT amounted to £0.9 billion in 1996/7. This annual loss rose to £3. 5 billion in the year ending 31 March 2001. In the calendar year 1996, £678 million revenue was lost through non-freight, cross-Channel smuggling of tobacco products (£943 million if alcohol smuggling is included). For 2000, the figure was £1,362 million (£1,690 million). The PRO and Council Directive 92/12/EEC ("the Excise Directive") both provided a guide level or Minimum Indicative Level ("MIL") of 800 cigarettes, 400 cigarillos, 200 cigars and 1kg of HRT, above which the Commissioners presumed that tobacco products brought in by an individual traveller were brought in for commercial purposes rather than for his own use. On the occasions when goods have been seized, the average seizure from a cross-Channel passenger has been 6,500 cigarettes (revenue evaded £1,124) or 20kg of HRT (revenue evaded £2,400).
8. Both the Government in general and the Commissioners in particular were acutely aware of the public harm and damage caused by smuggling. This harm included loss of revenue, undermining of the Governments health objectives as a consequence of the low price and unregulated modes of supply, a rise in general criminality (particularly near the cross-Channel ports), an increasing disrespect for the law, as more and more people became involved in supplying and using illegal cigarettes, and the adverse impact on legitimate traders and retailers who lost not only tobacco and alcohol sales, but also associated sales of other goods.
3. The Commissioners' strategies and policy guidance
9. In March 2000, the Government announced a £209 million strategy designed to slow, stabilise and reduce smuggling over a three year period. The aim of this strategy was to make smuggling less profitable and less attractive by increasing the chance of getting caught and by increasing the penalties on the smugglers who were caught. Key aspects of this strategy included a large increase in the Commissioners' resources (including the provision of more staff, who were made available to intensify the checks on cross-Channel passengers), and a hardening of policies relating to the seizure and retention of goods and vehicles. Other aspects of the strategy included the education of the public.
10. The strategy appears to have worked. In November 2001 the Commissioners estimated that revenue lost from non-freight, cross-Channel smuggling of tobacco products was down to £345 million (£395 million, if alcohol is included) in 2001. The claimants, however, contend that this success was achieved at the cost of their rights under EC law and the Convention.
11. In these circumstances the claimants seek declarations to the following effect:
(i) that the PRO is incompatible with the Excise Directive and Article 28 of the EC Treaty, by creating a presumption that goods imported to this country in excess of the MIL's are held for a commercial purpose and therefore chargeable to further excise duty, and by placing a burden on the traveller to prove that tobacco products and alcohol are not held or used for a commercial purpose (draft declarations 1, 2 and 3);
(ii) that the Commissioners' policies and practices relating to checks on individual travellers and the goods which they bring from other member countries, in particular France and Belgium, are contrary to Articles 28 and 49 of the EC Treaty, Council Directives 64/221/EEC and 73/148/EEC and Council Regulation (EEC) No 3925/91 (draft declarations 4 and 5);
(iii) that the Commissioners' policy of seizure and non-restoration of goods presumed to be chargeable to U.K. excise duty, and of vehicles containing such goods, is incompatible with EC law and with the rights conferred on individuals by Article 6 and Article 1 of the First Protocol to the Convention (draft declaration 6); and
(iv) that Customs' checks on Mr. and Mrs. Andrews and Mr. Wilkinson and their goods, and the decision to seize their goods, and the decisions to seize and not restore Miss Andrews' vehicle, in which they were carried, were contrary to EC law and incompatible with their Convention rights (draft declarations 7 and 8).
12. Some of the claimants' contentions rely on their interpretation of the PRO and the Excise Directive. Others depend partly on their interpretation of various domestic, Community and Convention provisions, and partly on matters of fact, including the Commissioners' policies and practices relating to checks, seizures and non-restoration. It is convenient to turn to the matters of fact first.
13. The development of the Governments new strategy is well documented. By 1996 it was already the Commissioners' normal policy to refuse to restore seized excise goods, to maximise the deterrent value of seizure. This policy was to be applied firmly but not rigidly. Most seized goods were not to be restored. In exceptional circumstances, however, officers could exercise their discretion to return goods. In April 1998, a new policy was introduced to the effect that where goods were seized for the first time, the vehicle involved would also be seized. It would be restored, however, following the payment of £250, or a sum equivalent to 50% of the duty due, whichever was the greater, up to a maximum of the value of the vehicle. Second and subsequent seizures would increase the payment on restoration to £1,000 or 100% of the duty due. In August 1999, as duty evasion continued, a "two strikes and you're out" policy was introduced. When non-rental vehicles were seized for the first time, they were subject to a restoration fee of 100% of the dutiable value of the goods seized, or the value of the vehicle, whichever was the lower, but subject to a £250 minimum. Second and subsequent seizures led to non-restoration of the vehicle unless there were mitigating circumstances.
14. The need for flexibility, however, was recognised. In certain mitigating circumstances the terms on which restoration was offered could be reduced. Vehicles which belonged to third parties who were not present at the seizure received special treatment. In such cases a distinction was drawn between "innocent and blameless" owners and "innocent but blameworthy" owners. The former category included cases where enquiries showed that the vehicles had been stolen, or where their owners could not possibly have known the use to which the vehicle had been put. They included rental, finance and leasing companies. The latter category embraced cases where enquiries suggested that the owner was innocent of any involvement in smuggling but had nevertheless been "blameworthy (negligent) in permitting the use of the vehicle", for instance "where no attempt was made to ascertain the use to which the vehicle was to be put". In the former case the vehicle was restored upon payment of £75 towards storage and administrative costs; in the latter case it was restored upon payment of £75 or a sum equivalent to 25% of the duty due, whichever was the greater, subject to a maximum of the value of the vehicle.
15. In mid-2000 the policy on seizure of vehicles became stricter, after senior Customs managers had become aware that some of their officers were electing to take no action in respect of quantities of goods which were well in excess of the MIL's In June 2000 a group of senior Customs staff agreed the terms of operational guidance which was sent to all senior managers, operational managers and senior officers of all teams in "South East England Collection". They issued a single page document headed "Cross Channel Strategy . . . Guidance to Efficient and Effective Handling of Excise Suspects . . . To Be Adopted By All Multifunctional Anti Smuggling Teams". This Guidance consisted of seven bullet points, in block capitals, as follows:
* ZERO TOLERANCE
*NOTICE 1s ISSUED. IN ALL CASES WHEN EXCISE GOODS ARE ABOVE THE GUIDANCE LEVELS AND NOT SEIZED
*NED's MUST BE COMPLETED WHEN NOTICE 1's HAVE BEEN ISSUED INCLUDING NAME, ADDRESS AND DOB
*WHEN SUSPECTS HAVE HAD NOTICE 1 ISSUED BEFORE, THE ASSUMPTION MUST BE SEIZURE NOT SIMPLY ISSUING ANOTHER NOTICE 1
*THE OBJECTIVE IN ANY INTERCEPTION IS TO SEIZE GOODS IN EXCESS OF THE MIL's OFFICERS SHOULD ALWAYS LOOK FOR REASONS FOR SEIZING, NOT SIMPLY ISSUING A NOTICE 1
*WHEN A-J INTERVIEWS ARE CONDUCTED THE EXPECTATION IS THAT A SEIZURE WILL BE MADE
*FOR GOODS IN EXCESS OF THE MIL's SEIZURES SHOULD ALWAYS BE MADE WHEN SUSPECTS HAVE HAD EXCISE GOODS SEIZED BEFORE."
"A-J interviews" is a reference to the factors set out in Article 5(2) of the PRO (see para 122 below), of which regard was to be taken when deciding whether excise goods were not being held or used for a commercial purpose. "NEDS" is a database of travellers who are stopped and examined. "Notice 1" is a fold out leaflet: "A Customs guide for travellers entering the U.K. " "DOB" means "date of birth".
16. In July 2000 the Commissioners circulated advice to their staff on changes to their vehicle seizure and restoration policy. One of the objectives of their harsher policy was "to support and evidence the Governments new 'get tough' policy". It applied to all cars and light goods vehicles other than those which were rented. The advisory note stated that Customs was now in the process of applying "the toughest possible sanctions in terms of our vehicle seizure policy". "Two strikes and you're out" was being replaced with immediate effect by "if you use it, you will lose it". There were to be no second chances. Thus:
"Revised Policy – 'No Second Chances'
8. With immediate effect, our headline policy will be that any car or light goods vehicle (other than rented) used for smuggling or for transporting smuggled or diverted excise goods within the U.K. will be seized and not restored. Restoration will be very much the exception, not the rule, irrespective of whether it is the first time the smuggler has been caught. This policy is to be applied vigorously both at the ports and all inland locations where it can be proved that a vehicle was used to transport goods which are liable to seizure.
Vehicles not owned by the smuggler
9. In all cases the vehicle is to be seized. If an owner of a vehicle can subsequently demonstrate to the Senior Officer or Review Officer that he was genuinely innocent of any involvement e.g. his vehicle was stolen and reported to the police prior to seizure, the vehicle should be restored to him at no charge. Restoration will only take place where an owner can demonstrate they are completely innocent/unaware of the cars use. Any person who has consented to the use of their vehicle by others accepts a variety of risks by doing so and in future they should expect to lose their vehicle permanently.
10. The onus should be placed upon the owner of the vehicle to demonstrate why the vehicle should be restored. Staff should not restore the vehicle until they are satisfied. However, Senior Officers/Review Officers should not refuse restoration if they believe that to do so would be indefensible if challenged.
. . .
12. It is important for seizing officers to bear in mind the issues of proportionality and human rights (ECHR) when considering whether restoration is appropriate. It is not intended that restoration will be an option in any other circumstances.
. . .
Disposal
17. Unless the seizure of the vehicle is the subject of condemnation proceedings, or an appeal against the decision not to restore has been received within 45 days, or the defence solicitor has confirmed that it is required as evidence in Court for the defence, the vehicle is to be disposed of forthwith."
17. The application of section 141(b) of the Customs and Excise Management Act 1979 ("CEMA"), which provides for the seizure of goods which are mixed with other goods that are liable for forfeiture, had meanwhile led to complaints to Ministers. In December 2001 the Commissioners issued the following guidance to staff:
"Where it is clear goods have been individually purchased and one or more of the travellers satisfy the officer as to own use, then only the excise goods belonging to those travellers who have failed to satisfy the own use criteria are to be seized. Those goods which are identifiable to travellers who have satisfied the own use criteria should not automatically be seized under CEMA Section 141(1)(b)."
Mr. and Mrs. Andrews were to benefit from this change of policy (see para 59 below).
18. Greater efforts were now to be made to identify which goods belonged to which traveller, and whether goods were held or used for a commercial purpose as a joint venture. The guidance concluded, however:
"In all cases where any excise goods are seized, the vehicle is also to be seized, regardless of who owns the vehicle (Section 141(1)(a) CEMA refers)."
We were unimpressed by that part of the Commissioners' evidence to this Court which sought to equate the risk of automatic seizure with the risk that a registered keeper of a vehicle may be pursued for a parking fine incurred by someone to whom he has lent it.
19. On 20 February 2002, the Court of Appeal gave judgment in Lindsay v. Customs and Excise Commissioners [2002] EWCA Civ 267, [2002] 1 WLR 1766. We will describe the effect of this judgment in paragraphs 135-141 below.
20. This judgment caused the Commissioners to review their July 2000 policy. In April 2002, internal guidance referred to the Court of Appeals ruling. It said that the Court had confirmed that in cases of commercial (i.e. for profit) smuggling, Customs were typically justified in not restoring seized vehicles, but in cases of not-for-profit smuggling the Court concluded that it was not necessarily proportionate to refuse restoration. Seized vehicles belonging to third parties would, as before, be treated in the same way as they would if they had belonged to the person doing the smuggling. The revised seizure policy summarised the "restoration terms in future" as follows:
" . . . in cases where we are satisfied that the intention is to smuggle goods with a view to making a profit any vehicle involved is ordinarily to be seized and not offered for restoration other than in highly exceptional circumstances (e.g. humanitarian situations as per existing guidance), the Court having confirmed that in such cases those involved 'cannot reasonably complain'. In cases where we consider that the smuggling attempt was not made with a view to making a profit or feel that we have insufficient evidence to challenge a claim to that effect then any vehicle involved is seized but will be offered for restoration on the new Lindsay restoration terms."
21. It said, in conclusion:
"It is interesting to note that over the past two years Customs have seized in excess of 20,000 vehicles and only a small percentage of those involved have chosen to contest that seizure . . . Although each case has to be considered on its merits the overall impact of these changes to our restoration policy will be kept under close review and it is not our present expectation that they will lead to a large proportion of seized vehicles being offered for restoration."
4. Recent events at Dover Hoverport
22. So much for the Commissioners' evolving policies. The background to the operation of these policies at Dover Hoverport was largely common ground. Hoverspeed uses fast catamarans and mono-hulled ships to sail to Calais and Ostend. It is principally engaged in tourist traffic, as the vessels only carry small freight vehicles, less than six metres in length. This restricts the carriage of freight to small vans. Its service, however, is particularly vulnerable to abuse by individual smugglers because it provides inexpensive, quick access to French or Belgian retailers, or to Hoverspeed's own shop on French soil, all of which sell cigarettes and tobacco at a fraction of the U.K. price. Its trips between Dover and Calais take less than an hour.
23. Hoverspeed has always co-operated with Customs, providing it with intelligence, information and facilities, but along with other cross-Channel carriers it advertises the savings to be made by using its services to buy tobacco products and alcohol on the continental mainland Its fares are inexpensive, particularly the "French Flyer" which restricts landing in France to the area of Hoverspeed's shop. In March 2001, a trip from Dover to Calais and back could cost as little as £1 during the week and £5 at weekends. Until January 2002, the identification of passengers who were travelling frequently was not helped by the fact that the names of purchasers were not recorded on the daytime standby French Flyer tickets.
24. The effect of this was that the names of a significant minority of passengers were not available for Customs checking. French Flyer passengers were required to write their names on their tickets, but this requirement was not always enforced, and some names, "D Duck" for instance, were less than convincing. Since January 2002 all standby passengers' surnames have been booked straight into Hoverspeed's computer and have thereby become available to Customs, but the absence of forenames or initials may still leave doubt as to whether a particular passenger has travelled recently. Although other carriers provide just as many cross-Channel services in a 24 hour period, and also have very cheap tickets and special deals, Hoverspeed's crossings are packed into the daytime, making them preferable to smugglers who wish to make repeat trips in a "working day".
25. Identifying the risk of smuggling among Hoverspeed passengers still leaves Customs officers with the task of identifying the actual smugglers. Mr. Leslie Smith, the anti-smuggling manager covering the Dover Hoverport, calls this "targeting to risk". He says that it is "not a precise science". In reality there is specific intelligence of comparatively few smuggling attempts. What Mr. Smith calls "trend intelligence" is used much more often to assist in the selection of travellers who may be of interest to Customs. Such information may be general and historic. For example, experience on the Dover-Calais route has identified trends in smuggling. For instance, the use of a recently acquired vehicles is relatively common amongst smugglers, presumably because they do not wish their movements to be tracked. The use of hire cars (after the tightening in Customs' policies on vehicle seizure), frequent trips abroad for short stays or, conversely, frequent short trips to the U.K. made by overseas residents, are among the factors which are of use in deciding which vehicles to intercept.
26. Intelligence may be more focused. Prior knowledge from manifest information of who is about to arrive on a particular ship is an important aid in the selection of travellers as a result of both specific and trend intelligence. Checks can be made by Customs against the NEDS database and recent intelligence reports. Research of this kind allows officers to try to identify patterns of travel, for instance a traveller who has made a day trip five times in the last month, or other factors which appear to fit risk profiles, for instance an individual who has previously identified himself as unemployed, but is making a cross-channel trip soon after a previous trip. In this way travellers who appear to pose a risk can be targeted, allowing Customs to concentrate their resources on those travellers identified as posing the greatest risk.
27. Risk profiles are essentially patterns of behaviour, or features, which together indicate an increased risk. They are developed from experience and recent results, which identify new or re-emerging smuggling methods. A common long-lived risk profile is a single male in a Dutch hired car. Although apparently stereotypical, use of this profile still generates a number of drug seizures every year. Another profile is an unemployed or disabled person who is claiming benefits, but is making regular short-stay day trips and importing significant quantities of tobacco products. Experience has shown that such a profile is a clear indicator of a potential bootlegger, primarily because of the obvious question of how he can afford to make his purchases.
28. Such profiles are not written down, but they are known by all anti-smugglers. Where new factors or smuggling trends are detected, the information is shared between teams and locations by word of mouth and, where a seizure is particularly unusual or significant, details will be referred to Customs intelligence teams for them to distribute more widely as they see fit. Such a system may appear to be haphazard, but it is said to be surprisingly effective. The members of virtually every team, as they arrive for duty at the start of their shift, will ask their departing colleagues for information of any unusual seizures since they were last on duty. An example of a risk which was quickly brought to officers' attention in this way was the smuggling of HRT in giant boxes of washing powder, which is cheaper in France than in this country.
29. When a vehicle is selected for investigation, it is directed into a search area where officers speak in more detail to the driver and any passengers, covering topics such as details of travel arrangements, places visited, and length of journey. The officers assess the answers and reactions to questioning. Checks are made of the NEDS database and manifest information to see whether there are records of recent travel. A search of the vehicle is then undertaken if the officers believe this may be productive, the extent of the search being at the officers discretion. The information provided during questioning is compared with what is found during the search.
30. Customs officers make their own selection of individual foot passengers or small groups of foot passengers. They take them to a nearby baggage search area and then ask questions about their baggage and travel arrangements.
31. Should examination reveal quantities of excise goods above the MIL's set out in the PRO, the officer will consider whether or not to require the traveller or travellers to answer questions to satisfy him that the goods are not being held for a commercial purpose, taking account of such matters as the quantities of goods found, whether the traveller had told the officer that he was carrying goods of that quantity, whether there are indications that the traveller travels frequently, whether he has previously been stopped by Customs and, if so, with what result. The NEDS database and manifest information are again available to identify regular travellers, and to compare the reasons given for travel, quantities imported and claimed consumption rates with those previously stated.
32. The claimants adduced evidence about Customs' actual checking practices from individual travellers, and this evidence often conflicted with Customs' records. However, a sufficiently clear picture emerged for the purpose of the decisions of principle we have been invited to make.
5. Checks and lock-ins
33. The main areas of complaint by individual travellers can be divided into two categories. The first embraced the nature of the checks of passengers arriving at Dover Hoverport, including some intensive checks which led to "lock ins" and undue delays. The second related to the unjustified seizures of goods (sometimes accompanied by travel bans), and seizures of vehicles, and Customs' failure to restore vehicles even when the owner of the seized vehicle had taken no part in the questionable import.
34. The evidence of checks and "lock-ins" was derived from statements made by respectable travellers and by representatives of Hoverspeed, as well as from travellers whom Customs had reason to suspect of being professional smugglers. We were shown statistics for a two-month period in July-September 2001. These revealed that out of 683 arrivals from Ostend and Calais, on 117 occasions 10% of foot passengers were stopped and questioned, and on 34 occasions 20% or more were stopped and questioned. Mr. Smith did not dispute the accuracy of the statistics. For his part, he drew attention to the fact that on over 40% of the arrivals no Customs officers were present at all.
35. There is no doubt that Mrs. H and Mrs. P were respectable travellers. They are both retired. Mrs. P travelled to Ostend on Hoverspeed on 16 January 2001. She bought two bottles of vodka and 800 cigarettes on board. On arrival back at Dover, by her account, passengers were forced to queue up and wait on the gangway between the hovercraft and Immigration for nearly an hour. No information was given to them about what was happening. After eventually passing through Immigration control she found the arrivals hall very congested – packed full of passengers. There were approximately 15 Customs and police officers present. Most of the passengers were being stopped and their baggage searched. There were no refreshments, toilets or chairs. Passengers were tired and stressed, pushing and shoving. Mrs. P was frightened. She was delayed between two and a half and three hours. She has been reluctant to travel with Hoverspeed since.
36. By Mrs. H's account she arrived as a foot passenger at Hoverspeed's arrivals hall on 4 April 2001, after a day trip to Ostend. She had not purchased any tobacco products or alcohol. Her partner had bought £70 worth of cigars. A large number of passengers were detained in the arrivals hall. There had been no announcement to say what was happening, but people were queuing up to go through Customs. Six officers were going through nearly everyone's bags. Fire doors were locked. There was a lot of pressure from people pushing, and a degree of panic. There were elderly people and children in the crowd. She had to hold on to her partner to prevent him from falling and being crushed. She was very upset. They were caught in the crowd for 20 to 30 minutes.
37. Hoverspeed's new Customs Advisor spoke of an intensification exercise on 16 January 2002. The Customs team were dressed like a police tactical team, in dark uniforms, carrying police tool belts. A hundred or more passengers were herded or filtered into lines and directed to a six foot wide door with a Customs officer placed on either side. All the passengers who tried to pass through were questioned and their bags searched. Some were directed into the Customs area for further questioning. A queue of passengers backed up almost to the Immigration desks. He said that the same team has attended the Hoverport since, and it is aggressive in its approach. The Commissioners' case is that a CCTV video showed that the whole movement on 16th January 2002 took less than ten minutes to clear.
38. More generally, Hoverspeed's representatives say that the number of passengers who have been stopped and questioned and searched has increased, and that exits have been blocked by Customs officers, creating a funnel effect for passengers. Customers have complained of being intimidated by Customs officers, and being made to feel like criminals. Those who are selected for further questioning have to wait in sight of other passengers. The arrivals hall is designed only as a temporary area of passage from ship to port, and it does not have the facilities for an extended stay. The "lock-in" is indiscriminate. There is no advance warning, so delay causes nervousness, confusion and panic, particularly among older passengers and children. Customs interviews take time, and cause delay.
39. In their evidence in reply the Commissioners accept that, in addition to particular exercises to deal with violent gangs "steaming" Customs, there has been an increase in the visible Customs presence, in order to deter smuggling, from May 2000 onwards. They also accept that they have been operating "intensification or filtering exercises" on a regular basis at the Dover Hoverport as well as at Dover Eastern Docks, and the Channel Tunnel, and at Folkestone while it carried tourist traffic. They say, however, that such exercises have normally lasted for short periods – less than an hour. They have involved Customs officers speaking briefly to every passenger in order to establish the quantity of excise goods they are carrying. Where it is apparent that passengers are carrying alcohol, cigarettes or tobacco at or below the guidance levels (MIL's), they are not delayed. Most of the passengers who are of no apparent interest to Customs therefore leave the port quickly.
40. In the early part of 2001, because of the significant risk of smuggling at the Hoverport, such checks may have taken place as often as twice a day, but not more frequently than five or six times a week on average. Since the summer of 2001, they have probably taken place not more than once or twice a week, and no intensification exercise has been performed at the Hoverport since January 2002. Fire exits have never been locked by Customs, although they notice that they are now locked by approved "break glass" bolts; nor have they denied access to the toilets in the Hoverspeed concourse. They accept that the evening boat from Ostend on which Mrs. P arrived back at Dover was the subject of an intensification exercise. It was an arrival known to be favoured by bootleggers. There were approximately 280 passengers on board.
41. It appears to be commonground that Customs officers refuse to give reasons for stopping and questioning passengers, even when asked, save to say that the route travelled by the passenger matches a known smuggling route.
42. Despite the conflict in some areas of the evidence, it is clear to us that on a significant number of occasions over the last two years large numbers of passengers with limited quantities of excise goods, or none at all, must have been detained in Hoverspeed's arrivals hall at Dover for periods of as long as an hour (and sometimes longer) and then questioned and their baggage searched. This practice occurs for no reason which relates to the individual passenger save that he has taken a route known to be taken by smugglers in the company of many other honest and innocent travellers.
43. In the absence of oral evidence it is not easy for us to form any clear view about the extent to which these checks are intimidating to passengers. Large numbers of uniformed officers may well be intimidating to those who are not used to them. No doubt the manner of some officers is more abrupt than that of others. Everything else being equal, the innocent traveller is unlikely to be intimidated by questioning. A search of baggage for no reason specific to the individual traveller is no doubt offensive to many. The question we have to decide is not whether it is offensive but the circumstances in which it may be lawful.
6. Seizure of innocent travellers' goods and travel bans
44. Hoverspeed also relied on the statements of a number of passengers for its contention that Customs officers confiscate innocent travellers' goods and impose travel bans for the future.
45. Five particular travellers, P, R, W, C and M, were selected to make this point. They typically lived in Kent, and travelled by Hoverspeed from Dover to Calais or Ostend with varying frequency – between two or three times a week and once every three or four weeks – bringing back tobacco products which were often on or near the guidelines (MIL's), and which they said, and told Customs Officers, were for their own consumption or to be given to members of their immediate family, or to a close friend. A number of them had their goods confiscated by Customs on occasions in late 2000 or in 2001, and they were told that if they travelled again within, for example, the next three weeks they would be stopped and their goods would be confiscated, or - more simply – that they were not to travel again within the specified period. One of them was furious when a Customs officer told him that she would let him "keep them this time".
46. The difficulty we encountered with these five examples as an indictment of Customs methods was that on close enquiry Customs have been able to put forward strong arguments to the effect that all save R were in fact serial smugglers. We accept that passengers whom Customs strongly suspect of regularly bringing back quantities of tobacco products for sale rather than for their own, personal use, even if they are within the guidelines, are "warned off" by being told that if they return within a certain period they will be stopped and stand at risk of having their goods confiscated. No doubt, some are simply told not to travel again within a certain period, as shorthand for that very message.
47. All this seems sensible enough on the part of Customs, provided that their policies are otherwise lawful. Experienced travellers, like the witnesses in question, would hardly believe that Customs would think they had power to stop them travelling altogether. If such passengers are deterred from making frequent trips in order to bring back tobacco goods, not all of which can sensibly be seen to be for their own use, or for the non-commercial use of family or close friends, they can hardly complain with any justification. Nor can Hoverspeed justifiably complain about losing their custom.
7. Mr. and Mrs. Andrews: the facts
48. A more reliable indication of the potential harshness of Customs' practices in seizing and refusing to restore goods and vehicles, including vehicles which do not belong to those using them to import tobacco products and alcohol, is given by the experiences of Mr. and Mrs. Andrews, Mr. Wilkinson and Miss Lynne Andrews.
49. They all live in Widnes which is a five hour drive from Dover. According to Mr. Andrews, he and his wife travelled with Hoverspeed on four occasions over a period of twelve months during 2000 and 2001. On three of these trips they travelled from Dover to Calais and then drove to Adinkerke in Belgium, where they normally spent time sightseeing. There are a number of large retail outlets, selling tobacco products and alcohol, in Adinkerke, which is just over the border from France. They bought tobacco products, alcohol and on some occasions, soap powder which is much cheaper there.
50. Mr. Andrews normally took his own car, but at the time of his booking on 22nd August 2001 he had had a crash. He therefore borrowed his sisters small Nissan Micra, which she had obtained on hire purchase. In his statement he says that this was at her suggestion; she says that he asked if he could borrow the car.
51. In any event, Mr. and Mrs. Andrews left Widnes in the small hours, with Mr. Wilkinson, Miss Andrews's lodger, as their passenger. Miss Andrews did not come with them. She had simply lent her car to her brother for a day, for what she understood to be a pre-booked, special offer trip across the Channel. She presumably knew that he would bring back tobacco products and alcohol in significant quantities, as he had done so before.
52. They caught the 11. 30am hovercraft from Dover to Calais, and made the short motorway drive to Adinkerke where Mr. Andrews bought 10,000 cigarettes, 8kgs of HRT, three bottles of brandy and a bottle of rum. His wife bought 5,000 cigarettes and 2 cases of sparkling wine. Mr. Wilkinson bought 10,000 cigarettes for himself, and 200 as a present for his mother, and two bottles of wine.
53. They then caught the hovercraft back to Dover where they were the third car to leave the boat, at about 5.10pm (GMT). According to Mr. Andrews there was a white Transit van in front packed with boxes of 5,000 cigarettes, which Customs inspected and let pass. Customs cannot verify this, but it is commonground that Mr. Andrews was stopped and questioned. He was not given any reason for this. Indeed, no reason was given in the Commissioners' evidence before this Court, and no reason was given during the course of the hearing itself.
54. He was open about the tobacco products and alcohol in the car. All three were further questioned, and their goods were confiscated. Miss Andrews' car was also seized. Although the Customs officers accepted Mr. and Mrs. Andrews' accounts that the goods which they had purchased were for their own use, they said that they did not accept Mr. Wilkinson's story that his goods were for his own use. They were therefore going to seize all the goods in the car, and the car as well, although Mr. Andrews told them that it was his sisters car and on finance.
55. In his evidence to this Court Mr. Wilkinson has explained, among other things, that he was receiving incapacity benefit. He also smoked 60 cigarettes a day. He had not had a holiday for three years when Mr. Andrews invited him to join the day trip to France, and he had never crossed the Channel before. Until 12 months previously he had been living with his mother, and when he moved out he raised £500 by selling his computer equipment, stereo, video and TV to his brother. He had been able to make savings when he lived with his mother, and he also made savings from the £150 benefits he received every two weeks. He was stocking up for two years, because he was a heavy smoker. He did not drive and he had no plans to travel to France or Belgium again. He says that one of the Customs officers suggested to him that he should go across the Channel every six weeks or so in order to stock up in smaller amounts. It is not at all clear to us how he could have done this.
56. Mr. Andrews said he felt he had been treated like a criminal. When he told the officers that it was a five hour drive home, he was simply shown the door. The party finally left the Hoverport two and a half hours after they arrived. They eventually got home by public transport at 5am, about nine and a half hours later, with the help of a neighbour who had to drive down from Widnes to Birmingham to rescue them in the middle of the night. The following day Mr. and Mrs. Andrews each wrote to the Commissioners requesting the return of their goods. They followed this up with letters confirming their wish to resist the forfeiture of their goods. On 10th September they received a holding letter in reply. Ten weeks later the Solicitors Office of Customs and Excise wrote and told them that the Commissioners had decided to return their goods if they still existed, or pay them their market value, but that they still maintained that the original seizure was lawful.
57. On the same day Customs Law Enforcement wrote to all three with a Summary of Condemnation to appear in the Channel Magistrates' Court. In their formal Complaint they said that Mr. and Mrs. Andrews had satisfied officers that their goods were not held or used for a commercial purpose, but they had been seized as liable to forfeiture under section 141 of CEMA because they had been mixed packed or found with Mr. Wilkinson's goods which were liable to forfeiture. Solicitors who act for Hoverspeed as well as for the four individual claimants in the present proceedings then intervened. The condemnation proceedings were stayed pending the outcome of the present applications. Since Mr. and Mrs. Andrews' goods had been destroyed, a payment of £1,750 to them was authorised.
58. Miss Andrews also wrote to the Commissioners on 23rd August 2001 to resist the forfeiture of her car. She later withdrew this challenge and made a request for the restoration of the car instead. She pointed out that she was not driving it when it was seized. On 18th October the Commissioners refused restoration on the grounds that excise goods in excess of the PRO guidelines had been found in the vehicle, and that in willingly lending her vehicle to her brother she had accepted the risks involved. In their view she should seek redress from the person whose act had caused her loss. Her employers also wrote on her behalf. They drew attention to her exemplary work record and the difficulties which she was experiencing in having to travel to work without her car.
59. On 22nd November, the Commissioners wrote to Miss Andrews confirming their decision not to restore her car. A very detailed letter from the review officer set out the history. This letter referred to the Commissioners' policy which was in application at the time of the vehicles seizure. Private vehicles seized as a result of their use in the improper importation of excise goods would not be restored, although a vehicle might be restored to a third party if it had been stolen and the theft had been reported to the police at the time. The review officer was satisfied on the evidence available to her, which she explained, that the officers conclusion that Mr. Wilkinson had failed to rebut the presumption of commerciality was a reasonable one. The decision letter concluded:
"Any other excise goods found with his were liable to forfeiture by virtue of section 141(1)(b) of the 1979 Act which. I have mentioned above and the vehicle used to transport them was equally liable by virtue of section 141(1)(a) of the same Act. I am satisfied that they, too, were properly seized.
It remains for me to determine whether or not the seized item(s) should have been restored.
The crux of your disagreement with Customs is the retention of your car and I have gone through what you have written to decide whether or not the over-arching policy of non-restoration should not have been applied. In essence. I take your argument to be that as you were not there and none of the goods were for you, the policy should indeed be waived. That however is not the perspective of the Commissioners.
You offered a loan of your car as your brothers was damaged in an accident. The purpose of the loan was to go to the continent to buy excise goods. By placing your car in the charge of Mr. Andrews you placed an onus upon him and those with him not to abuse your trust. One of them did. It is essentially the position of Customs in circumstances such as yours that it is to that person whom you should turn for redress. The seizure and retention of the car is due to the use which was made of it and [this is] not dependent upon any direct involvement on your part.
Given the ready access to quantities of cheap excise goods on the continent you took a risk that those using your car would not be tempted to go beyond the parameters of own-use cross-border shopping. I am satisfied that this is what Mr. Wilkinson did and that the outcome in relation to your car was in line with policy and treats you no more leniently or harshly than anyone else in your circumstances. I cannot conclude that refusal to restore it was an unreasonable decision.
. . . I have to advise you that the decision which you are contesting has been confirmed. The car will not be restored to you."
60. The car has remained in storage. Miss Andrews has made the remaining three hire purchase payments on it. Her appeal to the VAT and Duties Tribunal (see para 136 below for the procedure) against the review decision awaits the conclusion of these proceedings. In the meantime her travel to work, her ability to shop, and her social life have all been adversely affected by the loss of her car. She often finishes her night shifts in the middle of the night. There is no public transport available at that hour, and it takes 45 minutes for her to walk home.
61. Even if these proceedings had not delayed matters, it would have been many months before the condemnation proceedings in respect of Mr. Wilkinson's goods and, more inconveniently, the proceedings in respect of Miss Andrews' car, were concluded.
62. In their witness statements Mr. and Mrs. Andrews say that they will never use Hoverspeed again.
8. Publicity for the Commissioners' vehicle seizure policy
63. During the course of the hearing we invited the Commissioners to tell us what notice was given to an "innocent" third party vehicle owner like Miss Andrews of the way in which they had decided to exercise their section 141(1) powers from July 2000 onwards. We have shown in paragraphs 13-16 above how in recent years the Commissioners have changed their policy from time to time without any Parliamentary sanction other than the wide language of section 141 (for which see para 88 below). It would therefore be impossible for a citizen to be able to predict the consequences of his actions or omissions at any given time unless he had express notice of the changes that the Commissioners had made to their policy.
64. Our request elicited a further statement from Mr. Smith. Apart from any notices at the ports, which would not have come to the attention of an innocent third party owner like Miss Andrews, they relied on two forms of publicity. The first was "A Customs guide for travellers entering the U.K. which was distributed to owners with their tax renewal forms by the DVLA between April and December 2000. The second consisted of press advertisements which appeared in a number of newspapers during seven months between September 2000 and August 2001.
65. So far as the former was concerned, it is headed "If you're taking your vehicle to another E.U. country, make sure you know what you are allowed to bring back". This would convey nothing to Miss Andrews who was not intending to do this. Similarly the headlines on the reverse side "DON'T RISK LOSING IT. PEOPLE WHO USE THEIR VEHICLE TO TRY TO SMUGGLE TOBACCO OR ALCOHOL ARE LIKELY TO LOSE IT" were irrelevant so far as she was concerned. If and only if she had read on, despite the irrelevant headline, she would have read the words:
"You should be very careful who you lend your vehicle to. Even if you are not responsible for the smuggling, if your vehicle has been used to commit this crime it will be seized. When a vehicle is seized and the owner is not present at the time of seizure, customs officials will want to interview the owner and may confiscate the vehicle permanently or charge a very substantial fee for its return."
This gave no real hint that Customs had been operating an almost automatic vehicle seizure policy from July 2000 onwards (see para 16 above: "No Second Chances").
66. We were also shown a schedule of the Press advertising (in a number of different national tabloid newspapers). Only two of the advertisements appear to refer to the possibility of a car being seized. One of these was headed "Smuggle tobacco and you could end up behind bars" and contained the banner: "New tougher penalties: Seizure of all goods and vehicles used. Heavy fines. Up to 7 years in prison". The other contained the text: "Smugglers: are you willing to risk losing your car? Anyone caught smuggling tobacco or alcohol may have their car confiscated permanently". Neither of these would convey any relevant message at all to someone like Miss Andrews.
67. This lack of any effective notice about the way the Commissioners were in fact using their very wide discretionary powers will be relevant when we come to consider whether the European Court of Justice (or, where relevant, the European Court of Human Rights) would consider that their practices were prescribed, or provided for, by law. The evidence in paragraphs 13-16 above shows that the Commissioners decided to change their vehicle seizure policies no less than three times in the space of 27 months. It was not suggested that they were not entitled to do this as a matter of English law. Whether they were entitled to do this as a matter of E.C. or Convention law without express Parliamentary sanction or effective notice to the persons concerned is one of the issues we will have to decide.
9. The effect or Customs activity on Hoverspeed's business
68. Hoverspeed's own concern about Customs' operations at the Hoverport is that its business has been adversely affected. Delays in allowing passengers and vehicles off a ship or away from the Hoverport cause delay in loading and dispatching the next service. They cost Hoverspeed fuel, labour and port costs. Customers who appreciate the fast port to port service lose that advantage and are deterred from using Hoverspeed again.
69. More generally, Hoverspeed has been confronted with a steady increase in the number of complaints from customers to the effect that they have been impeded and badly treated by Customs officers, and deprived of their goods and vehicles. Resentment of the actions of Customs, which customers like Mr. and Mrs. Andrews associate with the Hoverspeed service, deters them from travelling with Hoverspeed. Those deterred include passengers travelling to buy cheap groceries and household goods, and to fill up with fuel, as well as those whose primary aim is to buy tobacco products and alcohol. A "fear factor" drives many to keep well below the guidelines for tobacco products and alcohol, when genuinely buying for their own use from Hoverspeed outlets.
70. Moreover, the appeal processes, or the processes involved in resisting condemnation proceedings, are very costly in time and money. Comparatively small sums of money are at stake (when it is not a vehicle that is seized), and people do not think the cost and trouble involved in fighting for their rights can be justified. One witness said that she instructed a solicitor, but she withdrew instructions after receiving a bill for £180 for the solicitors preliminary advice. As this was more than she had paid for the tobacco she did not think it was worth pursuing her complaint against Customs any further.
71. Hoverspeed's day trip traffic fell significantly in 2001, according to its Managing Director. He attributes this to a substantial extent to Customs activity with consequent losses of ticket and catering revenue and of profit from "retail spend". The Commissioners challenge the suggestion that their actions have been detrimental to Hoverspeed's business. They point to optimistic and encouraging press-releases and in particular to a March 2002 press release announcing increased bookings and positive figures for the 2002 season. They note that the cross-Channel market was badly affected by the foot and mouth epidemic in this country. This appears to be commonground. It does not appear to us, however, to be necessary to reach any conclusions on these contentious issues, save to say that it is obvious that many of Hoverspeed's customers had an unpleasant experience when crossing what was in essence an internal frontier of the European Community at the Dover Hoverport, and a number of them, who had no involvement with smuggled goods, had to endure quite significant delays.
10. Relevant principles of EC law up to 1992
72. So much for the facts. We will now turn to issues of law. It is not possible to address the issues raised in this case without examining in some detail relevant provisions of English law and the law of the European Community. The latter has for many years jealously protected the free movement of goods and of E.U. nationals between the member states of the Union, subject only to whatever limitations or restrictions might be recognised by the provisions of the governing treaty from time to time.
73. The provisions of the European Convention on Human Rights are now becoming fairly familiar to non-specialist lawyers in this country, because Convention rights now perfuse so much of our law. The provisions of the EC Treaty, on the other hand, are much less well known to the non-specialist. Because of the wide interest this judgment is likely to engender, and because many English people have only a vague idea of what the internal market of the European Community entails, we will now set out the provisions of the EC Treaty which are of relevance in this case. We will give the articles of the Treaty their present numbering and add their original numbering in brackets:
Article 10 (ex Article 5)
Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the achievement of the Community's tasks.
They shall abstain from any measure which could jeopardise the attainment of the objectives of this Treaty.
Article 14 (ex Article 7a)
1. The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 15, 26, 47(2), 49, 80, 93 and 95 and without prejudice to the other provisions of this Treaty.
2. The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.
Article 17 (ex Article 8)
1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall complement and not replace national citizenship.
2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby.
Article 18 (ex Article 8a)
1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect.
Article 23 (ex Article 9)
1. The Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.
Article 25 (ex Article 12)
Customs on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature.
Article 28 (ex Article 30)
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
Article 29 (ex Article 34)
Quantitative prohibitions on exports, and all measures having equivalent effect, shall be prohibited between Member States.
Article 30 (ex Article 36)
The provisions of Articles 28 and 29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and . . .
Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.
Article 49 (ex Article 59)
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 Saturday of the Community other than that of the person for whom the services are intended.
Article 93 (ex Article 99)
The Council shall, acting unanimously on a proposal from the Commission . . . adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time-limit laid down in Article 14.
Article 249 (ex Article 189)
A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authority's the choice of from and measures."
What are now Articles 14 and 93 of the EC Treaty were inserted into the Treaty by the Single European Act. What is now Article 18 was inserted by the Maastricht Treaty with effect from 1993.
74. It will at once be obvious that as soon as the internal market was established on 1st January 1993 no excise duties could be levied on the importation of goods from France to the United Kingdom any more than they could be levied on an internal frontier within the United Kingdom, such as the border between England and Scotland or the border between the counties of Kent and Surrey. Frontier checks may be permissible on other grounds, but not for excise purposes. The strains that have been evident at Dover arise directly from the fact that national legislation concerning excise duties within the member states has not been harmonised and there is still an enormous disparity between the level of excise duty charged on alcohol and tobacco in this country and that charged in other member states on the other side of the English Channel.
75. There are also two Council Directives to which we must refer at the outset. Council Directive 64/221/EEC was concerned with the co-ordination of special measures concerning the movement and residence of foreign nationals which were justified on grounds of public policy, public security or public health (a matter formerly covered by Article 48 of the Treaty). Article 3(1) provided:
"Measures taken on grounds of public policy or of public security shall be based exclusively on the personal conduct of the individual concerned."
76. Council Directive 73/148/EEC was concerned with the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services. Article 1 identified the beneficiaries of this directive, and Article 3(1) provided:
"Member States shall grant to the persons referred to in Article 1 [the] right to enter their territory merely on production of a valid identity card or passport."
A very similar provision is also to be seen in Article 3(1) of Council Directive 68/360/EEC (in relation to workers of member states and their families).
77. These two directives made significant changes to the way nationals of the different member states could move freely within the Community at that time for the economic purposes identified in them. So far as the movement of alcohol and tobacco between member states was concerned, a modicum of relief from excise duty on importation was permitted prior to 31st December 1992 because it was considered desirable that even before the harmonisation of indirect taxes had reached an advanced stage, "the populations of the Member States should become more strongly conscious of the reality of the common market" (see the second recital to Council Directive 69/169/EEC ("Directive 69/169"). The signature (in 1986) and subsequent ratification of the Single European Act revolutionised the position with effect from 1st January 1993, and we will have to examine very carefully both the terms of the Excise Directive which put into effect the objectives of that Act pursuant to what is now Article 14 of the Treaty, and the way in which the requirements of that directive were transposed into English law. We will call the period prior to 1st January 1993 "the old regime" and the period which started on 1st January 1993 "the new regime".
11. Relevant principles of U.K. law up to 1992
78. We will also have to consider the effect of changes to this countries primary and secondary legislation which came into effect later than January 1993, for example those flowing from the Governments adoption of the recommendations of the Keith Report in 1994 and the changes which followed the judgment of a VAT and Duties Tribunal in Hodgson v Commissioners of Customs and Excise [1997] E.U. LR 116.
79. Under the old regime (see para 77 above) the charging of excise duties on tobacco and alcohol imported into the United Kingdom from other member states of the European Union was not contrary to Community law. The reason for this was that these duties did not constitute customs duties upon imports or charges having equivalent effect (within the meaning of what was then Article 12 of the EC Treaty) since they formed part of a system of taxation applied equally to goods manufactured within the territory of the particular member state. What was then Article 95 of the Treaty merely required such systems of taxation (broadly speaking) not to discriminate between imported and home-manufactured goods. We have taken this summary of the situation from the judgment in Hodgson at [3. 1].
12. EEC exemptions on imports of excise goods up to 1992
80. In those days a limited degree of exemption from turnover tax and excise duty on imports in international travel was afforded by Directive 69/169. By Article 2 of that directive the exemption applied, as regards travel between member states, to goods in travellers' personal luggage if such imports had no commercial character and if the total value of the goods did not exceed a stated amount. By Article 3(2) importations were to be regarded as having no commercial character if they:
"(a) take place occasionally and
(b) consist exclusively of goods for the personal or family use of the travellers, or of goods intended as presents; the nature or quantity of such goods must not be such as might indicate that they are being imported for commercial reasons."
This directive also permitted tax-free shops on ferries and in airports to sell goods without paying excise duty (up to specified limits) when such goods were to be exported to other member states.
81. Very similar language was used five years later in the definition of the phrase "small consignments of a non-commercial character" in Article 1(2) of Council Directive 74/651/EEC. This directive afforded relief from turnover taxes and excise duties in relation to goods dispatched by a private person in one member state for the benefit of a private person in another member state. In addition to the requirements that tax should have been imposed on the goods when they were acquired in the first state and that their total value did not exceed a stated amount, the Article 1(2) definition provided that they:
"(b) are not intended for commercial use and appear from their nature and quantity to be intended solely for the personal or family use of the recipient; and
(c) are not sent against payment of any kind by the recipient."
82. The exemptions from excise duty conferred by these directives were transposed into English law by personal relief orders made under enabling powers conferred by primary legislation. It is convenient for this purpose to look at the statutory provisions which emerged from the 1979 consolidation of the customs and excise legislation without going back to their predecessor Acts. In short, excise duty was in general chargeable on all importation of tobacco or alcohol into the United Kingdom, but the Commissioners were empowered by section 13(1) of the Customs and Excise Duties (General Reliefs) Act 1979 ("the General Reliefs Act") to grant reliefs in relation to persons entering the country. We were told that the effect of the 1969 and 1974 directives was achieved by appropriate personal relief orders made under this statutory power (see, for instance the Customs Duty (Personal Reliefs) (No 1) Order 1968).
13. Relevant provisions of the Customs and Excise Management Act 1979
83. Because duty was payable (subject to the exemptions and reliefs we have mentioned) on alcohol and tobacco brought into this country from other member states by individual travellers for their personal or family use, all such travellers were under the positive duty to make the declarations required by section 78(1) of CEMA:
"(1) Any person entering the United Kingdom shall, at such place and in such manner as the Commissioners may direct, declare any thing contained in his baggage or carried with him which –
(a) he has obtained outside the United Kingdom; or
(b) being dutiable goods or chargeable goods, he has obtained in the United Kingdom without payment of duty or tax,
and in respect of which he is not entitled to exemption from duty and tax by virtue of any order under section 13 of the Customs and Excise Duties (General Reliefs) Act 1979."
84. They were also required to answer questions put to them by officers of Customs and Excise under section 78(2) of CEMA:
"(2) any person entering . . . The United Kingdom shall answer such questions as the proper officer may put to him with respect to his baggage and any thing contained therein or carried with him, and shall, if required by the proper officer, produce that baggage and any such thing for examination at such place as the Commissioners may direct."
85. Section 164(1) of CEMA conferred on officers of Customs and Excise a power of search:
"(1) Where there are reasonable grounds to suspect that any person to whom this section applies is carrying any article
(a) which is chargeable with any duty which has not been paid or secured; or
(b) with respect to the importation . . . of which any prohibition or restriction is for the time being in force under or by virtue of any enactment,
an officer . . . may . . . search him and any article he has with him."
86. Section 49(1) of CEMA provided that various categories of goods improperly imported were liable to forfeiture. By section 49(1)(a):
"(1) where –
(a) except as provided by or under the Customs and Excise Acts 1979, any imported goods, being goods chargeable on their importation with customs or excise duty are, without payment of that duty –
(i) unshipped in any port,
(ii) unloaded from any aircraft in the United Kingdom . . .
These goods shall . . . be liable to forfeiture."
87. Section 139 of CEMA provided, so far as is material:
"(1) Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer . . .
(5) Subject of subsections (3) and (4) above and to Schedule 3 of this Act, any thing seized or detained under the customs and excise Acts shall, pending the determination as to its forfeiture or disposal, be dealt with and, if condemned or deemed to have been condemned or forfeited, shall be disposed of in such manner as the Commissioners may direct.
(6) Schedule 3 to this Act shall have effect for the purpose of forfeitures, and of proceedings for the condemnation of any thing as being forfeited, under the customs and excise Acts."
88. In addition to the goods mentioned in section 49(1) of CEMA as being liable to forfeiture, the vehicle in which they were being carried, and any other thing mixed, packed or found with them, were also liable to forfeiture, as section 141(1) of CEMA makes clear:
"(1) Without prejudice to any other provision of the Customs and Excise Acts 1979, where any thing has become liable to forfeiture under the customs and excise Acts –
(a) any . . . vehicle . . . which has been used for the carriage, handling deposit or concealment of the thing so liable to forfeiture . . . and
(b) any other thing mixed, packed or found with the thing so liable,
shall also be liable to forfeiture."
89. The provisions of Schedule 3 of CEMA (which is entitled "Provisions relating to forfeiture") can be summarised quite briefly. Once an article has been seized as liable to forfeiture the Commissioners must give notice of its seizure to its owner unless, for instance, it was seized in the owners presence (para 1). The notice must be in writing (para 2), and a person seeking to resist the forfeiture must give notice to the Commissioners of his claim within a month (para 3). If no such notice is given within that period, "the thing in question shall be deemed to have been duly condemned as forfeited" (para 5).
90. If on the other hand notice of a claim is duly given, the Commissioners must take proceedings for the condemnation of the article in question by a Court, and "if the Court finds that the thing was at the time of seizure liable to forfeiture the Court shall condemn it as forfeited" (para 6). If the article is either condemned (under para 6) or deemed to have been condemned (under para 5) to forfeiture, then the forfeiture will have effect as from the date when the liability to forfeiture arose (para 7).
91. In this jurisdiction proceedings for condemnation (which are described as "civil proceedings") may be instituted in the High Court or in the appropriate magistrates' Court (paras 8 and 9). In such proceedings the claimant or his solicitor must state on oath that the thing seized was his property at the time of the seizure (para 10). Provision is made for either party to condemnation proceedings to appeal from a magistrates' Court to the Crown Court (or to the High Court by way of case stated) (paras 11 and 12). Paragraph 13 provides that "in any proceedings arising out of the seizure of any thing, the fact, from and manner of the seizure shall be taken to have been as set forth in the process without any further evidence thereof, unless the contrary is proved". Paragraph 16 gives the Commissioners power to deliver up the seized article to the claimant at any time on his payment of "such sum as they think proper", which must not exceed its value (as assessed by them) including any unpaid but chargeable duty or tax. Provision is made by paragraph 17 for the Commissioners to make amends to the claimant if he succeeds in the condemnation proceedings.
92. There are three other provisions of CEMA which warrant attention: section 144, which provides a measure of statutory protection for Customs and Excise officers in relation to the seizure and detention of goods; section 152, which confers wide powers on the Commissioners to mitigate penalties or to restore forfeited or seized goods to their owners, either unconditionally or subject to such conditions as they think proper; and section 170, which creates a criminal offence of fraudulently evading duty payable on goods. Section 170 also creates an offence if someone intentionally evades a prohibition or restriction on the importation of what are known as prohibited and restricted ("P & R") goods, such as firearms or dangerous drugs.
93. The remedies available prior to 1994 to an "innocent" owner of goods which were seized by Customs and Excise pursuant to the powers of seizure conferred on them by section 139 of CEMA can be seen in the Strasbourg case of AGOSI v United Kingdom (1987) 9 EHRR 1. The applicants were a German company who had sold a quantity of Krugerrands subject to a retention of title clause, pursuant to which the ownership of the coins remained with them after the dishonour of the cheque tendered as payment. The Krugerrands, which were at that time prohibited goods, were seized on arrival in this country, and the purchasers were charged with an offence under the statutory predecessor of section 170 of CEMA. The applicants asked the Commissioners to restore their property to them under the statutory predecessor of section 152 of CEMA. When the Commissioners refused, it was commonground that the applicants' only remedy under English law lay by way of judicial review.
94. The same statutory scheme was under consideration in the later Strasbourg case of Air Canada v United Kingdom (1995) 20 EHRR 150, although CEMA was now the governing statute, since the events in question had occurred in 1987. The applicants' challenge was to the requirement of the Commissioners under section 152 of CEMA that they should pay £50,000 in order to achieve the restoration of their aircraft, on which over 300 kilograms of cannabis resin had been found.
14. Freedom of movement of E.U. nationals and goods within the Community
95. As we have seen in paragraph 76 above, freedom of movement within the European Community had for many years been guaranteed by Article 3(1) of Directive 68/360 and Article 3(1) of Directive 73/148. The production of a valid identity card or passport was all that was required at an internal frontier.
96. The meaning of this provision was explained by Advocate General Tesauro and by the European Court of Justice in Commission v Netherlands [1991] ECR I-12637. The Advocate-General made it clear (at [3]) that the case was not concerned with personal checks at an internal frontier which related to matters of public policy, public security or public health, or with the inspection of luggage and other goods. He said (at [12]) that on matters of public policy, public security or public health the officials responsible for frontier checks might put questions to people whose behaviour was such as to raise suspicions or, in any event, in circumstances in which public security appeared particularly threatened. He emphasised, however, that the refusal of the right of entry on those grounds could only be exercised in individual cases where there was sufficient justification. In the earlier case of Commission v Belgium [1989] ECR 997 the Court had said that sporadic checks of residence permits at a frontier were permissible, but that they must not be carried out in a systematic, arbitrary, or unnecessarily restrictive manner.
97. In the Netherlands case the Court, for its part, declined (at [8]) to be drawn into those questions. It contented itself with impliedly holding (at [14]-[15]) that frontier officials were entitled to satisfy themselves that the travellers identity card or passport was indeed valid. They were not, however, allowed to ask citizens of member states questions regarding the purpose and duration of their journey or the financial means at their disposal.
98. This distinction between individual checks (or questions) and systematic checks at a frontier between member states was also made in a different context in Deutsches Milch-Kontor [1994] ECR I-2757. The background is to be found in what were then Articles 30 and 34 of the Treaty. In that case the European Court of Justice was concerned with systematic inspections of skimmed-milk powder at a frontier between member states which were not justified by one of the purposes recognised by what was then Article 36 of the Treaty. The relevant regulations provided that this powder, when exported, must be accompanied by a certificate relating to its composition and quality, and the Court held (at [22]) that systematic inspection at a frontier to ensure that the goods complied with the certificate constituted an obstacle to inter-Community trade which might be in breach of Articles 30 and 34 of the Treaty, so that the introduction of such inspections could for that reason be permitted only in duly justified circumstances. See also Commission v France [1983] ECR 1013, where the European Court of Justice outlawed systematic checks at a frontier which were directed towards ascertaining whether imports of Italian wine into France could be restricted on public health grounds.
15. The Excise Directive: the meaning of Articles 8 and 9
99. It is now necessary to look in some detail at the Excise Directive "on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products". This directive was made on 25th February 1992 pursuant to Article 99 (which is now Article 93) of the Treaty. It required member states, subject to certain derogations (Article 31), to implement it on 1st January 1993. Its first recital recognised that "the establishment and functioning of the internal market require the free movement of goods, including those subject of excise duties". Its third recital acknowledged that products subject to excise duty might be subject to other indirect taxes for specific purposes, but stressed that the maintenance or introduction of other indirect taxes "must not give rise to border-crossing formalities". The next five recitals presaged the provisions of Articles 6-10 of the directive (which we consider in paras 111-115 below).
100. The prohibition of checks liable to impede free movement within the Community was reiterated in the tenth recital. The nineteenth recital provided:
"Whereas, as a result of the abolition of the principle of taxes on imports in relations between Member States, the provisions on exemptions and allowances on imports cease to apply in respect of relations between Member States; whereas these provisions shall therefore be abolished and the directives concerned adapted accordingly . . . "
The only other recital we need to mention is the twenty-first, which we will consider in more detail (in paras 116-119 below) when we consider the effect of the transitional arrangements for Denmark, Finland and Sweden contained in Article 26 of the directive.
101. Under the scheme of this directive the crossing of an internal frontier is no longer in principle a chargeable event for excise duty purposes. If we put on one side the case of products moving under "suspension arrangements", the chargeable events are now (i) manufacture within the territory of a member state; (ii) importation of a product from outside the Community; and (iii) "holding for commercial purposes" within a member state. When His Honour Stephen Oliver QC described the scheme in the Tribunals judgment in Hodgson he said that it was evident that when the directive provided that holding for commercial purposes was to be a chargeable event, it was intended that member states should be empowered to charge excise duties on what he described as "false personal imports".
102. We find this a helpful way of looking at the matter. It enables us to concentrate on the juxtaposition of Article 8 of the directive ("true personal imports") and Article 9 ("false personal imports") without being distracted by the provisions of Articles 7 and 10 which deal with the arrangements whereby excise duty chargeable and paid in one member state may be reimbursed when goods are held for commercial purposes, and excise duty charged, in a second state following some form of commercial transportation or commercial delivery (as distinct from being carried by a private individual).
103. The critical articles (Articles 6, 8 and 9) read, therefore, so far as is material:
"6. (1) Excise duty shall become chargeable at the time of release for consumption . . .
Release for consumption of products subject to excise duty shall mean:
(a) any departure . . . from a suspension arrangement;
(b) any manufacture . . . of those products outside a suspension arrangement;
(c) any importation of those products [into the Community] . . . where those products have not been placed under a suspension arrangement.
2. The chargeability conditions and rate of excise duty to be adopted shall be those in force on the date when duty becomes chargeable in the Member State where release for consumption takes place. Excise duty shall be levied and collected according to the procedure laid down by each Member State, it being understood that Member States shall apply the same procedures for levying and collection to national products and to those from other Member States.
8. As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired.
9(1) Without prejudice to Articles 6, 7 and 8, excise duty shall become chargeable where products for consumption in a Member State are held for commercial purpose in another Member State.
In this case, the duty shall be due in the Member State in whose territory the products are and shall become chargeable to the holder of the products.
(2) To establish that the products referred to in Article 8 are intended for commercial purposes, Member States must take account, inter alia, of the following:
-the commercial status of the holder of the products and his reasons for holding them,
-the place where the products are located or, if appropriate, the mode of transport used,
-any document relating to the products,
-the nature of the products,
-the quantity of the products.
For the purpose of applying the content of the fifth indent of the first sub-paragraph, Member States may lay down guide levels, solely as a form of evidence. These guide levels may not be lower than:
(a) Tobacco Products
cigarettes 800 items
cigarillos (cigars weighing not
weighing more than 3g each) 400 items
cigars200 items
smoking tobacco1 kg;
(b) Alcohol beverages
spirit drinks 10 l
intermediate products 20 l
wines (including a maximum of 60 l of sparkling wines) 90 l
beers110 l."
104. Article 8 is concerned with "products acquired by private individuals for their own use" as opposed to being acquired for their "personal or family use". When the language of the Excise Directive was transposed into English law in the PRO (see para 2 above), Article 2(1) of that order provided that:
"'own use' includes use as a personal gift provided that if the person making the gift receives in consequence any money or money's worth (including any reimbursement of expenses incurred in connection with obtaining the goods in question) his use shall not be regarded as own use for the purpose of this Order."
105. We consider that the change of language in the Excise Directive must be regarded as deliberate, and that the directive has in this respect been correctly transposed into English law. While it was understandable that it was a matter of indifference whether the two litres of wine or the litre of whisky or vodka imported into a different member state under Directive 69/169 was destined for personal or family use, the new directive, which carried with it the possibility that alcohol or tobacco might be imported in private cars or vans, was set in a different context, and its framers clearly had in mind the need to make a distinction between the use of the individual who was "transporting" the goods and the use to which his/her possibly extended family might put an increased volume of goods. We see no reason not to adopt the words of Advocate-General Colomer in EMU Tabac [1998] ECR I-01605 when he said (at [29]) that:
"Article 8 of the directive provides only for action by the private individual on his own behalf."
106. In that opinion the Advocate-General also explained, at [64]–[68], that the "principle governing the internal market", characterised as it was by the abolition between the member states to the free movement of goods, persons, services and capital, was achieved by avoiding double taxation simply by applying the rule of taxation at origin, subject to different requirements in specific cases where excise duty was payable at the destination of the goods.
107. It follows that for "true personal imports" the charging of excise duty at the frontier is simply abolished by the combined effect of Articles 6 and 8. There is now no question of duty being chargeable subject to exemptions or allowances. As the nineteenth recital of the directive makes clear, the only excise duty payable on these goods is that which forms part of the price of the goods when they are bought by the individual in the first member state and then transported to another member state (usually his home state) by him for his own use.
108. When we turn to Article 9 and "false personal imports", these provisions are expressed to be without prejudice to Articles 6 and 8, and they make excise duty chargeable on goods when they are "held for commercial purpose[s]" in the second member state without any right to reimbursement from the state where they were originally "released for consumption". It should be noted in this context that although the English text refers to "products for consumption" the French text makes it clear that the reference is to "products released for consumption". Article 6(1), for its part, defines "release for consumption," in contexts other than suspension arrangements, as meaning manufacture or importation into the Community.
109. Although it may be administratively convenient for the United Kingdom to identify and charge excise duty on "false personal imports" at the frontier, it should be noticed that chargeability to excise duty arises when they are held for commercial purposes in the second state and not necessarily on importation. There is nothing in the recital to the directive to show that its draftsmen were contemplating the creation of checks at an internal frontier which were liable to impede free movement within the Community. Indeed, a combination of the first and tenth recitals to the directive (see paras 99 and 100 above) underlines the importance of ensuring that free movement is not undesirably impeded.
110. How, then, is a false personal import to be identified? Article 9 is clearly parasitic on Article 8. Article 8 creates a regime of non-chargeability in the second state in respect of "products acquired by private individuals for their own use and transported by them". Article 9 creates a regime of chargeability when the second state can establish that "the products referred to in Article 8" are intended for "commercial" (as opposed to "own use") purposes.
111. So much is clear from the language "To establish that the products referred to in Article 8 are intended for commercial purposes member states must take account . . .". There follows a check-list of a type which is becoming increasingly familiar in English primary and secondary legislation (compare rule 3. 9 of the Civil Procedure Rules 1998: "the Court will consider all the circumstances including . . .").
112. The creation of check-lists of this type is a requirement of both EC and ECHR law (for the connection between these two systems of law see the judgment of the European Court of Justice in Kremzow [1997] ECR I-02629, and Constitutional Law of the European Union (Lenaerts et al, 1999) at pp 542-4). The exercise of an administrative discretion to determine whether goods are held for commercial purposes and therefore chargeable must follow the requirements of precision and predictability identified by the Strasbourg Court in such cases as Sunday Times v U.K. (1979-80) 2 EHRR 245 at [49] and Silver v U.K. (1983) 5 EHRR 347 at [90].
113. Article 9, therefore, requires the decision-maker to take into account the five listed criteria inter alia. The quantity of the products an individual holds is only one of the criteria to be applied. So far as questions of quantity are concerned, this directive is quite different from its predecessor (Directive 69/169: see para 80 above). That directive preserved the right of member states to charge excise duty on imports from another member state, subject to the "quantitative limits for exemption" provided for in Article 4 (two litres of wine etc). This directive abolishes the right of member states to charge excise duty on imports from another member state, but it allows the second state to charge such duty either under the circumstances described in Articles 7 and 10 or when it can establish that the goods, though transported by an individual, are false personal imports because he holds them for "commercial", not "own use" purposes.
114. Article 9 does not impose a persuasive burden of proof on the holder of the goods. Its language is different. The decision-maker has to consider, among other things, the "quantity of the products" as well as the other four listed criteria, and when he does so, his state is permitted to lay down "guide levels, solely as a form of evidence", which may not be lower than the amounts listed in the article. The French text of the article uses the words "élément d'épreuve", and the Italian and Spanish texts use similar phrases. The distinction between "épreuve" and "présomption" in French law is clearly indicated in the judgment of the European Court of Human Rights in Salabiaku v France (1991) 13 EHRR 379 at [30]:
"It is clear . . . that the courts in question were careful to avoid resorting automatically to the presumption laid down in Article 392(1) of the Customs Code. As the Court of Cassation observed in its judgment of 21 February 1983, they exercised their power of 'assessment on the basis of the evidence adduced by the parties before [them]'. They inferred from the 'fact of possession a presumption which was not subsequently rebutted by any evidence of an event responsibility for which could not be attributed to the perpetrator of the offence or which he would have been unable to avoid'. .. It follows that in this instance the French courts did not apply Article 392(1) of the Customs Code in a way which conflicted with the presumption of innocence."
115. It follows that if an individual is found in possession of goods in excess of the guide levels (if, as in the United Kingdom, they have been adopted at national level) this creates at most an evidential burden on the holder of the goods to provide an explanation. If no satisfactory explanation is forthcoming, then the national official may well conclude that the goods were indeed held for "commercial purposes".
16. The effect of the transitional provisions for three Scandinavian countries
116. We turn now to the arguments we received about the effect of the twenty-first recital to the Excise Directive and Article 26 of that directive. This article permitted Denmark, Finland and Sweden to maintain for a transitional period a tougher excise regime in relation to certain alcoholic drinks and tobacco products brought into their territory by private individuals for their own use than that prescribed by Title. I (Articles 1-10) of the directive. Article 26(4) provides:
"Denmark, Finland and Sweden may collect excise duties and carry out the necessary checks with respect to the products covered by this Article."
117. The twenty-first recital to the Excise Directive is in these terms:
"Whereas Article 1(2) of the Regulation concerning the elimination of controls and formalities applicable to the cabin and hold baggage of persons taking an intra-Community flight or making an intra-Community sea-crossing states that its enforcement is without prejudice to controls relating to bans or restrictions laid down by Member States, provided that they are compatible with the three Treaties establishing the European Community; whereas in that context the verifications necessary for the enforcement of the quantitative restrictions referred to in Article 26 must be considered to be such controls and, as such, to be compatible with Community legislation . . ."
This is a reference to Council Regulation 3925/91/EC ("the Baggage Regulation") which was adopted to take account of the problems posed by international air and sea ports, where passengers arrive both from other member states and from third countries, so that it was necessary to specify at what point their baggage might lawfully be checked.
118. The Baggage Regulation recognises in relation to baggage from all destinations that the authority's of the member states may lawfully conduct safety and security checks, and also checks linked to "prohibitions or restrictions laid down by the Member States, provided they are compatible with the three Treaties establishing the European Communities" (see Article 1(2)). Articles 3, 4 and 5 of the regulation are concerned to identify the place where "any controls and any formalities" referable to baggage arriving at an external frontier of the Community are to be carried out, and these may of course include checks connected with excise duty since this will be a chargeable event (see the definition of "release for consumption" in Article 6(1) of the Excise Directive).
119. In these circumstances, what the twenty-first recital to the Excise Directive is concerned to explain is that the transitional arrangements by which Denmark, Sweden and Finland were being permitted to retain a regime of charging excise duties on imports of alcohol and tobacco from all destinations (including member states) were to be interpreted as constituting checks linked to restrictions laid down by these states which were compatible with the Treaties for the purposes of Article 2(1) of the Baggage Regulation. This simply goes to emphasise the fact that as the Excise Directive does not sanction frontier checks for excise duty purposes as such, a special explanation had to be given as to why these three Scandinavian countries were being permitted to continue these checks for a limited period of time without breaching Community principles relating to the free movement of goods and personnel.
17. The Personal Reliefs Order and other changes in U.K. law since 1992
120. We turn now to consider the way in which the requirements of the Excise Directive were transposed into English law through the PRO. The critical articles for present purposes are Articles 3 and 5. Article 3 provides, so far as is material:
"3. Subject to the provisions of this Order a Community traveller entering . . . The United Kingdom shall be relieved from payment of any duty of excise on excise goods which he has obtained for his own use in the course of cross-border shopping and which he has transported."
121. In addition to furnishing a definition of "own use" (see para 104 above), Article 2, for our purposes, defines "Community traveller" as "a person who makes a journey between a member State and the United Kingdom"; and "cross-border shopping" as "the obtaining of excise goods duty and tax paid in the Economic Community provided that payment has not been, and will not be, reimbursed, refunded or otherwise dispensed with".
122. Article 5 in its present form provides, so far as is material:
"(1) The reliefs afforded under this Order are subject to the condition that the excise goods in question are not held or used for a commercial purpose whether by the Community traveller who imported them or by some other person who has possession or control of them; and if that condition is not complied with in relation to any excise goods, those goods shall, without prejudice to article 6 below, be liable to forfeiture.
(2) [In determining whether or not the condition imposed under paragraph (1) above has been complied with,] regard shall be taken of –
(a) his reasons for having possession or control of those goods;
(b) whether or not he is a revenue trader;
(c) his conduct in relation to those goods and, for the purposes of this sub-paragraph, conduct includes his intentions at any time in relation to those goods;
(d) the location of those goods;
(e) the mode of transport used to convey those goods;
(f) any document or other information whatsoever relating to those goods;
(g) the nature of those goods including the nature and condition of any package or container;
(h) the quantity of those goods;
(i) whether he has personally financed the purchase of those goods; and
(j) any other circumstance which appears to be relevant.
(3) Paragraphs (3A) to (3C) below apply to a person who has in his possession or control any excise goods afforded relief under this Order in excess of any of the quantities shown in the Schedule to this Order.
(3A) The Commissioners may require a person to whom this paragraph applies to satisfy them that the excise goods afforded relief under this Order are not being held or used for a commercial purpose.
(3B) Where a person fails to satisfy the Commissioners that the excise goods in question are not being held or used for a commercial purpose the condition imposed by paragraph (1) above shall, subject to paragraph (3C) below, be treated as not being complied with.
(3C) Paragraph (3B) above shall not apply where a Court or tribunal is satisfied that the condition imposed by paragraph (1) has been complied with.
(4) No relief shall be afforded under this Order to any person under the age of 17. "
123. In its original form, prior to the amendments effected by the Excise Duties (Personal Reliefs) (Amendment) Order 1999, Article 5(1) began with the words
"The reliefs afforded by this Order are subject to the condition that the excise goods in question are not imported for commercial purpose nor are held or used for such purpose . . ."
124. Articles 5(3), (3A), (3B) and (3C) were all inserted into the order by substitution in 1999. Article 5(3) in its original form read:
"(3) For the purpose of the determination referred to in paragraph (2) above a person shall be regarded as having imported, held or used excise goods for a commercial purpose if he has in his possession or control any excise goods in excess of any of the quantities shown in the Schedule to this Order unless, if required to do so, he satisfies the Commissioners to the contrary."
Part 2
- HMRC trying to bankrupt you? Free advice at Piggybankrupt. 
- BBC News. 
- The Daily Telegraph. 
- Express Newspapers. 
- Guardian & Observer. 
- Independent. 
- The Times. 
- Ulster TV. 
- The Economist. 
- Financial Times. 
- The SUN. 
