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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Oakley Inc v Animal Ltd & Ors [2005] EWCA Civ 1191 (20 October 2005) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2005/1191.html Cite as: [2006] Ch 337, [2006] 2 WLR 294, [2005] EWCA Civ 1191

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM The Chancery Division (Patents Court)
Of the High Court
Peter Prescott QC sitting as a High Court Judge
HC 02 CO2484

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/10/2005

Waller LJ :

1. The point raised on this appeal is an important one. As between the appellants (Oakley) and the respondents (Animal) it can be expressed quite shortly. EC Directive 98/71/EC required Member States including the United Kingdom to 'approximate' their legislation in relation to Registered Designs. But it provided by Article 11.8 an option allowing Member States to derogate and retain in force existing legislation for designs registered under that existing legislation. The Secretary of State under section 2(2) of the European Communities Act 1972 (the 1972 Act) issued the Registered Designs Regulations 2001 (the 2001 Regulations) implementing the Directive. In accordance with Article 11.8, Regulation 12 of those regulations retained in force existing legislation in relation to designs already registered under that legislation. The existing legislation was the Registered Designs Act 1949 (as amended).
2. Section 2(1), (2) and (4) of the 1972 Act provide as follows:-

"2(1) All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly; and the expression "enforceable Community right" and similar expressions shall be read as referring to one to which this subsection applies.

2(2) Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision-

(a) for the purpose of implementing any Community obligation of the United Kingdom, or enabling any such obligation to be implemented, or of enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised; or

(b) for the purpose of dealing with matters arising out of or related to any such obligation or rights or the coming into force, or the operation from time to time, of subsection (1) above;

and in the exercise of any statutory power or duty, including any power to give directions or to legislate by means of orders, rules, regulations or other subordinate instrument, the person entrusted with the power or duty may have regard to the objects of the Communities and to any such obligation or rights as aforesaid.

In this subsection "designated Minister or department" means such Minister of the Crown or government department as may from time to time be designated by Order in Council in relation to any matter or for any purpose, but subject to such restrictions or conditions (if any) as may be specified by the Order in Council.

2(4) The provision that may be made under subsection (2) above includes, subject to Schedule 2 of this Act, any such provision (of any such extent) as might be made by Act of Parliament, and any enactment passed or to be passed, other than one contained in this Part of the Act, shall be construed and have effect subject to the foregoing provisions of this section; but, except as may be provided by any Act passed after this Act, Schedule 2 shall have effect in connection with the powers conferred by this and the following sections of this Act to make Orders in Council and Regulations."

3. Peter Prescott QC sitting as a Deputy High Court Judge of the Chancery Division held, by a judgment dated 17^th February 2005, that in so far as the Secretary of State has by the 2001 Regulations exercised the option to retain existing legislation in relation to old registered designs, he has acted ultra vires. He has held that Regulation 12 was not passed "for the purpose of implementing any Community obligation of the United Kingdom" under section 2(2)(a); he has further held that it was not passed "for the purpose of dealing with matters …arising out of or related to any such obligation.." under section 2(2)(b). He held that:-

"142. The decision (whether or not to retain the old law of validity in respect of existing registrations the scope of whose monopoly was anyway going to be different) was a significant policy choice and, in my judgment, had to be implemented by primary legislation. Thus I hold that the Secretary of State did not have the power to make that decision – one way or the other – and to implement it by secondary legislation. Such a legislative act would be ultra vires."

4. That finding, although ostensibly only as between Oakley and Animal and limited to these regulations, has serious and very wide implications. It would mean if right at the very least that a Secretary of State could never exercise a similar option to retain existing legislation when issuing regulations implementing an obligation imposed on the United Kingdom by a Directive. It also seems to go further and hold that any exercise of a "significant policy choice" would need primary legislation. If right, that will force the Government to introduce primary legislation in every such case with obvious consequences. It has placed a narrow construction on both Section 2(2)(a) and (b) which heretofore has not been adopted by Secretaries of State. It places in jeopardy many regulations passed under section 2(2). It is these general issues which caused the Secretary of State to be invited to address the Court below, and has caused the Secretary of State to become a party for the purpose of appealing that ruling, and be represented by the Attorney General in this court. I shall call the point on which the Attorney General has appealed, and on which he was supported by Animal represented by Miss Clark, the validity point.
5. For the original parties to these proceedings, the impact of the ruling was in fact paradoxical. By the proceedings before the Deputy Judge, Oakley was seeking to prevent infringement by Animal of certain registered designs relating to sunglasses. Shortly before the commencement of the trial it became apparent that Oakley had published one of their designs a month before registering the same under the 1949 Act. If the 1949 Act applied without any amendment by the 2001 Regulations, that Registered Design was thus invalid. If the 2001 Regulations applied including Regulation 12, since that would maintain in force the 1949 Act the Registered Design was invalid. But Oakley argued before the judge that the result of holding Regulation 12 ultra vires should be that Regulation 12 should be excised and the 2001 Regulations otherwise held valid. On that basis Oakley would succeed in defending the validity of their registered design on the basis that the 2001 Regulations had in accordance with the Directive amended the 1949 Act to provide a 12 month grace period for prior publication i.e. prior publication by them within the 12 months prior to registration no longer invalidated the Design.
6. Animal argued before the judge, that it would be wrong simply to excise Regulation 12 because that would have the effect of bringing into force regulations that the Secretary of State did not intend to pass. The judge held that Animal's argument was right, and he refused to sever. In the result he held that the 2001 Regulations were invalid as a whole. He recognised that "the somewhat paradoxical consequence" was that the validity of the registered design had to be tested therefore by reference to the 1949 Act. The result for the parties was precisely as if the Regulations had been valid. Oakley has appealed this aspect of the judgment. I shall call the point on which Oakley has appealed the severability point.
7. Although it was Oakley who had appealed the severability point, it was accepted that, if the decision of the judge on the validity point was reversed, there would be no point in taking up time in this court at this stage in arguing the severability point, and accordingly the Attorney General opened the appeal on the validity point.
8. I should mention in order to put it on one side a further point, which I shall call the timing point. Under the Directive the United Kingdom had only until 28^th October 2001 to exercise the option to derogate. The Regulations were only passed on 8th December 2001. Oakley argued that on that basis the exercise of the option was in any event too late, and argued that in this context severability should be allowed. The judge ruled that the question whether the United Kingdom was too late and its effect, should be referred to the European Court, but also ruled by a supplementary judgment that if the European Court ruled that the exercise of the option to derogate was invalid, in this context it would be possible to sever. It has been accepted that it was appropriate to refer the question of validity by reference to date to the European Court and it has also been accepted that it would inappropriate to deal with the consequences of the European Court ruling until that Court has ruled.

The validity point

9. Much argument before the judge and before us was taken up with the context in which section 2 should be construed and as to the proper approach to construction. The judge stressed that a registered design is a monopoly, and that the Executive is not able to grant monopolies unless and to the extent that it is authorised to do so by Parliament. He expressed concerns as to the extent to which the European Community had taken up the revision of intellectual property law. He expressed concerns as to the extent to which regulations were used to bring into force Community law which did not receive the same scrutiny as an Act of Parliament. He suggested that in the result there were in the intellectual property field regulations of doubtful validity – a view expressed as an author of The Modern Law of Copyright and Designs (see paragraphs 22 to 34 of the judgment). He was further critical of the way in which regulations and indeed the 2001 Regulations evolved from the Directive.
10. The Attorney General submitted that the fact that in this instance regulations were concerned with Registered Designs and thus monopolies and the points made by the Deputy Judge to which I have just referred, were not relevant to the validity point which was of much wider import.
11. In my view the Attorney General is right. These matters are by the way when considering the validity point, which is a matter of general importance and not confined to intellectual property.
12. More importantly however the Deputy Judge took the view that Section 2(2) when combined with Section 2(4) was what is termed a Henry VIII clause. He said this at paragraph 79:-

"Even so, it is clear that the combined effect of section 2(2) and (4) is to enable the Executive, in appropriate circumstances, to make legislation with all the force of an Act of Parliament, and even to amend an existing or future Act of Parliament. Thus section 2(2) combined with section 2(4) is an instance of what is sometimes known as a "King Henry VIII clause" (per Laws LJ in Thoburn v Sunderland City Council [2002] EWHS 195 (Admin); [2003] QB 151 at paragraphs 13 and 38). It is a power granted by Parliament to the Executive to make subordinate legislation which itself counts as if it were primary legislation. The name is a reference to that monarch's supposed avidity for absolute powers."

13. He then explained in paragraph 80 the approach to construction which flowed from a clause being a Henry VIII clause:-

"Now, whatever may be the precise constitutional position concerning King Henry VIII clauses, it will be obvious that powers of that sort have to be watched rather carefully. Therefore when Parliament does delegate to the Executive the power to amend primary legislation the courts scrutinise that power with care and consider that it should not receive anything but a narrow construction. Any doubt is to be resolved against the Executive. Of course if there is no doubt the provision must be applied as it stands. See R v Secretary of State for the Environment, Ex parte Spath Holme Ltd [2001] 2 AC 349 at 382, 400, HL; R v Secretary of State for Social Security, Ex parte Britnell [1991] 1 WLR 198, 204 HL; see also Thorburn v Sunderland City Council [2002] EWHC 195 (Admin); [2003] QB 151 at paragraph 73. In Spath Holme at page 382 Lord Bingham of Cornhill cited with approval this passage from the judgment of the Lord Donaldson MR in McKiernon v Secretary of State for Social Security (1989, unreported):-

'Subordinate legislation . . . is subject to much briefer, if any, examination by Parliament and cannot be amended. The duty of the courts being to give effect to the will of Parliament, it is, in my judgment, legitimate to take into account of the fact that a delegation to the Executive of power to modify primary legislation must be an exceptional course and that, if there is any doubt about the scope of the power conferred upon the Executive or upon whether it has been exercised, it should be resolved by a restrictive approach.'

At page 400 Lord Cooke of Thorndon referred to that as one of the "established canons" of interpretation. In R v Secretary of State for Social Security, Ex parte Britnell at page 204, Lord Keith of Kinkel (with whom Lord Brandon of Oakwood, Lord Ackner, Lord Oliver of Aylmerton and Lord Jauncy of Tullichettle concurred) referred with approval to what the Court of Appeal had said in McKiernon and summarised the point thus:

'[A] power to modify the provisions of a statute should be narrowly and strictly construed, and that view is indeed a correct one.' "

14. The Attorney General submitted that Section 2(2) was not a Henry VIII clause. It was he submitted sui generis bringing into force as it did laws, which the United Kingdom was already by Treaty bound to bring into force. He did not dispute the judge's summary of the correct approach to a Henry VIII clause, but submitted the approach was not appropriate in this case.
15. The Attorney General in this context criticised the judge for failing to give any credit to the way in which even secondary legislation is scrutinised. He took us to the Standing Orders of both Houses setting up the Joint Committee on Statutory Instruments. He showed us how that Committee could identify points for consideration by the House of Commons or the House of Lords. He accepted that such legislation could not be amended in either the House of Commons or the House of Lords. He accepted, as emphasised by Mr Howell QC, that if any aspect of a Regulation is unacceptable to members of either House the only course open is to attempt to defeat the secondary legislation as a whole. That as Mr Howell pointed out can place members of either House in a dilemma where in part the secondary legislation is introducing matters obviously beneficial.
16. The judge's emphasis on the total lack of scrutiny may have gone too far but the general statement of Lord Donaldson MR in McKiernon was not as I understood the Attorney General's submissions actually in dispute. Thus the position is that where the power has been given to the Executive to amend primary legislation by regulation the courts will approach that power with some caution. The Attorney General made something of the point that the power conferred by Section 2 has been used on many occasions and no-one in Parliament has apparently complained that Parliament's own powers are being circumscribed. Why if Parliament is not complaining of any abuse should the courts seek to defend the role of Parliament in relation to primary legislation?
17. This point was not pressed and I respectfully suggest rightly. It is the people of the United Kingdom, the electorate, who are entitled to the assurance that laws are normally made by primary legislation and will only exceptionally be amended by secondary legislation.
18. Mr Howell did not seek to emphasise the monopoly aspect and the other points made by the Deputy Judge in that context, but he did submit that Section 2(2) when taken with Section 2(4) was a Henry VIII clause. He submitted that the judge was therefore right to place a narrow construction on both Section 2(2)(a) and (b).
19. My view is that Section 2 including 2(2) is sui generis. Unlike other provisions allowing for the amendment of primary legislation by secondary legislation, it flows directly from the Treaty obligations of the United Kingdom. Article 249 of the Treaty provides as follows:-

"In order to carry out their task and in accordance with the provisions of this Treaty, the European Parliament acting jointly with the Council, the Council and the Commission shall make regulations and issue directives, take decisions, make recommendations or deliver opinions.

A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.

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 authorities the choice of form and methods.

A decision shall be binding in its entirely upon those to whom it is addressed.

Recommendations and opinions shall have no binding force."

20. Section 2(1) brings into force "rights, powers, liabilities, obligations and restrictions" which are without further enactment to be given legal effect i.e. laws of the European Union to which direct effect must be given. By Section 2(2)(a) Parliament provides machinery for implementing results which under Article 249 it is bound to achieve. It is concerned with the implementation of Community obligations which are defined as "any obligation created or arising by or under the Treaties" i.e. directives and obligations flowing from directives. In so far as the United Kingdom uses secondary legislation under Section 2(2)(a) to bring into force directives it does not seem to me to be meaningful to talk in terms of narrow construction or otherwise; the regulations are bringing into force that directive and obligations flowing from that directive, and the correct approach is to construe the regulations by reference to the directive which is being introduced.
21. Section 2(2)(b) is however different. This subsection has two aspects. It empowers a secretary of state to produce regulations "arising out of" or "relating to" (1) any such obligation or rights, and (2) the coming into force or the operation, from time to time, of subsection (1). The words "arising out of" or "relating to" seem to me despite Mr Howell's argument to which I shall come in more detail in a moment, to envisage something additional, but still by virtue of Section 2(4) something which if the regulations become law, can amend primary legislation. The Attorney General's submission at least at the commencement of the appeal was to suggest that the words "arising from" and "related to" were very wide, and that there was no reason not to give words of such wide meaning their full width. Mr Howell suggested that the proper approach was that adopted to a Henry VIII clause, and to give the words a strict construction. His construction however involved confining the words within the United Kingdom's obligations under European Law, as I shall explore in more detail below.
22. In my view both these submissions go too far.
23. I do not think that for example Section 2(2)(b) could allow a Secretary of State to amend by secondary legislation primary legislation, when he or she was not at the same time bringing into force a directive or without the trigger of a law becoming directly applicable under section 2(1). Equally to confine the words "arising from"or "related to" as Mr Howell has sought to do fails to give the words their natural meaning, but I am getting ahead of myself.

Detailed Submissions

Section 2(2)(a)

24. The Deputy Judge in his judgment and Mr Howell in his submissions adopted the following approach to Section 2(2)(a). Section 2(2)(a) (they would say) is concerned to allow the Secretary of State to bring into force or to enable to be brought into force Community obligations. If a Directive is analysed, it is possible to identify those aspects, which a Member State is obliged to bring into force and those aspects where the Member State is free to choose. Section 2(2)(a) should not be construed so as to allow the United Kingdom to bring into force by regulation those aspects where there is no obligation, and in particular to bring into force what is in effect a policy decision. Article 11.8 of Directive 98/71 does not impose any obligation on the United Kingdom to retain the law, as it was for previously registered designs. It is a choice and indeed a significant policy choice to retain that law, and thus (they would say) not within Section 2(2)(a).
25. The Attorney General submitted that Community obligation in Section 2(2) (a) does not demand a line by line analysis of a Directive. He pointed out that some Directives give a choice between the courses, which a Member State is obliged to pursue (e.g. Directive 2001/80/EC on the limitation of emissions of certain pollutants into the air from combustion plants, Article 4(3)). On the line by line approach since a Member State would not be obliged to follow any particular course and entitled to take a "policy choice" between the courses, Section 2(2)(a) would not apply. He submitted that it makes no sense to think Parliament intended such a result.
26. Coming back to the form of the Directive with which this case is concerned, which follows a form common to many directives, he submitted that it makes no sense to confine the power to make regulations to the new aspects of the law being implemented, and to suggest that transitional provisions keeping in force old law needed primary legislation. These submissions were cogently supported by Miss Clark for Animal.
27. The Attorney General submitted that it was important to stress the words in Section 2(2)(a) included "enabling any such Community obligation to be implemented …..". So he submitted transitional provisions allowing a former law to be retained should be held to fall within the words of Section 2(2)(a). The proper construction to place on such a directive was that it was obliging a Member State to change the law in a certain respect from a certain date, and it could fulfil that obligation as regards old registrations, either by bringing the new law in with immediate effect or by retaining the old law for a period.

Conclusion on Section 2(2)(a)

28. I am clear that the Attorney General's argument on this aspect, supported by Miss Clark for Animal, is to be preferred. Section 2(2)(a) is concerned primarily with the bringing into force of Community obligations arising from the Treaty. Those obligations are primarily the Directives themselves and do not suggest a line by line approach to the Directive. It makes little sense to divide things which the Member State must do from those where it may not have to do, if it chooses to do something else. To hold that transitional provisions where the United Kingdom has a choice to take advantage of retaining the old law for a period needs primary legislation, whereas the rest of the Directive did not, would be illogical as this case demonstrates. Transitional provisions keep in play the legislation which has been scrutinised – why, one asks rhetorically, should Parliament have thought that further primary legislation should be introduced to keep primary legislation in place at the same time as allowing the same primary legislation to be repealed by regulations?
29. One answer to the above might be that one does not need to construe Section 2(2)(a) to cover transitional provisions because Section 2(2)(b) is the relevant provision. If that were right it would of course not help Mr Howell's clients. But more relevantly in my view the adoption of a transitional provision when bringing into force a Directive, does not "arise out of" or "relate to" the bringing into force of that Directive as those words would be naturally understood. It is actually part of the bringing into force of that Directive i.e. that Community obligation, and does not arise from it or relate to it.

Section 2(2)(b)

30. If the view expressed in paragraph 28 above is right, this aspect falls away. It was however argued both in the court below and before us that if Section 2(2)(a) does not apply, then section 2(2)(b) must. This led the Deputy Judge to express views on the construction of section 2(2)(b) on which others may, in the future, rely. It is therefore right just to consider the competing arguments and the Deputy Judge's views.
31. Mr Howell in his arguments did not strictly support the judge's reasoning. He supported the Henry VIII Clause approach to construction but his route to confining Section 2(2)(b) to a narrow area was more logical. He took us to those authorities of the European Court which demonstrated that where a Member State was obliged to carry out a Community obligation, that might bring into play a further obligation under Article 10 which provides as follows:-

"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."

32. He referred us to The Queen v Ministry of Agriculture, Fisheries and Food, Ex parte Hedley Lomas (Ireland) Ltd Case C/944 at paragraph 19; Ebony Maritime and Loth Navigation Co Ltd v Preffetto della Provincia di Brindisi and others Case C 177/95 at paragraph 35, Commission of the European Communities v Ireland Case C 354/00 at paragraph 41. They support the proposition that even where a Directive or Regulation contains no penalties or monitoring procedure, Article 10 of the Treaty (previously Article 5) "requires the Member States to take all measures necessary to guarantee the application and effectiveness of Community law" (these words come from paragraph 35 of Ebony). It is with that secondary obligation Mr Howells submitted that section 2(2)(b) was concerned.
33. He then brought us back to Section 2 and emphasised the "Side note" which states :- "General implementation of the Treaties".
34. He also took us to the debates in Parliament from which he suggested one could draw a confirmatory inference that Section 2(2)(b) was not intended to go outside the confines of introducing the Community obligation itself. He was critical of the dictum of Otton LJ in R v Secretary of State for Trade and industry Ex parte Unison [1996] ICR 1003 where he said in a judgment with which Newman J agreed at 1014F-H as follows:-

"Against this analysis I am satisfied that the applicants have not advanced a sound basis for limiting the scope of the phrase "relating to" in section 2(2)(b) of the European Communities Act 1972. I reject the alternative meaning suggested by Mr Langstaff of "tangential to or consequential." This is not the language of the Directive or the United Kingdom legislation. I see no reason not to give the phrase "relating to" or "related to" any meaning other than its natural, everyday meaning. Thus I am satisfied that the obligation to consult a trade union in regard to one redundancy is related to a Community obligation, and not distinct, or separate, or divorced from it."

35. He suggested that the approach he advocated was supported by dicta of Lord Johnson in two decisions of the Employment Appeal Tribunal in Scotland, Addison and others v Denholm Ship Management (UK) and Others [1997] ICR 770 and Perth and Kinross Council v Donaldson and Others [2004] ICR 667. In Addison at page785 C-F Lord Johnson said this:-

"Assuming, finally, that that issue of construction which we prefer is erroneous, the matter of vires does arise. Without venturing a view as to whether Reg v Secretary of State for Trade and Industry, Ex parte UNISON [1996] ICR 1003 is correctly decided on its own facts, we confess considerable concern with the general approach of Otton LJ if he is seeking to suggest that "related to" in section 2(2)(b) of the European Communities Act 1972 can be used to enable a minister to widen, by regulation, the main thrust or effect of the Directive it is seeking to implement. In our opinion, as a matter of general law in relation to primary and subordinate legislation, as stated by Lord Mackay of Clashfern LC in Hayward v Cammell Laird Shipbuilders Ltd (No 2) [1988] ICR 464, 473, if the Directive is to be regarded as the parent, the child cannot be larger, wider, or have greater implications than its parent allows. Accordingly, if the effect of regulation 2(2) of the Regulations of 1981 is to confer a lesser exclusion, and thus a wider benefit, to workers otherwise excluded by the Directive, we consider that the regulation is ultra vires the enabling power, and would require primary legislation as contemplated by article 7 of Directive (77/187/EEC)."

36. In Perth and Kinross at 672 B-C Lord Johnson said:-

"If it is to be suggested that the 1981 Regulations have effectively allowed the Directive to operate in that context, we consider that it falls foul of the approach that we adopted in Addison v Denholm Ship Management (UK) Ltd [1997] ICR 770 to the effect that it is going beyond the scope of the Directive and would therefore in that respect be ultra vires. The issue requires to be addressed by primary legislation."

37. Mr Howell suggested that Section 2(2) (b) should be confined to bringing into force Community obligations flowing under Article 10 of the Treaty from or as he would say "arising out of" the primary obligations, and he submitted that Lord Johnson supported that view.
38. The Attorney General argued that the secondary obligations identified in the above authorities of the European Court were none the less obligations and that they therefore fell within Section 2(2)(a). He argued that the judgments of Lord Johnson in the two Employment Appeal Tribunal Cases, contained no persuasive reasoning as to why Section 2(2)(b) should be confined within the ambit of the Community obligation itself. He commended the approach of Otton LJ in Unison and submitted that this court should endorse that view.
39. Lord Johnson's opinion as to the ambit of the Section is not in my view right. Furthermore I can see nothing in the wording of the Section which would support the view that in some way a policy decision or a significant policy decision is automatically excluded from the ambit of Section 2(2)(b). At the same time I do not for my part equate the words "related to" or "arising from" in this subsection with "not distinct, separate, or divorced from" (the language used by Otton LJ). I would endorse his words that they should be given their natural meaning but as we know context means everything. That context is the bringing into force under Section 2 of the laws, which under the Treaties the United Kingdom has agreed to make part of its laws. The whole section is clearly primarily concerned with that obligation and the primary objective of any secondary legislation under Section 2(2) must be to do just that. Section 2(2)(b), and the words "arising from " and "related to" take their context from that being the primary purpose of Section 2. It seems to me that Section 2(2)(b) from its position in Section 2, from the fact that it adds something to both subsection (1) and (2), and from its very wording is a subsection to enable further measures to be taken which naturally arise from or closely relate to the primary purpose being achieved. I accept that I will be accused of adding the words "naturally" and "closely", but I believe that describes the context which provides the meaning of the words.

Conclusion

40. I would accordingly allow the Attorney General's appeal on the validity point. This makes it unnecessary to examine the severability point.

Lord Justice May :

41. I agree that this appeal should be allowed for the reasons given by Waller LJ, whose account of the facts and circumstances giving rise to the appeal I gratefully adopt. I can express my essential reasons quite briefly.
42. Article 249 of the European Treaty provides that a Directive shall be binding on each Member State as to the result to be achieved, but shall leave to the national authorities the choice of form and methods. Thus domestic legislation of some kind is needed to implement a Directive.
43. The relevant domestic legislation in this jurisdiction which enables Parliament to implement Directives is section 2(2) of the European Communities Act 1972. This provides:

"Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision –

(a) for the purpose of implementing a Community obligation of the United Kingdom, or enabling any such obligation to be implemented, or of enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised; or

(b) for the purpose of dealing with matters arising out of or related to any such obligation or rights or the coming into force, or the operation from time to time, of sub-section 1(1) above;

and in the exercise of any statutory power or duty, including any power to give directions or to legislate by means of orders, rules, regulations or other subordinate instrument, the person entrusted with the power or duty may have regard to the objects of the Communities and to any such obligation or rights as aforesaid."

Section 2(4) enables regulations under sub-section (2) to make such provision as might be made by Act of Parliament.

44. Implementing a Directive will usually involve making some choices, and Article 249 expressly refers to choices. The extreme version of the deputy judge's decision and of Mr Howell's submission, that any policy choice made as part of implementing a Directive can only be done by primary legislation, is logically possible but practically absurd.
45. Implementing a Directive is likely to require one or more policy choices. These may include amending existing legislation, providing methods of enforcement and making transitional provisions. Article 11(8) of the Designs Directive 98/71/EC expressly provides for the making of the transitional provisions which the deputy judge held to be beyond the power of the Minister who made the Registered Design Regulations 2001.
46. In my judgment, the making of these transitional provisions was "for the purpose of implementing" the obligations of the United Kingdom arising from the Directive and Article 249; or it was for the purpose of "enabling any such obligation to be implemented". It thus came within section 2(2)(a) of the 1972 Act. If that were wrong, it was "for the purpose of dealing with matters arising out of or related to" the obligation to implement the Directive in terms of section 2(2)(b).
47. I do not consider that to hold that the making of these transitional provisions came within section 2(2)(a) has the effect of making section 2(2)(b) devoid of content. There is a distinction between providing something which, although it is a choice, is a choice which the implementation of the Directive requires you to make, and one which is not so required, but which has the effect of tidying things up or making closely related original choices which the Directive does not necessarily require. Section 2(2)(b) is confined by its words and context. Redefinition in the abstract is to be avoided. I would refrain, therefore, from deciding whether the passage in the judgment of Otton LJ in R v Secretary of State for Trade and Industry ex parte Unison [1996] ICR 1003 at 1014F-H, quoted by Waller LJ in paragraph 34 of this judgment, correctly interprets and applies section 2(2)(b). But I respectfully agree with Waller LJ that the opinion of Lord Johnson in Addison v Denholm Ship Management (UK) [1997] ICR 770 at 785C-F, quoted by Waller LJ in paragraph 35 of his judgment, is not correct.

Lord Justice Jacob:

48. Who would have guessed that a pair of fashion sunglasses could lead to a case of such constitutional importance that the Government found it necessary to intervene by its chief law officer, the Attorney General? But it has. Rather as the first case about the Rome Treaty to reach this court "came about because of a tin can" (per Lord Denning MR in Appn des Gaz v Falks Veritas [1974] Ch 381 at p.368).
49. The point arises in this way. The Registered Designs Regulations 2001 create a new law of registered designs for the future from 9^th December 2001. The regulations purport to implement the Design Directive 98/71/EC which requires all Member States to have this new law for their domestic systems of design registration. The relevant Minister made the Designs Regulations purportedly exercising the powers conferred by section 2 of the European Communities Act 1972. Under the regulations, the old law about validity of a registered design continues to apply to old registered designs. The old law invalidated a design registration if it was not "new" in the UK. Novelty could be lost by a single item of the design in question entering the UK in the hands of someone free in law and equity to use the information embodied in the design. That is what has happened here. The registered design in question was registered under the old law. Someone free to make use of the information embodied in the design imported a pair of the design owner's sunglasses of the design concerned during the year before the date of registration. If the new law applies the registration would be valid because it allows for a "grace period" of one year during which a prior use by the design owner himself does not count as novelty-destroying. If the old law applies the registration is invalid.
50. Now the Directive expressly says that Member States can apply their old law to old design applications and registrations stemming from old applications (Art.11(8)). So what the Minister provided for in the regulations was expressly contemplated and allowed by the Directive. The language used by the Directive to allow this is by way of derogation from the general rules for the future.
51. The Deputy Judge has held that the Minister had no power to make any such derogation, so that the Design Regulations are at least in part invalid. He went on to deal with a number of complicated consequences about severability. Like Waller LJ I think the appeal should be allowed on the basis that the regulations are valid; that it was within the Minister's power to make them with the derogation expressly permitted by the Directive. So the question of severability (whether some bits are valid even if others are not) does not arise.

The Nature of Directives

52. My starting point is the definition of a Directive now contained in Art. 249 of the Treaty, but unchanged from the original Rome EEC Treaty when it was Art. 189 (Do those who re-number know much it costs? I think not.)

"A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.

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 authorities the choice of form and methods.

A decision shall be binding in its entirety upon those to whom it is addressed.

Recommendations and opinions shall have no binding force."

53. The description of a Directive therefore itself clearly contemplates that a Member State is to have a degree of discretion as to how it shall be implemented. It is not like a Regulation which is to take effect directly. Indeed if there is only one specific way in which a law is to be implemented, then a Regulation rather than a Directive is the appropriate method.
54. Given that a Directive can confer a discretion, there is no reason why, as is commonly the practice, a Directive may at least in part not condescend to particulars, or may prescribe alternative forms of implementation – it need not prescribe a unique way in which it must be implemented. It has always been common for Directives to prescribe alternative ways for their implementation, or to contain some bits of detail which can only be implemented one way and other bits which are specific alternatives, or bits which leave details to be filled in by each Member State.
55. All these forms of Directive are and have been common for many many years. Member States have been implementing them for many years too. At one point during the argument I asked Mr Howell what the position would be if a Directive said Member States should implement it by doing A or B. He questioned whether that would be a valid Directive at all – pointing to the words "the result" to be achieved in Art.249. If he were right, that would be a severe limitation on the powers of the Commission and Council. It depends on such literalism and leads to such an absurd conclusion that it must be wrong – super acte claire.
56. Realising the danger in this he qualified his answer by saying that it would be all right for a Directive to say: this is the result but you have a limited permission not to achieve it – a "derogation." But this would be to draw a distinction between different sorts of option – an option to derogate being somehow different from an explicit option to achieve result A or B. I can see no rational basis for this.
57. Taking examples reinforces this conclusion. The very Directive we are concerned with actually contains both sorts of option. Art 11.2(c) provides that Member States may provide for refusal of registration or invalidity of design registrations of badges, emblems and escutcheons which are of particular public interest in the Member State. That option is not described as a "derogation" – it is just an explicit option. As it happens the UK has taken advantage of it, for instance in the case of the Royal Arms (see Sched 1(1)(a) of the 2001 Regulations). The Designs Directive also contains an option by way of an express derogation: Art.11.8, the optional transitional provision allowing Member States to maintain pre-existing grounds of invalidity for design registrations applied for before the date for compliance with the Directive. It makes no sense whatever for one option to be treated as properly part of the Directive and the other not.
58. A clear example of a Directive simply saying that Member States shall do A or B was found by the Attorney. It is Art. 4(3) of the Directive 2001/80/EC on limitation of polluting emissions. There is no need to set it out. If Mr Howell were right this would not be a Directive at all.
59. Before I part from the nature of Directives I should deal with Mr Howell's other main point – based on the fact that a Directive can have legal effect beyond merely being an instruction to Member States. He relied on the well-known Francovich principle (Francovich v Italy Joined cases C-6/90 and C-9/60 [1991] ECR I-5357) which establishes that, given that certain conditions are satisfied, an individual can obtain reparation from a state which has failed to implement a Directive. I do not see how that helps him by way of restricting the nature of a permissible form of Directive. Nor do I see how it affects the obligation to implement a Directive which forms part of the general obligation to "take all appropriate measures … to ensure fulfilment of the obligations … resulting from action taken by the institutions of the Community" (Art.5 of the original Treaty of Rome, Art. 10 in the current Treaty).

Section 2(2) of the 1972 Act

60. s. 2 of the 1972 Act implements, in UK law, the obligation created by Art. 10. It reads:

"(2) Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision—

(a) for the purpose of implementing any Community obligation of the United Kingdom, or enabling any such obligation to be implemented, or of enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised; or

(b) for the purpose of dealing with matters arising out of or related to any such obligation or rights or the coming into force, or the operation from time to time, of subsection (1) above;

and in the exercise of any statutory power or duty, including any power to give directions or to legislate by means of orders, rules, regulations or other subordinate instrument, the person entrusted with the power or duty may have regard to the objects of the Communities and to any such obligation or rights as aforesaid."

61. Several preliminary points can be made:

i) S. 2(1) operates to make regulations automatically part of UK law.

ii) S.2(2) which is clearly designed with Directives in mind, allows implementation by a statutory instrument;

iii) However certain things (those in Sched 2. e.g. taxation) can only be implemented by Parliament. This is because s.2(2) opens with the words "Subject to Schedule 2 to this Act"

62. Given that structure of the Act, the Deputy Judge's conclusion, that non-Schedule 2 derogations provided for in a Directive can only be implemented by an Act of Parliament is startling and, to my mind, obviously wrong. In 1972 Parliament itself decided what to reserve to itself. It must have known that Directives frequently contained options and frequently left details of implementation to Member States. That is the key difference between a Directive and a Regulation. If there is only one way of implementing what is wanted in legislation throughout Europe, it is a Regulation which is the appropriate instrument.
63. In short, the fact that Parliament did not reserve to itself optional or discretionary matters in a Directive to itself is conclusive in this case. Such matters as a generality were not put into Schedule 2. And if they had been, there would hardly be a Directive which could be complied with, at least in part, save by an Act of Parliament. Parliament cannot have intended that.
64. Further, however, the language of s.2(2)(a) – "for the purpose of implementing any Community obligation of the United Kingdom, or enabling any such obligation to be implemented" – does not begin to suggest any limitation on the power to implement a Directive. On the contrary it is "for the purpose of" and "enabling".
65. One test as whether or not a Directive is properly implemented by a statutory instrument is to compare the Directive with the purportedly implementing statutory instrument. If there is nothing in the latter which is not explicitly contemplated the Directive (whether as an option or not) then it is a case falling within s.2(2)(a). In such a case the statutory instrument is made solely for the purpose and solely for enabling implementation. This is such a case.
66. The Deputy Judge took the view that s.2(2)(a) is limited to implementation of an essential, non-optional, part of a Directive – only an irreducible core (if one can be found) is covered. Anything which requires a policy decision, including the choice of how to exercise an option specifically conferred by the Directive, requires a full Act of Parliament. This would apply however trivial the choice might be. The Deputy Judge's view would require a close examination of each part of a Directive to decide which bits are "core" and which only optional. I do not think s.2(2)(a) is limited in that way at all. Nor in many cases would the test even be workable – suppose for instance an "essential" portion which required for its working a choice of two alternatives set out in the Directive. Are neither or both "core"? If neither then the Directive could not be implemented by a regulation at all.
67. I reject the Judge's view as a non-purposive and irrational construction of s.2(2)(a).

Does s.2(2)(b) add anything, and, if so, what?

68. That being so, it is strictly unnecessary to consider the ambit of s.2(2)(b). So I only touch upon it lightly, preferring to leave any real question actually depending on its ambit for another day. However I do think it right to reject the Deputy Judge's approaches. He thought there were two approaches – both leading to the court approaching any purported regulation in the most restrictive way possible. First he noted that this case was concerned with a statutory monopoly and had regard to the jealous way in which the common law has always viewed monopolies, tolerating them only when good reason could be shown. Second he had regard to s.2(4) which says that a s.2(2) regulation may include provision "as might be made by an Act of Parliament." This brought into play, he held, the approach to so-called "Henry VIII" clauses: that a clause giving a Minister power to make delegated legislation which had the effect of an Act (including therefore the power of repeal of an Act) should be construed narrowly with any real doubt being resolved against the Executive.
69. The monopoly point seems to me to be entirely irrelevant. There cannot be a different approach to a purported s.2 regulation depending on whether or not it is dealing with a monopoly – an intellectual property right to give it its "nice" name. The provision is perfectly general, and the approach must accordingly be the same for all Directives, whether or not they are about monopolies.
70. The Henry VIII point is to my mind also bad. The approach to such clauses was devised in a wholly different context from that of the 1972 Act. The latter is a sui-generis piece of legislation whose general purpose, bringing into our law European Community law, is paramount. It seems to me that the approach to the regulation making power should be driven by that idea, given that the UK's obligation under the Treaty is to "take all appropriate measures … to ensure fulfilment of the obligations .. resulting from action taken by the institutions of the Community" (Art.10).
71. Nor did I find the Attorney-General's submission based on the fact that there is some Parliamentary scrutiny of proposed implementing regulations helpful. I accept that there is, though no-one could seriously say it is as profound as that which an Act of Parliament is apt to receive. But the rule making power simply does not depend on whether there is scrutiny or not – it depends on the language used in the 1972 Act.
72. Finally by way of matters which I think do not help is Mr Howell's appeal to an application of the principle established by Pepper v Hart [1993] AC 593, namely that in some cases regard may be had to the Parliamentary history of a clause. Laws LJ in Thoburn v Sunderland City Council [2003] QB 151 at paras. 75-76 explains why.
73. Of course rejecting the Judge's view does not solve the problem of the ambit of s.(2)(b). Nor indeed what the limits are of s.2(2)(a), a related question which must be considered first. I have held that s.2(2)(a) clearly covers the case where a Directive contains explicit alternatives and the implementing statutory instrument merely selects one of these. But Directives frequently do not spell detail out, leaving that for the implementing Member State. For instance a Directive may say that "Member States shall take appropriate measures to achieve objective X," without spelling out what those measures are to be. A statutory instrument implementing the Directive will provide the detail. Is it subsection 2(a) or 2(b) which enables this to be done? Is the provision of the detail "for the purpose of" or "enabling implementation" (s.2(2)(a)) or is it "for the purpose of dealing with matters arising out of or related to" implementation (s.2(2)(b))?
74. The reason this matters is this: if the provision of the detail is all part of the s.2 (2)(a) power then clearly s.2(2)(b) goes further then merely enabling implementation. It allows more to be done by delegated legislation. If on the other hand the provision of the detail is not within s.2(2)(a) then it would be within s.2(2)(b) being a matter arising out or related to the duty of implementation. Putting it more generally, the wider s.2(2)(a) the narrower s.2(2)(b) is likely to be.
75. The ambit of s.2(2)(b) has been considered in two main conflicting authorities, neither of which is binding on us. The cases are ex part Unison [1996] ICR 1003 in the Divisional Court and Addison v Denholm Ship Management [1997] ICR 770, an EAT case in Scotland. In Unison Otton LJ (with whom Newman J agreed) held that certain employment law regulations not explicitly required by a Directive were nonetheless valid. He said (p.1014):

"I see no reason not to give the phrase 'relating to' or related to" any meaning other than its natural meaning. Thus I am satisfied the obligation to consult a trade union in regard to one redundancy is related to a Community obligation, and not distinct, separate or divorced from it."

In Addison Lord Johnston, obiter, said this:

"Without deciding whether ex parte Unison is correctly decided on its own facts, we confess considerable concern with the general approach of Otton LJ if he is seeking to suggest that 'related to' . . . can be used to enable a Minister to widen by regulation, the main thrust or effect of the Directive it is seeking to implement. In our opinion, as a matter of general law … if the Directive is to be regarded as the parent, the child cannot be larger, wider or have greater implications than its parent allows."

76. Lord Johnston's view assumes a narrow ambit of s.2(2)(a). For if as he says one cannot go beyond the Directive ("parent") at all, then if s.2(2)(a) covers all forms of implementation of a Directive (whether selecting explicit options or provision of detail), there is necessarily nothing to which s.2(2)(b) could apply. And that cannot be right – s.2(2)(b) must add something to s.2(2)(a).
77. Otton LJ's view is clearly that s.2(2)(b) can cover a case which goes wider than anything provided for in a Directive, whether specifically or by way of leaving it to Member States to provide the detail. On the facts of the case the court upheld a statutory instrument which did just that, removing a right of consultation about redundancy for individuals when the Directive was concerned only with such a right where more than 20 employees were to be made redundant.
78. Of course even Otton LJ's view does not mean that the power to make subordinate legislation is virtually unlimited. Mr Howell played that old advocate's trick of putting up an Aunt Sally so as to knock it down in the hope that more would be knocked down than just Aunt Sally. He invited us to reject the view that just because a Directive contains a specific obligation, a statutory instrument can be made dealing with anything related to that obligation, that related to the obligation only in a most general sense is enough. That I am happy to accept. For instance, a Minister could not by statutory instrument change the whole law of contract just because a Directive related to some corner of contract law. But so to conclude does not advance the debate far. To say only a tenuous relationship with the subject-matter of a Directive will not do (with which I agree), does not identify what will do.
79. My own view, provisional though it must be in the absence of any specific context relevant to this case, is this: that s.2(2)(a) covers all forms of implementation – whether by way of choice of explicit options or by way of supply of detail. Both of these are "for the purpose of implementing" or "enabling any such obligation to be implemented". Supplying detail required by a Directive is just that.
80. So s.2(2)(b) indeed adds more and Lord Johnston was wrong to say that it could not. How much more must depend on the particular circumstances of the case – the statutory language is the guide. It says "for the purpose of dealing with matters arising out of or related to". Whether a particular statutory instrument falls within those words must depend on what it purports to do and the overall context. One cannot put a gloss on the meaning. If Otton LJ was adding a gloss – "distinct, separate or divorced from it" – then I do not agree with that gloss. You just have to apply the statutory language to the case concerned. And in doing so you bear in mind that the purpose of the power given by the section is European – the Art.10 purpose. Whether or not Otton LJ was right in the circumstances of Unison, I, like Lord Johnston, do not decide. It would not be right to do so in the absence of the affected parties.
81. In the result, however, whatever the ambit of s.2(2)(b) and indeed of s.2(2(a), I agree that this appeal should be allowed. The Designs Regulations were validly made.