Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2016] CSOH 26

 

CA14/15

OPINION OF LORD TYRE

In the cause

ANGUS GROWERS LIMITED and OTHERS

Pursuers;

against

THE SCOTTISH MINISTERS

Defenders:

Pursuers: Mure QC, M Ross;  Drummond Miller LLP

Defenders: Dean of Faculty QC, Cameron;  Scottish Government Legal Directorate

11 February 2016

Introduction
[1]        The first pursuer (AG) is a producer organisation under the EU’s Fresh Fruit and Vegetable Scheme.  A producer organisation (PO) is an entity through which a number of growers market their products.  If recognised for the purposes of the EU Scheme, it may qualify for financial aid in respect of expenditure on operational programmes.  The second to 21^st pursuers are present or past grower members of the first pursuer.  In this action the pursuers seek reparation from the defenders, in accordance with the principles enunciated by the European Court of Justice in Francovich v Italy [1991] ECR I-5357 and subsequent cases, for loss and damage said to have been incurred as a consequence of the defenders’ breach of community law.  This opinion concerns two issues debated as preliminary matters, namely (i) whether the second to 21^st pursuers, as members of a PO, have title to sue or, more accurately, whether they may relevantly advance claims for Francovich damages; and (ii) whether the breach of EU law founded upon was “sufficiently serious” to give rise to state liability.  A third issue set down for debate, namely whether the pursuers were barred from advancing their claims by having accepted a payment in compromise of a claim for interest, was not insisted upon by the defenders.

[2]        The loss and damage said to have been incurred by the pursuers was sustained as a consequence of the withdrawal on 16 March 2010 by the Rural Payments Agency (RPA), acting on behalf of the defenders, of AG’s recognition as a PO.  That decision was maintained after two internal reviews, but on 14 February 2012 the Land Court allowed an appeal by AG and set aside the defenders’ decision to withdraw recognition.  The defenders brought a Special Case in this court and on 7 December 2012 the First Division of the Inner House decided the matter in favour of AG.

[3]        The factual background leading up to withdrawal of recognition, and the matters canvassed at the various stages of review and appeal, are set out in detail in the opinion of Lord President Gill, reported at 2013 SLT 611.  That opinion, along with the concurring opinions delivered by Lord Eassie and Lord Malcolm, may be accessed at the following link:  Scottish Ministers v Angus Growers Limited .  It is unnecessary for me to narrate the whole circumstances again here, but I will provide a summary of matters relevant to the two issues with which this opinion is concerned.

 

The Producer Organisation (Fresh Fruit and Vegetables) Aid Scheme
[4]        According to a Special Report (8/2006) by the European Court of Auditors, the object of the Scheme is to offer aid amounting to 50% of the costs of measures taken by fruit and vegetable growers in operational programmes aiming inter alia to improve product quality, reduce production costs and improve environmental practices.  The aid is available only to groups of growers who collectively market their produce in POs.  Member states are responsible for approving operational programmes and paying the aid.  Financial assistance may be available for expenditure on inter alia capital projects including new packhouses, harvesting equipment, employment of quality control staff, and implementation of environmentally sound techniques.  The amount received by way of financial assistance is matched by an equivalent contribution by the members of the PO.

[5]        The relevant EU instruments have been amended and consolidated from time to time.  At the time of the events with which these proceedings are concerned, the regulations in force were Council Regulation 1234/2007 (“the CMO Regulation”), a consolidating regulation establishing a common organisation of agricultural markets, and Commission Regulation 1580/07, laying down implementing rules.  It is necessary for context, however, also to narrate Recital 10 of a predecessor of the CMO Regulation, namely Council Regulation 1182/2007:

“(10)  Producer organisations are the basic actors in the fruit and vegetables regime, the decentralised operation of which they ensure at their level.  In the face of ever greater concentration of demand, the grouping of supply through these organisations continues to be an economic necessity in order to strengthen the position of producers in the market.  Such grouping should be effected on a voluntary basis and prove its utility by the scope and efficiency of the services offered by producer organisations to their members.  Since producer organisations act exclusively in the interests of their members, they should be deemed as acting in the name and on behalf of their members in economic matters.”

 

[6]        Article 122(c) of the CMO Regulation requires member states to recognise POs constituted on the initiative of the producers in the fruit and vegetable sector which

“…pursue a specific aim which may in particular, or as regards the fruit and vegetables sector shall, include one or more of the following objectives:

1. ensuring that production is planned and adjusted to demand,

                           particularly in terms of quality and quantity;

2. concentration of supply and the placing on the market of the products produced by its members;
3. optimising production costs and stabilising producer prices.”

Article 125a makes provision for various matters that must or may be included in the rules of POs.  The rules must provide inter alia for the imposition on members of financial contributions needed to finance the PO, and accounting and budgetary procedures necessary for its operation.  Article 125a(4) states that POs in the fruit and vegetables sector “shall be deemed as acting in the name of, and on behalf of, their members in economic matters”.

[7]        Article 125b obliges member states to recognise POs that meet certain listed conditions.  As regards POs which have been recognised, article 125b(2)(b) requires member states to carry out checks at regular intervals to ascertain that POs comply with the Regulations, to impose penalties on POs in the event of non-compliance, and to decide, where necessary, to withdraw recognition.  Sanctions for non-compliance are dealt with in more detail in Article 116 of Commission Regulation 1580/07, which provides as follows:

“1.  Member States shall withdraw the recognition of a producer organisation if a failure to respect the criteria for recognition is substantial and results from the fact that the producer organisation acted deliberately or by serious negligence.

Member States shall in particular withdraw the recognition of a producer organisation if a failure to respect the criteria for recognition concerns:

1. a breach of the requirements of Articles 23, 25, 28(1) and (2) or 33; or
2. a situation where the value of marketed production falls, in two consecutive years, below the limit set by the Member State pursuant to Article 4(1)(b) of Regulation (EC) No 1182/2007.

The withdrawal of recognition under this paragraph shall take effect from the date from which the conditions for recognition were not fulfilled, subject to any applicable horizontal legislation at national level on limitation periods.

2.  Where paragraph 1 does not apply, Member States shall suspend the recognition of a producer organisation if a failure to respect the criteria for recognition is substantial but is only temporary.

During the period of suspension, no aid shall be paid. The suspension shall take effect from the day where the check has taken place and shall end on the day of the check which shows that the criteria concerned have been fulfilled. The period of suspension shall not exceed 12 months. If the criteria concerned are subsequently not fulfilled after 12 months, recognition shall be withdrawn.

…

 

3.  In other cases of a failure to respect the criteria for recognition, where paragraphs 1 and 2 do not apply, Member States shall send a warning letter stating the corrective measures to be taken. Member States may delay payments of aid until the corrective measures are taken.”

 

The references in paragraph (1)(a) above to articles 23, 25, 28(1) and (2) and 33 are to requirements applicable to POs regarding, respectively, minimum number of members;  adequacy of staff, infrastructure and equipment;  nature of the PO’s main activity;  value of marketed production; and democratic accountability to the PO’s members.  It will be noted that there is a three-tier system of sanctions, consisting of (i) withdrawal of recognition for a substantial failure to respect the criteria for recognition caused deliberately or by serious negligence;  (ii) suspension for a substantial but temporary failure; and (iii) a warning letter for any other failure. 

 

Suspension and subsequent withdrawal of AG’s recognition
[8]        At paragraphs 14 to 30 of his opinion, Lord President Gill narrated in detail the history of AG and of Angus Soft Fruits Limited (ASF), a company whose shareholders were among the members of AG and had been instrumental in its creation, the agency agreement between AG and ASF, and the relationship between AG and ASF.  I adopt that narrative for the purposes of this opinion, and take up the story on 9 June 2009 when the RPA sent a letter suspending AG from the Scheme.  In that letter, Ms Joanne Lockey, a Team Manager in the RPA, expressed a number of concerns, including:

• a lack of centralised billing and invoicing;
• method of levy collection;
• benefits to members seemed to be based around their financial input to the PO rather than the overall benefit of the PO;
• •no evidence of planned production or marketing; members appeared to be acting individually and then advising the PO of what should be invoiced and to whom;

• ·no evidence of proper commercial and budgetary management of activities by the PO;

• the PO's administrative base was at the marketing agent's [ie ASF’s] premises which, although “not of itself a criticism, when added to the overall picture [tended] to suggest a lack of independence from the marketing agent”;
• dominance of two members of the PO.

It is apparent from this letter and from subsequent correspondence that the RPA’s concerns were largely focused upon the relationship between AG and ASF, and in particular on what was perceived to be insufficient separation and independence of AG from control by ASF.  Ms Lockey listed a number of matters in respect of which AG had agreed to provide evidence, and in the meantime confirmed that AG had been suspended temporarily from the Scheme in terms of Article 116 of Commission Regulation 1580/07.

[9]        AG responded in a letter dated 24 June 2009 which addressed in detail, and with supporting documentation, the RPA’s request for evidence.  AG set out proposed changes in its management to meet the RPA’s concerns.  Ms Lockey replied by email on 10 July intimating the RPA’s intention to carry out a full recognition review within the next few weeks.  A visit duly took place on 31 July, and by letter dated 18 August, AG’s Mr Lochart Porter addressed certain issues that had arisen as a result of the visit.  On 15 September, the RPA’s Mr Mike Allaway wrote to Mr Porter as follows:

“After reviewing all of the evidence presented to me and in recognition of the steps you have taken to rectify our initial concerns regarding the PO, I am pleased to confirm that, subject to Angus Growers addressing the concerns outlined below, suspension of your recognition under the F&V aid scheme can be lifted.  For the present, suspension will remain in force pending receipt of documentary evidence confirming that the necessary changes have been implemented.

 

1. You must ensure that Angus Growers' centralised billing and invoicing system is amended to make clear its independence from Angus Soft Fruits (ASF).

2. As suggested in your letter dated 24 June 2009, you will resign as Chairman of the PO and James Gray will resign from the Board of Directors.  We will require details of your replacements and a copy of the minutes of the meeting where the change is agreed.

3. You must also undertake to review AG’s position and capacity to operate as a standalone company.  Prior to lifting suspension we will need to see proposals to develop the PO working together as a company and, where possible, undertaking functions currently carried out by ASF, together with an indicative timetable for introduction: Jamie Sawday's recent employment and AG taking over a basic PO function previously undertaken by ASF is a good example of this sort of initiative.  Clearly, we would not want the PO to introduce artificial situations or to spend money unnecessarily, however, given the significant turnover of AG, we would expect to see a business model and activities commensurate with that.”

 

[10]      On 1 October 2009, Mr John Lang, the new chairman of AG, wrote to Ms Lockey advising that changes had been implemented to address the RPA’s three concerns, and providing details of the changes.  He set out an action plan in relation to the third concern and expressed the hope that the suspension could now be lifted.  Documentary evidence vouching the board changes were sent to RPA on 16 October.  It now appeared to AG that the way was clear for suspension to be lifted.

[11]      On 26 October 2009, however, Ms Lockey wrote to Mr Lang stating:

“In view of the changes already made and further changes proposed, recognition of [AG] will be maintained, however the RPA will review the governance of the company again in early 2010.

 

There has been a development at European level that means we cannot lift the suspension yet, however. I refer to Mike Allaway's letter dated 15 September 2009, where he informed you of the UK's current policy on shared facilities and the challenge made to this by Commission Auditors. You may be aware that France challenged the Commission on this issue through the European Court of First Instance. The Court has recently issued a judgment on the case in favour of the Commission and this has an immediate impact on current UK policy. We are working urgently with Defra to revise UK policy in line with the law as now stated. Until this policy is settled and we know that [AG] falls within it, we will not be able to lift the suspension on [AG' s] recognition status.

We will be writing to all POs very soon to explain the position more fully and to establish what facilities are currently shared within each PO. [AG] will of course be included in this exercise.

 

In the meantime as you currently have negligible shared facilities, I would suggest that you formalise arrangements for sharing packhouses and consider what assets are owned by members individually that might otherwise be provided by or through the PO.”

 

The judgment of the Court of First Instance referred to was an unpublished judgment in France v Commission, Case T-432/07, in which the CFI held that the fact that some or all of a PO’s members had adequate “technical material” available to them did not relieve the PO of its obligation to make shared facilities available.  Commenting on Ms Lockey’s letter in his opinion at paragraph 81, Lord President Gill observed that:

“what is clear is that from that date the suspension was being maintained in force for a different reason from that for which it had been imposed, and that maintaining the suspension in force enabled the RPA to temporise for a further two months while new policy guidance was being prepared”.

 

I respectfully agree with and adopt that observation.

[12]      On 6 November 2009, AG’s Mr Ian Thompson wrote to Ms Lockey expressing disappointment that the suspension was being maintained and providing details of what might be regarded as AG’s shared facilities.  The most important of these were four packhouses where 18 of the 21 members of AG cold-stored, sorted and packed their fruit.  Marketing of fruit by ASF was also mentioned.  This did not prompt any action by RPA.  On 24 November, however, the RPA held a meeting with POs in the course of which it was announced that recognition of all POs (and not just payments) was suspended pending the shared facilities review that was being carried out in the light of the France v Commission decision.

[13]      On 4 December 2009, a solicitor acting on behalf of AG emailed Mr Allaway intimating that AG considered that they had been suspended without any, or any sufficient, grounds, and sought clarification regarding an appeal.  This prompted an internal email exchange at the RPA in the course of which Ms Helen Gordon-Lee of the RPA’s legal division observed that:

“…we have a bit of a history of telling Angus they needed to do a, b and c to get recognised, then refusing subsequently to recognise them on account of d, e and f, not previously raised with them”.

 

AG’s appeal was lodged on 8 December. 

[14]      On 18 December 2009, DEFRA and the RPA issued a guidance letter entitled “Recognition criteria Fruit & Vegetable Scheme – provision of technical facilities, including shared facilities”.  According to the letter, the revised recognition policy clarified

“…that POs must own or have responsibility for provision to members of all necessary facilities as defined in Council Regulation1234/2007 Article 125 b1(e).  These must include facilities for the collection, storage, packaging and marketing of members' produce (subject to limited exceptions). The policy allows that these facilities may be provided through PO members but POs must be able to demonstrate they control and are responsible for any facility provided this way.  To help POs, we have introduced the option of Mutual User Agreements (or similar contractual agreement).  Guidance on points to consider when drawing up these agreements (or checking existing agreements) is at annex 2.  Although RPA will be able to check general agreement details (for example the facility covered), POs are responsible for managing them and implementing their application.”

 

[15]      On 15 January 2010, Mr Thompson sent Ms Lockey a copy of AG’s growers agreement, drawing attention to clauses dealing inter alia with storage facilities.  On 20 January, the RPA advised Mr Thompson that they had approved AG’s new operational programme, but emphasised that final approval would be given only once the RPA had in place a revised policy on shared facilities and had confirmed that AG satisfied the revised criteria for recognition.  On the same day, however, Ms Lockey emailed Mr Thompson for further information regarding the collection and storage of produce, and stated that AG would remain suspended until the issues raised in her letter had been addressed.  On 28 January, Mr Thompson sent an amended growers agreement and a draft mutual user agreement; on 2 February the RPA replied stating that Ms Lockey had confirmed that these documents looked “fine”.  Again, however, this produced no tangible benefit;  Ms Lockey wrote to AG the following day stating that AG remained suspended because it did not conform to the requirements for shared facilities in the CFI judgment.

[16]      On 23 February 2010, AG’s appeal against suspension was picked up for consideration by the RPA’s customer relations CEO.  In the course of ensuing internal email correspondence, Ms Gordon-Lee observed that:

“…The current suspension is because Angus have no shared facilities, and is a result of the ECJ [sic] judgment in the French case. The grounds of appeal do not make this important distinction.”

 

On 5 March, Mr Thompson emailed a copy of the “final growers agreement” to Ms Lockey and asked for confirmation that the suspension was lifted.  Ms Lockey replied on 8 March indicating that she would have to seek clarification that clause 14, which concerned preparation of produce for sale, was acceptable, and also whether it was acceptable that AG did not provide collection facilities for its members.  She stated that she would be unable to clarify these points until 10 March.  On 10 March, Mr Thompson provided a detailed clarification of why clause 14, and clause 18 regarding delivery of fruit, were included in the growers agreement.  As usual he invited the RPA to seek any further clarification they wished.

[17]      Instead, however, on 11 March 2010, Ms Lockey telephoned Mr Thompson to inform him that AG was to be de-recognised.  This verbal intimation of de-recognition was followed up by letter dated 16 March 2010 from Mr Allaway to Mr Lang, which it is necessary to quote at length:

“In my letter dated 15 September 2009, we agreed that the suspension of the PO from the scheme could be lifted once our concerns outlined in that letter had been addressed. My letter dated 20 October 2009 advised you that we would review the governance of the PO in early 2010.

The recent documentation you have submitted in relation to the provision of shared technical facilities and the most recent compliance audit visit demonstrate that some steps have been taken to address the issues raised.  However there remain major concerns surrounding Angus Growers compliance with recognition requirements – I have noted these below:

1. The invoicing system is still heavily reliant on information passed to the PO from the Marketing Agent – Angus Soft Fruits (ASF).

2. Of the seven packhouses used by the PO, four are used by several members and three are owned and used by individual members. For these three, we understand that these members pick, store (if necessary), pack and deliver their own produce. There are no mutual use agreements for these packhouses.  Consequently, the PO has limited involvement with these members and increasing the POs VMP could appear to be the sole benefit to the PO of these growers membership.

3. The PO, does not organise collection of the produce after harvest for delivery to the packhouse.  Although the PO has introduced rules on collection, this is currently a paper exercise. Whilst this may not be an issue on its own, along with the other concerns that we have, it reinforces our overall concern in relation to the structure of and control mechanisms employed by the PO.

4. The most recent visit also raises concerns that PO members are not involved in any decision making.  The PO relies heavily on the use of their independent consultant in relation to the operational programme, with limited involvement of the PO and constituent members.

We also requested that more steps were taken to review the POs position and capacity to operate as a standalone company.  Although some progress has been made this has not been addressed sufficiently.  The PO are still heavily reliant on Angus Soft Fruits.  The PO does not play a significant role in the concentration of supply and marketing of the members produce.  It is using historic marketing channels that were in place prior to the set up of the PO and in this area there has been minimal change since the PO obtained recognition.  If the PO ceased to exist it appears likely that the members would continue to supply the Marketing Agent, there does not appear to be any added value resulting from membership of the PO.

Commission Regulation (EC) 1580/07, Article 116(1) states:

 

‘Member States shall in particular withdraw the recognition of a producer organisation if a failure to respect the criteria for recognition concerns:

 

(a) a breach of the requirements of Articles 23, 25, 28(1) and (2) or 33;’

The PO is in breach of this Article, specifically in its failure to address Article 25 concerning the structure and activity required of a producer organisation. Consequently we must withdraw the recognition of the PO from the date of this letter.”

 

[18]      The decision to withdraw recognition came as a surprise to AG who had believed that their discussion with the RPA was concerned with having the suspension lifted and that they were close to achieving that.  It is worth noting at this stage two important features of the RPA’s letter.  First, the reasons given for de-recognition extend beyond matters said to arise from the CFI decision in France v Commission and the RPA’s subsequent guidance regarding shared facilities.  They included matters that AG had addressed, apparently to the RPA’s satisfaction, by the time Ms Lockey’s letter of 29 October 2009 had been received.  Secondly, the quotation from article 116(1) is incomplete and materially misleading in that it omits the first paragraph requiring, firstly, a “substantial” failure to respect the criteria for recognition and, secondly, that the failure resulted from the PO acting “deliberately or by serious negligence”.

[19]      More importantly, the legal interpretation of article 116(1) upon which the decision proceeded was, as the respondents now accept, wrong in law.  Acting in reliance upon internal legal advice obtained from Ms Gordon-Lee, the RPA proceeded upon the basis that a breach of the requirements of any of the articles mentioned in the second paragraph of article 116(1) of itself constituted grounds for de-recognition, the rationale being that the Commission must have regarded them as essential to the nature of a PO so that breach had to amount to either serious negligence or a deliberate act.

 

Reviews and appeals
Stage 1 review
[20]      A meeting between representatives of AG and the RPA on 23 March 2009 concluded with Mr Alloway advising AG that unless they could provide “strong evidence” to prove RPA’s current findings incorrect, they would not gain re-recognition for 2010, and that unless links with the marketing agent (ASF) were completely changed, it was unlikely that recognition could be re-instated.  In accordance with the Common Agricultural Policy Non‑IACS Support Schemes (Appeals) (Scotland) Regulations 2004 (SSI 2004/278), AG sought a review, known as a Stage 1 review, by the RPA of the decision to de-recognise.  The outcome was that the decision was upheld.  The reasons were summarised as follows:

“It remains the opinion of RPA that Angus Growers fails to meet the requirements of Article 25 of Commission Regulation (EC) No 1580/2007 in relation to the structures and activities of a PO.  Angus Growers has been unable to demonstrate that it has the staff and infrastructure in place to ensure the essential functioning in particular as regards:

 

• collecting, sorting, storing and packaging the production of their members
• commercial and budgetary management and
• centralised bookkeeping and a system of invoicing.”

 

A detailed explanation was given in relation to each of these three items.  It may be noted that the reasons are not on all fours with those in the letter of 16 March 2010.

 

Stage 2 review
[21]      AG then took the matter to a Stage 2 review.  This consisted of a hearing before a panel of three individuals, none of whom was legally qualified, at the RPA’s Newcastle office.  AG were represented by counsel, who led evidence from AG representatives and made legal submissions.  The RPA were also represented by counsel.  Evidence was led from Mr Allaway who did not dispute AG’s evidence but maintained the RPA’s position that AG had not provided all the information required.  The basis of the RPA’s reliance on article 116(1), however, changed.  They now contended that AG’s failure had been “deliberate” because they had failed to put a proper structure in place while knowing what the law was, and that the factors relied upon by the RPA were “substantial” breaches, because they were not technical breaches.

[22]      The panel upheld the RPA decision.  I will not narrate the panel’s reasoning here; suffice to say that it was vague and failed entirely to explain why the panel considered that the requirements of Commission Regulation 1580/07 had been breached.  It made no mention of the test in article 116(1).  As regards AG’s legal submissions, the panel observed that “the Panel considers it is not qualified to consider legal issues” and accordingly disregarded them.  Commenting on this in its decision (see below), the Scottish Land Court said:

“We limit ourselves to observing that this was a misunderstanding of their role.  Decision makers must make decisions and the panel was, in any event, obliged in terms of reg 8(3) of [the 2004 Regulations] to make findings in fact and law.  If they were unable to make a formal finding as the basis of their recommendation to the Scottish Ministers they should have set out the nature of the issues which required determination.  The Ministers would then have had to take a view of the legal issues.  That the Scottish Ministers should simply accept the RPA approach – that legal issues were too difficult to bother with – is beyond the scope of useful comment by us.”

 

I respectfully agree.

 

Appeal to the Scottish Land Court
[23]      AG appealed to the Land Court, where the RPA’s position changed again.  It was now accepted that in making its decision to withdraw recognition the RPA had erroneously proceeded on the basis that, if there was a breach of the provisions listed in the second paragraph of article 116(1), this superseded the preceding provisions of the article.  Senior counsel for the respondents accepted that it was necessary to show that any breach of the criteria was deliberate or due to serious negligence.  It was contended that there had been serious negligence.  The RPA’s position that any breach of the listed provisions was “substantial” was maintained.  The alleged substantial breaches identified by the respondents were now said to be (i) exercise of insufficient control and responsibility in relation to three packhouses used by individual members;  (ii) failure to ensure AG’s essential functioning as a PO in relation to budgetary and commercial management; and (iii) failure to have at their disposal the staff, infrastructure and equipment necessary to ensure a centralised bookkeeping and invoicing system.

[24]      The Land Court allowed AG’s appeal, holding, in summary, (i) that the only breach of article 25 of the Commission Regulation 1580/07 that had been established was an inadequate system of management control of marketing activities carried on by ASF;  (ii) that the breach was not “substantial”;  and (iii) that in any event serious negligence had not been established.

 

Special Case in the Court of Session
[25]      The respondents requisitioned a special case for the opinion of the Court of Session on two points of law, namely:

(1) Did the Scottish Land Court err in holding that the failure to respect the criteria for recognition which it had identified was not "substantial" for the purposes of article 116(1) of Regulation 1580/2007?

 

(2) Did the Scottish Land Court err in holding that the failure to respect the criteria for recognition did not result from serious negligence, as that term is to be understood in the context of article 116(1), on the part of the appellant?

 

The court answered both questions in the negative.  It prefaced its decision, however, by emphasising that the case should have been argued and decided in the Land Court on the question of the validity of the decision letter withdrawing recognition, rather than upon the respondents’ ex post facto rationalisation of the decision in their pleadings before that court.  In the view of Lord President Gill (paragraph 98), neither of the issues presented to the Court of Session need have arisen.  In any event, the court held that the Land Court had not erred in law in respect of either of the issues and that there was no cause to interfere with the Land Court’s decision.  Lord President Gill did, however, (with the concurrence of the other members of the court) express doubt as to whether AG had breached the Commission Regulation at all.  At paragraphs 117-125, his Lordship made observations, with which Lord Malcolm associated himself, that were strongly critical of the RPA.  He described the decision letter as “based on an obtuse misunderstanding of the legislation”, and expressed the opinion that the RPA emerged from the case with no credit.

[26]      The defenders do not now dispute that withdrawal of recognition from AG was unlawful, or that de-recognition disabled AG from qualifying for scheme assistance.  In pursuance of the decision of the Inner House, the RPA has now made payment of all scheme payments withheld from AG after its suspension in June 2009, together with interest thereon.

 

The pursuers’ claims for Francovich damages
[27]      In Francovich v Italy, the Court of Justice held (at paras 39-40) that where a member state failed to take all measures necessary to achieve the result prescribed by a Directive, community law required that there be a right to reparation, provided three conditions were fulfilled:

(i)         The result prescribed had to entail the grant of rights to individuals;

 

(ii)        It had to be possible to identify the content of those rights on the basis of the provisions of the Directive; and

(iii)       There had to exist a causal link between the breach of the state’s obligation and the loss and damage suffered by the injured parties.

In Brasserie du Pêcheur SA v Germany [1996] QB 404 (ECJ), a case involving exercise of discretion by a member state, the Francovich principle was stated as follows (para 51):

“Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the state and the damage sustained by the injured parties.”

 

In R v MAFF, ex parte Hedley Lomas (Ireland) Ltd [1997] QB 139, the Court of Justice held (para 26) that the conditions for state liability enunciated in Brasserie du Pêcheur were applicable in a case not involving the exercise of discretion by the member state. 

[28]      In the present case, each of the pursuers seeks an award of damages from the defenders in respect of an alleged breach of its community law rights consisting of the de‑recognition of AG.  It is common ground between the parties that the Francovich principle as stated in Brasserie du Pêcheur and Hedley Lomas (above) falls to be applied in determining whether the defenders have incurred liability to make reparation to any or all of the pursuers.  The claim of the first pursuer, ie AG itself, is for a sum representing legal, management and consultancy costs incurred in challenging de-recognition, conducting the administrative appeals, and negotiating the amount to be paid in respect of the period of wrongful de-recognition, plus interest.  The second to 21^st pursuers’ claims are presented under the following heads: lost scheme payments; loss of profit on soft fruit production in which the second to 21^st pursuers would have been able to invest if AG had not been de‑recognised;  loss of scheme funding on the additional turnover that would have been generated from those investments; loss of profit and scheme funding from the re‑investment of the original lost profits and the funding that those profits would have generated;  loss of profit on other projects in which the second to 21^st pursuers would have been able to invest;  and compound interest, which failing simple interest, on the foregoing heads of claim.

 

The first issue: relevancy of claims by PO members
Argument for the defenders
[29]      On behalf of the defenders it was submitted that the rule of community law relied upon by the pursuers was not “intended to confer rights on individuals” or on individual PO members, but only on POs as such.  The right to recognition was conferred exclusively on POs which met the criteria in the Council Regulations.  Scheme rules bestowed rights and responsibilities on POs themselves, not their members.  As stated in Recital 10 of Council Regulation 1182/2007 (above), POs are the “basic actors” in the fruit and vegetables regime.  Financial assistance was given to the PO and not to individual producer members.  Funds were used to finance the PO’s operational programme.  Although one of the purposes of the Scheme was to strengthen the position of producers in the market, the mechanism for achieving this purpose, among others, was the creation of POs as separate legal entities tasked with certain activities and entitled to receive financial support for those activities.  Article 3(5) of Commission Regulation 1580/07, which deemed POs to be acting on behalf of their members, merely emphasised the distinction between a PO and its members.

[30]      Reference was made to the decision of the Court of Appeal in Poole v HM Treasury [2007] 2 CLC 727, in which it was held (para 20) that the test for application of the first Francovich condition was whether it was necessary, in order to achieve the objective of the Directive, to confer the asserted rights upon the claimant.  In the present case it was not necessary, in order to achieve the objectives of the Scheme, to confer rights on the PO members as opposed to the PO itself.  It was not sufficient for the members to have an interest in the correct application of the Regulations.  Promotion of the welfare of producers was not among the stated purposes of the Scheme which was concerned rather with creating a market structure that strengthened the position of producers, improved efficiency and encouraged good environmental practices.  In Dillenkofer v Germany [1997] QB 259 (ECJ), a case relied on by the pursuers, the Court of Justice emphasised at paragraph 30 that it was necessary for the rights said to be conferred by the Directive to be “sufficiently identified”.  The identifiable rights in the present case were granted to the PO and not the members.

 

Argument for the pursuers
[31]      On behalf of the pursuers it was submitted that the second to 21^st pursuers as members of a PO recognised under community law had rights to benefit from the operational programme of the PO and in particular from the financial assistance available under the Scheme.  It was clear that the Scheme’s purpose was to protect and benefit individual growers and not the PO itself which was a not-for-profit company.  The producers were obliged to contribute matching funding to the PO’s operational fund and had a direct interest in the amount and prompt payment of the EU financial assistance that they were required to match.  Growers were explicitly referred to in the legislation and formed a clearly identifiable group of potential claimants.  If their claim was not admitted, that would be a breach of the community law principle that compensation had to be adequate in relation to the damage sustained, as there would be no effective remedy for much of the loss caused by the defenders’ breach of EU law.  In Dillenkofer v Germany (above), which concerned a Council Directive requiring package holiday retailers to provide evidence of security for refunds and repatriation of customers in the event of insolvency, the Court emphasised that the underlying purpose of the Directive was to protect consumers, who accordingly had been granted a right guaranteeing such refund or repatriation.  Similarly, in the present case the recitals to the relevant Regulations made plain that the purpose was protection and enhancement of the economic position of individual producers.  The fact that the recitals to the Regulations referred to broader objectives did not detract from the central role of growers, without whom POs would not exist.  Moreover, whereas the class of potential claimants in Dillenkofer was open, the class in the present case was identified and closed.  The fact that AG had a separate legal identity was no bar to claims by its members: for example in R v Secretary of State for Transport, ex parte Factortame Ltd (No 5) [2000] 1 AC 524, claimants had included companies and also shareholders or directors of those companies.

[32]      The notion of “rights” in this context should not be equated with the domestic law concept of a statutory right.  Dillenkofer illustrated that a high level purpose such as protection of consumers could give rise to rights.  Recital 11 to Council Regulation 1182/07 described POs as a “tool”.  The defenders’ focus on rights granted to the PO was formalistic and failed to recognise the purpose of the Scheme.  The case of Poole v HM Treasury was distinguishable because it was clear that the purpose of the Directive at issue in that case was protection of insured persons and not their insurers who had an opposing interest.  That was not the case regarding POs and their grower members.

 

Decision
[33]      In my opinion the submissions on behalf of the pursuers are to be preferred.  I accept, on the basis of the decisions of the Court of Justice in cases such as Francovich and Dillenkofer, that it would be wrong to give the expression “rights” an unduly narrow interpretation, and that a purposive approach should be adopted in identifying the individuals, or class of individuals, upon whom rights are conferred by community law.  In the present case it would in my view be an unduly narrow approach to interpret the Council and Commission Regulations as conferring rights only on POs.  As Recital 11 to Council Regulation 1182/07 states, POs are a tool for grouping supply.  The purpose of grouping supply is to enable producers to deal on a more equal basis with retail and other purchasing organisations who benefit from economies of scale.  As the EU material makes clear, the achievement of this purpose is intended to bring a range of benefits, including improved product quality, reduced production costs and better environmental practices, but underlying all of these desirable outcomes is the benefit to individual growers that arises from strengthening their position in the market.  That, in my opinion, is what is properly to be regarded as the purpose of the Scheme.  It must therefore be concluded, in accordance with the reasoning of the Court of Justice in Dillenkofer, that the result prescribed by the Regulations, ie recognition of POs as organisations entitled to financial assistance for operational programmes, entails the grant to member producers of rights identifiable as the right of each grower that their PO be recognised under the Scheme and not unlawfully de‑recognised by the relevant member state.

[34]      I accept also that it would not be in accordance with the approach prescribed by the Court to focus on the rights of the PO itself.  I agree with the pursuers that that would result in most of the loss sustained as a consequence of the defenders’ breach of EU law remaining uncompensated.  The PO is a non‑profit making entity which does not itself incur income or capital losses as a consequence of de-recognition.  It is noteworthy that the only losses that AG is claiming to have sustained are the legal and administrative costs of contesting the withdrawal of its recognition.  Any trading or capital losses that have been incurred ‑ and I note here that the defenders indicated that if this action proceeds further they would wish to address issues of causation and remoteness ‑ have been incurred by the second to 21^st pursuers.  If, as the Court of Appeal stated in Poole v HM Treasury, the appropriate test is whether it is necessary, in order to achieve the objective of the legislation, to confer the asserted rights on the claimants, I consider that that test is met.  Conferring a right only on the PO itself would be to confer a right which was largely devoid of substance; that would not accord with community law principles.  The decision in Poole is clearly distinguishable on its facts, and in particular on the identification of the group of individuals that required to be given a right to sue in order to support the objectives of the EU instrument in question.  In the present case, that group consists of the growers and not, for example, consumers who benefit from lower market prices of produce, or members of the public who benefit from improved environmental practices by producers.

[35]      For these reasons I hold that the second to 21^st pursuers have a relevant claim against the defenders for Francovich damages.

 

The second issue: sufficiently serious breach
Factors for consideration
[36]      The starting point in assessing whether the second condition for imposition of state liability for breach of community law, ie sufficiently serious breach, has been met is to be found in Brasserie du Pêcheur (above) at paragraph 55, where the Court of Justice stated that the test was “whether the member state concerned manifestly and gravely disregarded the limits on its discretion”.  The Court continued (para 56):

“The factors which the competent court may take into consideration include the clarity and precision of the rule breached; the measure of discretion left by that rule to the national or Community authorities; whether the infringement and the damage caused was intentional or involuntary; whether any error of law was excusable or inexcusable; the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.”

 

Not every breach of community law involves the exercise of a discretion conferred upon a member state.  However, the factors that the court may take into consideration in cases not involving exercise of discretion are the same: see Haim v Kassenzahnarzliche Vereinigung Nordrhein [2002] 1 CMLR 247 at para 43.  Where no discretion is conferred, the mere infringement of a rule of community law may of itself constitute a sufficiently serious breach, but it will not necessarily do so: Hedley Lomas (above), para 28; Haim, para 41.

[37]      Further guidance on the factors to be taken into consideration was provided by the House of Lords in Factortame (No 5) (above).  Lord Hope of Craighead observed (page 550) that the phrases “sufficiently serious” and “manifestly and gravely” indicated that the threshold was a fairly high one, and identified three factors which determined whether the breach was sufficiently serious to entitle a claimant to damages.  These were:

• whether the breach was of a fundamental nature;
• the potential of the breach for causing damage to those who were likely to suffer loss as a result of it; and
• the methods used to achieve the result.

Lord Clyde noted that no single factor was necessarily decisive, but considered that one factor by itself might, particularly where there was little or nothing to put into the scales on the other side, be sufficient to justify a conclusion of liability.  He identified some of the possible factors as follows:

1. whether the breach was of a general and superior principle of community law;
2. the clarity and precision (or otherwise) of the rule breached;
3. the degree of excusability of an error of law;
4. the existence of a relevant judgment on the point;
5. whether the infringer acted intentionally or involuntarily;
6. the behaviour of the infringer after it had become evident that an infringement had occurred;
7. the persons affected by the breach; and
8. the position taken by one of the community institutions in the matter.

 

Argument for the defenders
[38]      On behalf of the defenders it was submitted that the threshold of sufficiently serious breach had not been reached.  It was acknowledged that strong criticisms of the RPA’s decision‑making process had been expressed by the Land Court and by the Inner House of the Court of Session, but the test for Francovich liability should not be applied with the benefit of hindsight (cf Delaney v Secretary of State for Transport [2015] 2 CMLR 914, Richards LJ at para 39).  Although the law might be clear after a contested litigation, that did not imply that there has been a manifest and grave disregard by the state authorities for the limits of their discretion: see R (Negassi) v Secretary of State for the Home Department [2013] 2 CMLR 1252.  In the present case the defenders relied upon the following circumstances:

 

(a)  This was not a case concerning the exercise of a discretion; nor was it a case in which a finding, after contested litigation, of breach of community law of itself justified a finding of sufficiently serious breach.

(b)  At the time when the decision to de-recognise AG was made, there was no authoritative guidance from the courts on certain key issues of interpretation, including the relationship between the first two paragraphs of article 116(1).  The uncertain state of the law was demonstrated by the fact that the Land Court and the Inner House reached different views as to whether there had been a (non-substantial) breach of article 29.  This point was reinforced by the fact that since the decision of the Inner House (and contrary to its view), the Court of Justice had held in Fruition PO Ltd v Minister for Sustainable Farming and Food and Animal Health, Case C-500/11, that the requirement now in article 125d of the CMO Regulation that outsourced activities be under the control of the PO was not satisfied in the absence of de jure control.  The Land Court had acknowledged the difficulties faced by the RPA in giving guidance as to the proper meaning and effect of the Regulations.  If the Regulations were capable of more than one interpretation, that problem was created by the European institutions.

(c)  The RPA’s failure to consider whether the breach was substantial or resulted from serious negligence did not, in the circumstances, represent a manifest and grave disregard for the limits of a discretion, but represented the RPA’s own understanding of its obligations under community law.  It was acknowledged that the manner in which the decision was intimated without prior warning was open to criticism, but a single act of maladministration did not amount to a serious breach of community law.

(d)  The RPA’s concerns about AG’s relationship with ASF and the arrangements in relation to packhouses were, in the circumstances, legitimate and had been vindicated by the Court’s decision in Fruition.  The RPA had, moreover, been correct when in October 2009 it indicated to AG and to other POs that its policy on shared facilities might be affected by the decision of the CFI in France v Commission.  The decision to withdraw recognition had to be assessed in the context of the importance to the UK of ensuring that POs respected the recognition criteria; the Commission took a stringent approach and in 2008 had disallowed substantial sums paid by member states including the UK.

(e)  The rule breached was not a “general and superior principle of EU law”; nor did it concern fundamental rights.

(f)  Although withdrawal of recognition was intentional, for the reasons given in the RPA’s decision letter, it did not follow that there was an intention to commit a breach of community law.  The RPA’s purpose in withdrawing recognition was to advance the interests of the community rather than to disregard them.  As regards subsequent procedure, neither the Land Court nor the claimants themselves had taken issue with the defenders’ defence of their decision on a basis different from the reasoning in the letter.

 

Argument for the pursuers
[39]      On behalf of the pursuers it was submitted that the second condition in Brasserie du Pêcheur was met.  Reliance was placed upon the following factors:

(a)  The defenders’ failure to apply article 116 correctly was not excusable.  The rule was clear and precise.  The interpretation adopted in the decision letter was, as the Inner House had made clear, untenable, and subverted the intention and structure of the provision.  It had been abandoned by the defenders before the case reached the Land Court.  The RPA had been well aware at the material time of the need to have regard to the criteria of substantial breach and serious negligence; those criteria had been applied in a letter to AG’s agents in respect of another PO (Speciality Produce Ltd) only nine days after the letter de-recognising AG.  It was also clear from the Speciality Produce Ltd letter that the RPA understood that any continuing issue arising out of the France v Commission decision regarding shared facilities fell within article 116(2) (suspension) and not article 116(1).  To apply the same provisions to two POs in different ways infringed the fundamental community law principle of non-discrimination.

(b)  The rule breached was an important one because it was the key to the benefits of PO membership.  The Scheme depended upon the proper application of the Regulations by member states.

(c)  The defenders persisted, after the Land Court had found the de-recognition to be unlawful, with a further appeal to the Inner House, thereby exacerbating the loss caused by their breach of community law.

(d)  The infringement of community law was intentional: as noted above the RPA had applied article 116(1) incorrectly in the case of AG while applying it correctly to other POs.  They knew that the withdrawal of recognition would cause loss of financial assistance, contrary to a central purpose of the Scheme.  The seriousness of the breach was exacerbated by the chain of events of which the de-recognition letter was part, including in particular the fact that it occurred without prior notice in the middle of correspondence in which AG had made clear that it wished and was attempting to comply with the RPA’s requirements.  In the event, recognition was withdrawn without either clear reasons or a sound legal basis.

(e)  The infringement was directed against AG.

(f)  No position adopted by an EU institution contributed to the breach.

(g)  The RPA issued its decision letter without taking case-specific legal advice.

(h)  The RPA decided the matter in a dilatory manner and expressed its reasons for withdrawal of recognition in an inconsistent and contradictory fashion, thereby breaching principles of good administration and acting in a disproportionate manner.  It was not simply that article 116 was wrongly applied.  There was a litany of incoherence and contradiction leading up to a bolt from the blue when recognition was withdrawn.  The pursuers were still unclear as to what in fact had been the reasons for the decision.

 

Decision
[40]      As Carnwath LJ observed in Byrne v Motor Insurers’ Bureau [2009] QB 66 at paragraph 45, the “sufficiently serious” criterion for Francovich liability is not a hard‑edged test, but requires a value judgement by the national court, taking account of the factors listed by the Court of Justice in, inter alia, Brasserie du Pêcheur (above).  It is clear from the Luxembourg jurisprudence that in a case such as the present one which does not involve the exercise of a discretion, it is not necessarily enough to give rise to state liability that an error of law has been made.  More may be required, and other factors must be considered.  I consider it appropriate in the first instance to consider the factors mentioned in Brasserie du Pêcheur itself (other than measure of discretion) while bearing in mind the additional guidance provided by Lord Hope of Craighead and Lord Clyde in Factortame (No 5).  

[41]      Clarity and precision of the rule breached.  As regards the proper interpretation of the two paragraphs of article 116(1), I consider that these provisions are sufficiently clear and precise that one could reasonably expect a member state to interpret them correctly.  I respectfully share the view of Lord President Gill that the basis upon which the RPA proceeded was simply untenable.  It is not difficult to identify absurdities arising from the proposition that any breach of any of the provisions mentioned in the second paragraph of article 116(1) must be taken to be seriously negligent or deliberate.  Death or winding‑up of one of the members of the PO is an obvious example.  The interpretation adopted and applied by the RPA was, in my opinion, beyond the range of reasonable interpretations and the present case is accordingly distinguishable from the situation in which, after contested litigation, a statutory provision is held by the court to mean something other than that contended for by a member state.  It entirely fails to take account of the graded approach to sanctions in article 116, where only seriously negligent or deliberate failures leading to substantial breaches of the Scheme justify de-recognition.  I regard it as significant, though not surprising, that the defenders had already abandoned this interpretation by the time of the stage 2 review, where they contended instead that the requirements for deliberate failure and substantial breach were fulfilled, and that they did not attempt to support it in the Land Court or the Inner House. 

[42]      Intentional or involuntary infringement.  I have no difficulty accepting the defenders’ submission that the RPA did not intentionally breach its community law obligations under the Scheme.  In other respects, however, an element of intention must be found to have existed.  The RPA must have known that de-recognition would have significant financial consequences for the members of AG, who would be deprived of the financial assistance necessary to implement an operational programme which had already been approved by the RPA.

[43]      Excusable or inexcusable error of law.  This factor overlaps to some extent with the first, ie clarity and precision of the rule breached.  I have already commented on the RPA’s error in relation to interpretation of article 116(1) which I do not regard as excusable.  But as the pursuers contended, the matter goes further.  The breach of community law with which these proceedings are concerned is the withdrawal of recognition and not merely the misinterpretation of article 116(1).  Even on the defenders’ approach to article 116(1), the reasons founded upon did not justify the sanction of de-recognition.  The Land Court, which in contrast to the Inner House examined the reasons for withdrawal (as re-formulated in the defenders’ pleadings) on their merits, concluded that none was made out except for a breach, which the Land Court found not to be substantial, of article 25 quoad management control of marketing activity.  In this regard, the defenders founded upon the subsequent judgment of the Court of Justice in Fruition PO Ltd as demonstrating, with the benefit of hindsight, that the approach which they took to control of outsourced activities had been correct.  There is, however, no reason to assume that if the view of the Court in Fruition had been known prior to March 2010 this would have resulted in de-recognition of AG and any other POs whose outsourcing contracts did not meet the Court’s specifications.  It is more likely that a proportionate response by the RPA, similar to that which it took in the light of the France v Commission decision, would have ensued, whereby recognition would at worst have been suspended pending the issuing of guidance and an examination of individual POs to determine whether adequate control was retained in terms of their respective contractual arrangements.  Some of the other reasons in the decision letter, such as collection arrangements, were summarily abandoned.  At this level too, therefore, there was an error of law in regarding the factors founded upon as justifying de‑recognition which I do not regard as excusable.

[44]      But the matter goes further again.  The decision letter of 16 March 2010 does not stand alone; the decision to withdraw recognition must be examined in the context of the RPA’s constantly changing position, both before and after de-recognition, as regards AG’s alleged failures to fulfil the conditions for recognition.  I have referred above to Ms Gordon‑Lee’s comment in an internal email that there was a history of requiring AG to fulfil certain requirements and subsequently requiring them to fulfil others not previously mentioned.  That, if anything, is an understatement.  It is not disputed that throughout the period from suspension to withdrawal of recognition, AG co‑operated fully with the RPA and did its best to take whatever steps the RPA deemed necessary in order to have the suspension lifted.  It is apparent that AG were at times unsure what was required of them.  It is equally apparent from the internal correspondence that has now been made available by the defenders that the RPA themselves had no clear and consistent view of what had to be done by AG to satisfy the Scheme requirements.  The decision to withdraw recognition contained in the letter of 16 March 2010 depended to a large extent upon  concerns regarding the relationship between AG and ASF, yet AG had been advised almost five months previously that these matters had been satisfactorily addressed and that only the issue of POs’ shared facilities remained outstanding. 

[45]      Nor did the defenders’ shortcomings end with the issuing of the decision letter.  Although no criticism can be levelled against them merely for contesting the pursuers’ journey through the review and appeal process, it is noteworthy that at every stage of that process the defenders’ position altered in some way.  By the time the matter reached the Inner House the position being defended bore little resemblance to that taken in the decision letter.  Another element of the review procedure which I (in respectful agreement with the Land Court and the Inner House) regard as reprehensible is the attitude adopted by the panel tasked with the stage 2 review, and the apparent absence of any reaction by the defenders to the panel’s refusal to address the legal issues laid before them by the pursuers.  To add further to the confusion, in an internal minute dated 27 August 2010 concerning Speciality Produce Ltd, Ms Lockey stated that AG had been de-recognised “as a result of the close links held between two of the members and the Marketing Agents”.  It is, in my opinion, relevant in assessing the seriousness of the defenders’ breach of community law to take account of the fact that they took the drastic step of de-recognising AG against a background of inconsistent and incoherent analysis of the ways, if any, in which AG’s operations gave rise to failures to respect the criteria for recognition.

[46]      Contribution of position taken by community institution.  I do not consider that the breach of community law that occurred in the present case can be said to have been caused or contributed to by a position taken by any community institution.  I acknowledge and understand the defenders’ concern to ensure that they did not give wrongful financial assistance to a PO, and I accept that in case of doubt they might reasonably err on the side of caution by, for example, suspending payments pending clarification of entitlement, as they did after receiving the France v Commission decision.  Their actions in relation to AG are not, however, excusable on that basis.

[47]      Most of Lord Clyde’s eight factors in Factortame (No 5) are addressed in the foregoing discussion.  As regards the first of his factors, I do not regard the breach in the present case as having been of a general and superior principle of community law.  Nor do I find it established that AG were discriminated against vis-à-vis Speciality Produce Ltd; the perceived point of distinction, as I understand it, was that article 27, referred to in Ms Lockeys’ letter to Speciality Produce Ltd dated 25 March 2010, was not one of the provisions mentioned in the second paragraph of Article 116(1).

[48]      In the whole circumstances as set out in the foregoing paragraphs, I am of the opinion that the breach of community law occasioned by withdrawal of AG’s recognition as a PO was sufficiently serious to confer a right to reparation in accordance with the Francovich principle.  That, as I have said, is a value judgment; it takes account of all of the circumstances I have narrated, but in particular the inexcusability of the RPA’s errors of law, the incoherent and inconsistent approach adopted by the RPA during a very long period of time, and the seriousness of the consequences of de-recognition for AG and its members.  For these reasons I hold that the conditions for imposition of state liability are fulfilled.

 

Disposal
[49]      I should record that neither party submitted that I ought to refer either of the issues with which this opinion is concerned to the European Court of Justice for a preliminary ruling and I do not, for my part, consider it necessary to do so.

[50]      In accordance with the pursuers’ motion, I shall repel the defenders’ first plea‑in‑law (title to sue) and also the defenders’ second plea‑in‑law, which related to the abandoned argument that the pursuers’ claims were barred by their having accepted a payment in respect of interest.  I shall also sustain the pursuers’ first plea-in-law which is in these terms:

“The defenders (and the RPA on their behalf) having acted incompatibly with EU law, and the defenders being liable to the pursuers for loss and damage caused thereby, the defenders are liable to make reparation to the pursuers for such loss and damage.”

 

I shall put the case out by order for discussion of further procedure.  Questions of expenses are reserved.