NEWS

DEFRA Wins "Abuse of Right" Case in Court of Appeal

26 January 2010

The Court of Appeal today held that agricultural exporters that abused their rights under a CAP subsidy scheme should have to pay a substantial penalty.

The scheme in question had special provisions that helped small exporters. In order to meet the criteria of that scheme, a large exporter decided to get seven of its subsidiaries to make separate claims rather than make one large claim itself. Although the terms of the scheme permitted it to do that, it was held by the High Court that that tactic was an "abuse of right" and that the seven separate claims should be disallowed. In the Court of Appeal, the exporter argued that it should not also have to pay a penalty for making a claim to which it was not entitled. However, the Court of Appeal agreed with DEFRA's submissions that there was nothing in the EU case-law on "abuse of right" that stopped a penalty being imposed in this case: the relevant EU Regulation made it clear that a penalty was payable whenever it made a claim to which it was not entitled, even where there was no fault on the part of the exporter and even where the claim complied with the strict terms of the scheme.

The case is an interesting contribution to the developing EU principle of "abuse of right", which has recently become particularly important in the VAT field as well as in other areas of EU law.

George Peretz represented DEFRA in the Court of Appeal.

To view the judgment, please click here.

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