Introduction

Jersey Choice Ltd v HM Treasury ([2021] EWCA Civ 1941) is a pivotal case heard by the England and Wales Court of Appeal (Civil Division) on December 17, 2021. The core issue revolved around Jersey Choice Limited's (JCL) claim for damages against the UK Government for the removal of Low Value Consignment Relief (LVCR), which had significant financial implications for businesses operating from the Channel Islands.

JCL, a Jersey-based horticultural mail order company, claimed that the repeal of LVCR by Section 199(3) of the Finance Act 2012 breached EU law, specifically Articles 28 and 30 of the Treaty on the Functioning of the European Union (TFEU), alongside general principles of equality, fiscal neutrality, and proportionality. The High Court had previously struck out the claim, deeming it an abuse of process and lacking reasonable grounds. This appeal scrutinizes whether JCL's actions constituted an abuse of process and whether the LVCR removal violated EU directives and principles.

Summary of the Judgment

The Court of Appeal upheld the High Court's decision, reaffirming that JCL's claim was an abuse of process and lacked reasonable grounds for success. The court analyzed whether the removal of LVCR fell under customs or tax regimes and assessed the applicability of general EU principles post-Brexit. Ultimately, the court concluded that the LVCR removal was a tax matter, not a customs issue, and that the general principles of EU law did not apply to direct imports from non-EU territories like the Channel Islands. Consequently, the claim for damages was dismissed.

Analysis

Precedents Cited

The judgment extensively referenced pivotal EU and UK case law to delineate the boundaries between tax and customs regimes:

• Francovich v Italy (Case C-6/90 and C-9/90): Established the criteria for State liability under EU law for failure to implement directives, laying the groundwork for "Francovich" damages claims.
• Gaston Schul Douane Expediteur BV (Case 15/81): Clarified the distinction between tax and customs regimes, emphasizing that taxes integrated into a general system of internal dues fall under tax law, not customs.
• Weigel (Case C-387/01): Determined that general principles of non-discrimination under EU law do not extend to direct imports from non-EU countries.
• Viamar Ellinike Aftokiniton Kai Genikon Epicheiriseon AE: Reinforced that pecuniary charges imposed solely due to cross-border imports constitute prohibited charges under customs law.

These precedents were instrumental in the court's reasoning, particularly in determining the applicable legal regime and the justiciability of JCL's claims under post-Brexit UK law.

Legal Reasoning

The court's legal reasoning unfolded through several critical determinations:

• Abuse of Process: The court focused on whether JCL's separate proceedings constituted an improper relitigation of issues already addressed in a prior judicial review. Drawing on precedents like Johnson v Gore Wood, the court emphasized the importance of access to justice and distinguished between public law judicial reviews and private law claims for damages, ultimately finding that JCL's actions did not abuse the legal process.
• Applicable Regime – Tax vs. Customs: Central to the judgment was whether the LVCR withdrawal fell under the customs or tax regime. The court concluded it was a tax matter, not a customs issue, applying principles from Gaston Schul and Weigel. This distinction was pivotal in determining the applicability of Articles 28, 30, and 110 TFEU.
• General Principles of EU Law Post-Brexit: The court assessed whether general principles like non-discrimination and proportionality could be invoked by JCL in the context of imports from the Channel Islands. Citing cases like Offene Handelsgesellschaft, the court held that these principles do not extend to direct imports from non-EU territories, especially post-Brexit, thereby negating the basis for JCL's claim.

Impact

This judgment significantly impacts the interplay between UK domestic law and EU principles post-Brexit, especially concerning:

• State Liability and Damages Claims: Clarifies the limitations on invoking EU general principles for damages claims against the UK state after Brexit.
• Distinction Between Tax and Customs: Reinforces the clear demarcation between tax and customs regimes, impacting how similar cases might be litigated in the future.
• Access to Justice: Affirms the accessibility of courts for private parties to seek redress without being unduly restricted by previous proceedings, provided there is no abuse of process.
• Tax Policy and Enforcement: Empowers the state to adjust tax regimes to combat practices like roundtripping without facing legal challenges based on EU principles post-Brexit.

The case sets a precedent that, post-Brexit, UK courts will assess such claims based on UK legislation and retained EU law without granting indirect application of former EU principles, thereby limiting the scope for private damages claims against the state based on past EU law.

Complex Concepts Simplified

Low Value Consignment Relief (LVCR)

LVCR was a VAT relief policy that exempted low-value goods (initially under £18) sold via mail order from incurring VAT when imported into the UK from the Channel Islands. This relief aimed to simplify the tax process for low-value goods and encourage legitimate trade.

Roundtripping

Roundtripping refers to the practice where goods are shipped in a convoluted manner solely to exploit tax advantages. In this context, large UK retailers would send goods from the UK to the Channel Islands tax-free and then re-import them back to the UK without incurring VAT, thereby reducing their tax liabilities improperly.

Francovich Damages Claim

Named after the Francovich v Italy case, this is a legal remedy allowing individuals to claim damages from a state for failing to implement EU directives correctly, leading to loss of benefits the directive intended to confer.

Article 28 and 30 TFEU

These articles establish the customs union within the EU, prohibiting customs duties and charges equivalent to customs duties on imports and exports between Member States. Violations can lead to legal challenges against the imposing state.

General Principles of EU Law

Fundamental doctrines like non-discrimination, fiscal neutrality, and proportionality that guide the interpretation and application of EU law. These principles ensure fairness and consistency across Member States.

Conclusion

The Court of Appeal's decision in Jersey Choice Ltd v HM Treasury reaffirms the UK's autonomy over its tax regime post-Brexit, especially concerning territories like the Channel Islands. By distinguishing between tax and customs laws and limiting the applicability of EU general principles to intra-EU matters, the judgment delineates the new legal landscape for tax-related disputes involving non-EU territories.

For businesses operating in similar jurisdictions, this case underscores the importance of understanding the specific legal frameworks governing tax exemptions and the avenues available (or unavailable) for challenging state actions based on retained EU law. Moreover, it highlights the judiciary's role in balancing access to justice with preventing procedural abuses, ensuring that the legal system remains efficient and fair.

Ultimately, this judgment sets a significant precedent in clarifying the extent to which EU principles continue to influence UK law post-Brexit, particularly in the realm of taxation and customs, shaping future litigation and tax policy within the UK.