What has happened?
The Court of Appeal in Makeality v Doggo has confirmed that the principle of indirect effects (also known as the Marleasing principle) no longer forms part of UK law. The abolition of indirect effects has implications for the interpretation of UK law which derives from EU directives.
Why the confirmation?
Those who have carefully read the Retained EU Law (Revocation and Reform) Act 2023 (REULA) would already have known that indirect effects no longer applies in the UK for any matters occurring from 1 January 2024 onwards. REULA specifically says that "The principle of the supremacy of EU law is not part of domestic law". This did not stop some commentators questioning what was meant by "supremacy of EU law" and whether it included indirect effects. This was despite the fact that the Explanatory Notes to REULA make clear that the notion of supremacy is broad and includes indirect effects. The Court of Appeal has now confirmed the position although the point does not seem to have been argued.
What is indirect effects?
Indirect effects is the principle that EU-derived domestic legislation must be construed "as far as possible in conformity with, and to achieve the result intended by, the directive" from which it derives. That means interpreting EU-derived domestic legislation not only in conformity with the parent directive but also with any CJEU case law interpreting that directive and adopting the EU's teleological approach to statutory interpretation.
Are there any limits on indirect effects?
Yes – the principle only applies to conform domestic legislation with the parent directive "so far as possible". Indirect effects does not apply if it would go against the grain of the wording of the domestic legislation and distort the intention of Parliament.
Why does the EU have indirect effects?
The principle was developed to ensure consistency of interpretation and effect of EU law across EU member states. It has meant that, for example, relevant provisions of the Trade Marks Act 1994 have been interpreted – so far as possible - in accordance with the Trade Marks Directive which it implements. The UK retained the principle of indirect effects after the end of the Brexit transition period to ensure that retained EU law continued to be interpreted in the way it always had been.
Why did REULA abolish indirect effects?
The UK government wished to sever this connection between UK and EU law. It therefore abolished supremacy of EU law and all other general principles of EU law for any matters occurring from 1 January 2024 onwards.
It means that, where a particular piece of EU-derived domestic legislation needs to be interpreted for the period before 1 January 2024, indirect effects applies but where it needs to be interpreted for the period after 1 January 2024, it does not apply. In the latter case, normal UK rules of statutory interpretation apply instead.
It should be noted, however, that, retained CJEU case law (issued on or before 31 December 2020) continues to be binding in the UK, with only the Court of Appeal and Supreme Court able to depart from it. REULA did not affect that.
What are the normal UK rules of statutory interpretation?
The UK adopts a contextual approach to statutory interpretation, looking at the meaning of the words used in context. This is because "citizens with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament" (R(PRCBC)). The words of the legislation are paramount although 'external aids' (such as Explanatory Notes) can sometimes play a secondary role in interpretation.
It's a much different approach to the EU's teleological approach where the words of the EU legislation are interpreted purposively with considerable regard to the wider context (such as the recitals, the aims of the EU, relevant CJEU case law, and the Treaties).
Does this mean that directives are now completely irrelevant for statutory interpretation in the UK?
Probably not. There are good arguments that directives will continue to be relevant as statutory aides to interpretation (as suggested in Brent v Risk Management (ratio) and E-Accounting Solutions v Global Infosys (obiter)). However, the wording of the UK legislation itself is paramount.
What's the net result?
The UK has gone from a position where "…what matters is the language of the directive" (British Sugar v James Robertson) to a position where a directive "… cannot displace the meanings of a word conveyed by a statute, that, after consideration of that context, are clear and unambiguous and which do not produce absurdity." (E-Accounting Solutions v Global Infosys (obiter)). It has also gone from a teleological approach to interpretation (intention/purpose) to a contextual approach (words are paramount).
Where will this have a particular impact?
This will have a particular impact where:
- the wording of the EU-derived domestic legislation and corresponding directive differ
- the CJEU has read words into, removed words from or stretched words in a directive
- the UK has gold-plaited a provision of a directive
- the meaning of a directive has been fleshed out by its recitals or the wider context (eg the need for greater integration of the EU)
An example from copyright law
There is a well-known tension between EU and UK copyright law as applied to works of applied art (and more generally). EU law provides that a work of any kind attracts copyright protection provided it satisfies the EU's test for originality; nothing more is required (see the InfoSoc directive, as interpreted by cases such as Infopaq and Cofemel).
UK law provides that a work of applied art only attracts copyright protection if it is a work of "artistic craftsmanship" (meaning that it has "eye appeal" and potentially more) and is original (see s. 4(1) CDPA 1988, as interpreted by eg the House of Lords in Hensher).
For the period before 1 January 2024, the UK is bound to apply both sets of laws: the UK position as enshrined in the CDPA (as it is the relevant piece of UK legislation) and the EU position as enshrined in the InfoSoc Directive (because of indirect effects).
In the WaterRower v Liking case, the High Court said that these two positions could not be reconciled. While it chose to adopt the EU's test of originality, it held that it could not interpret section 4(1) CDPA in accordance with the InfoSoc Directive more generally (ie such that the work in question would attract copyright protection as long as it was original) as to do so would "go against the grain of the wording of the CDPA and distort the intention of Parliament". Indirect effects applies only "as far as it is possible" to interpret the CDPA in accordance with the InfoSoc directive – and here, it is not possible. While the work in question was held to be original, it did not attract copyright protection as it was not a "work of artistic craftsmanship".
Now that it has been confirmed that the UK has abolished indirect effects (for the period from 1 January onwards), there is even less incentive for the UK courts to interpret s. 4(1) CDPA 1988 in accordance with the InfoSoc directive. At most, the InfoSoc directive is now an "aide" to interpretation of the CDPA. (Although CJEU case law such as Cofemel is binding on the UK as retained CJEU case law, query how it can be applied given the different wording of s.4(1).)
This illustrates how the loss of indirect effects can impact the interpretation of retained EU laws.
What does this mean for you?
In most cases, the loss of indirect effects won't make a difference. However, there will be odd cases where it does. IP litigators should have the loss of supremacy of EU law in general (and what that means for the interpretation of UK legislation) in the back of their minds when advising, particularly in the scenarios identified above.
Litigators should also have in mind the Court of Appeal's recent decision in the Merck Serono case (see IPKat post here from Taylor Wessing's Paul England) on the powers of the Court of Appeal to depart from retained CJEU case law.
