Case No: CO/1211/2003

Neutral Citation Number: [2006] EWHC 1759 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Thursday 13th July 2006

Before :

MR JUSTICE NEWMAN

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Between :

	THE QUEEN on the application of
SYNTHON BV	Claimant	
	- and -		
	THE LICENSING AUTHORITY	Defendant	
	- and -		
	SMITHKLINE BEECHAM PLC	Interested Party	

(Transcript of the Handed Down Judgment of
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Gerald Barling QC and Sarah Stevens (instructed by SJ Berwin LLP) for the Claimant
Jason Coppel (instructed by The Office of the Solicitor to the Department of Health) for the Defendant
Jemima Stratford (instructed by Arnold & Porter) for the Interested Party

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Judgment

Mr Justice NEWMAN : 
1.	I have before me an application by the claimant, Synthon BV (Synthon), for an order that the stay of proceedings imposed by Master Venne by an order dated 19th February 2004 be lifted and that a reference be made to the European Court of Justice (ECJ) or, alternatively, that directions be given for the substantive hearing of this judicial review application.  In essence, the parties are at odds as to whether there should be a reference to the ECJ, for which Synthon urges, or whether directions should be given for the judicial review proceedings, for which the defendant, the Licensing Authority (the Authority), urges, whilst acknowledging that the need for a reference to the ECJ may emerge at a later date.  
2.	The resistance of the Authority reflects a change of position from that which was taken when these judicial review proceedings were commenced.  By a letter dated 4th April 2003 the Office of the Solicitor for the Department for Work and Pensions, Department of Health wrote as follows:
“We believe that discussions may already have taken place between our respective counsel to the effect that a reference to the European Court of Justice in the present proceedings is likely to be the most appropriate way forward.  We believe that such a referral ought to be made at this stage and write now to formally invite your clients to seek to agree the terms of a reference that can be put to the Court”.
	The same letter went on to add an opinion in connection with proceedings, which had then been referred to the ECJ by the Danish High Court, being proceedings between Smithkline Beecham plc (namely the Interested Party in these judicial review proceedings, hereafter SKB) and the Danish Medicines Agency (DMA).  They have now been concluded in the ECJ, SKB having lost on its challenge to the decision of the DMA.  Whereas in the letter dated 4th April 2003 the Authority’s solicitor stated that the proceedings were “clearly unlikely to resolve all of the issues that arise in your client’s present challenge to the MCA’s Varox decision”, it is now maintained that, for present purposes, the outcome of those proceedings has enabled all the issues in the judicial review proceedings to be clarified.  
3.	An order for reference was duly made by Silber J. dated 6th June 2003 and directions were given for all parties to agree a draft of the reference to be made to the ECJ.  Since the outcome of the patent proceedings between Synthon and SKB before the House of Lords, Synthon has sought the co-operation of the Authority in drafting the terms of reference, but co-operation has been refused.  Hence the need for this application.  
4.	By its substantive claim for judicial review, Synthon seeks to challenge the lawfulness of the refusal by the Authority to accept Synthon’s application for a marketing authorisation for its medicinal product containing the active principle paroxetine.  Since the proceedings commenced, on 6th February 2006 Synthon was granted a marketing authorisation in the United Kingdom by the Authority and thus, to that extent, that aspect of the claim has been superseded by the subsequent grant of authorisation.  However, Synthon has a claim for declaratory relief and a claim for damages pursuant to principles laid down in Joined Cases C-6/90 and C-9/90 Francovich [1991] ECR I-5357 and in Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur and Factortame, on the grounds that the Authority’s failure to comply with its obligations under EC law prevented Synthon from marketing the product in the United Kingdom during the relevant period prior to authorisation.  
5.	Synthon advanced two grounds for relief.  First, that since it possessed authorisation from the DMA, it was entitled to authorisation in the United Kingdom pursuant to the mutual recognition procedure (the MRP) established in European law.  In refusing authorisation, it is contended that the Authority acted unlawfully and in breach of European law and in breach of the MRP.  Secondly, it is alleged that the specific reason founding the refusal, namely that the Authority had an inflexible policy that different salts of the same active principle can never satisfy the criterion of essential similarity, was also unlawful.  In essence, what has occurred is that the ECJ resolved the second ground of challenge in favour of the DMA and therefore, for the purposes of these proceedings, in favour of Synthon.  In consequence, the Authority has accepted that it acted unlawfully in that regard but has not accepted that it acted unlawfully by failing to adhere to the MRP.  
6.	As a result, on this application, the Authority submits that it is not necessary for the court to make a reference to the ECJ in connection with the alleged unlawful operation of the MRP because, it having conceded unlawful conduct, if the claimant is entitled to damages, its entitlement can be determined in connection with the admitted breach.  It has been submitted that there is nothing to be gained by the ECJ ruling in connection with the first ground for relief in these proceedings.  
7.	Master Venne stayed the proceedings on 19th February 2004 because there were certain patent proceedings in the House of Lords which were related to Synthon’s product.  The outcome was pertinent to Synthon’s claim for damages, which was and remains an important element of the relief it seeks in these proceedings.  Had the patent proceedings been resolved in favour of SKB it might have been open to the Authority to contend that Synthon was not entitled to market the product in the United Kingdom until expiry of the patent, irrespective of any breach of the relevant EC legislation.  In the event, the patent proceedings were resolved in Synthon’s favour.  Thus it is now submitted that but for the Authority’s refusal of a marketing authorisation, Synthon would have been able to market the product in the UK in the relevant period.  
8.	It is common ground that the ECJ’s judgment in the SKB proceedings against the DMA did not touch on, let alone resolve, the issue in connection with the meaning and operation and consequent powers of the Authority under the MRP.  
Principles governing the making of an order for a reference to the ECJ
9.	The appropriate course is ordinarily to refer the issue to the ECJ unless the national court can, with complete confidence, resolve the issue itself.  If the national court has any real doubt, it should ordinarily make a reference.  See Sir Thomas Bingham MR, as he then was, in R v International Stock Exchange of the UK and the Republic of Ireland Ltd ex parte Else [1993] QB 534 at 545.  Between that date and 2001 certain practical concerns had arisen in the ECJ in connection with the volume of work and the number of references which were being made.  In the case of Trinity Mirror plc v Commissioners of Customs and Excise [2001] EWCA Civ 65, Chadwick LJ drew attention to the observations of Advocate General Jacobs in case C-338/95 Wiener SI GmbH v Hauptzollamt Emmerich [1997] ECR I-6495 and Chadwick LJ stated (paragraph 52):
“The solution is "a greater measure of self-restraint on the part of both the national courts and the Court of Justice" … Where the national court is not a court of last resort, a reference will be most appropriate where the question is one of general importance and where the ruling is likely to promote the uniform application of the law throughout the European Union…”
	As I understand the position, there is a need for restraint.  The court must be alert to the distinction between the real difficulty in needing to ascertain the relevant principles of Community law and seeking the assistance of the ECJ in connection with cases where it is a matter of the relevant principles of Community law being applied to facts.  A discrete area, however, has been identified where it is likely to be appropriate, namely where there is a point of general importance which, if decided, is likely to promote uniformity in the European Union.  It is common ground that there is no existing interpretive ruling by the ECJ on the meaning of the MRP and the contention advanced, that it is one of general importance which, when resolved, is likely to promote the uniform application of the law throughout the European Union has not been seriously challenged.  In truth it has not been submitted, on behalf of the Authority, that the MRP issue is not an appropriate one to be referred to the ECJ; the Authority’s objection to a reference being made at this stage is that the court cannot be satisfied that it is necessary.  It has been submitted that the ECJ could regard it as a hypothetical case.
The position of the Licensing Authority
10.	The Authority submits that it is not necessary for the court to determine the first ground, namely the proper application of the MRP, in order to determine Synthon’s application for judicial review.  It is submitted that since the illegality of the Authority’s decision has been conceded, additional arguments as to why it was unlawful are wholly academic and should not be entertained.  That being the position of the Authority, it has been submitted that the claim for declaratory relief, based upon the alleged unlawful application of the MRP, is irrelevant to the proper outcome of the proceedings.  Although not put in such terms, the argument amounts to a proposition that even if Synthon could prove that the Authority had behaved unlawfully by failing to apply the MRP according to its terms, no relief by way of declaration on that ground could or would be granted.  Next, as to the damages claim, it is said that before a proper legal analysis of the claim for damages has been carried out, no such analysis being possible until the matter is properly pleaded and particularised, it cannot be said that it is necessary at this stage to refer the MRP ground to the ECJ, because it might become clear that all or any damages to which Synthon are entitled can be recovered on the back of the admitted unlawful conduct.
11.	Mr Coppel, counsel for the Authority, developed the argument in connection with the claim for damages by reference to the case of Haim (Case C-424/97 [2000] ECR I-5123) and to paragraphs 34 to 44, in particular.  The case confirms that three conditions must be satisfied for a Member State to be required to make reparation for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible:
(1)	The rule of law infringed must have been intended to confer rights on individuals;
(2)	The breach must be sufficiently serious; and
(3)	There must be a direct causal link between the breach of the obligation resting on the State and the loss or damage sustained by the injured parties.
The judgment contemplates the two situations in which a breach can occur, for example a legislative breach, namely a failure to implement a Community directive, and secondly the adoption of an administrative act which is in breach of Community law.  
12.	In paragraph 38 the judgment continued:
“As regards, more particularly, the second of those conditions, the Court has held that a breach of Community law is sufficiently serious where a Member State, in the exercise of its legislative powers, has manifestly and gravely disregarded the limits on its powers …. and that where, at the time when it committed the infringement, the Member State in question had only considerably reduced, or even no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach …”
	In paragraph 42 the court observed:
“In order to determine whether such an infringement of Community law constitutes a sufficiently serious breach, a national court hearing a claim for reparation must take account of all the factors which characterise the situation put before it.”
13.	Mr Coppel’s argument in connection with damages concentrated upon conditions (2) and (3) as they appear in paragraph 11 above.  As to the condition that a causal link must be established between the breach of obligation resting on the State and the loss or damage sustained by the injured parties, he had developed detailed submissions in his Skeleton Argument and embarked upon an analysis of the issues which, he submitted, would arise on causation.  These arguments, which were controversial and would be hotly contested, were advanced for the purpose of persuading the court that, at this stage, it was premature to make a reference to the ECJ.  As he submitted, if a causal connection could not be established it would not be necessary for such a reference.  The latter submission is uncontroversial in its substance but, save perhaps in a clear case, it is not the normal approach to attempt to try causation before trying liability. 
14.	So far as the requirement to show a sufficiently serious breach was concerned, he submitted that, since the Authority had admitted a breach in connection with the similarity of salts policy, and, but for that unlawful application of the policy, it would have treated Synthon’s application as valid under the MRP, there is no basis for concluding that the breach of the MRP, if it occurred, could be regarded as a sufficiently serious breach.  He submitted that it would be regarded, in effect, as incidental to the effective breach.  In addition, he submitted that the strength of the argument underlying the alleged MRP breach had to be assessed in the light of the process, which is commonly accepted as being permitted under the MRP, namely the process of validation in connection with an existing authorisation.  The Authority’s contention is that, in applying a test of sufficient similarity, it was doing no more than was permitted under the validation process.  It submits, therefore, that either there was no breach of the MRP procedure or, if there was, it is manifestly a breach which would not be sufficiently serious to give rise to damages.  
Conclusion
15.	I am wholly unimpressed by these arguments for the Authority.  They have an appearance of opportunism.  They are designed to foreclose Synthon, so far as possible, from establishing a ground of unlawful conduct on the part of the Authority.  They ignore the significance which this court attaches to its discretion to grant declaratory relief in aid of a claim.  
16.	I am satisfied that Synthon has a good arguable case for contending that the Authority acted in breach of the MRP.  I am satisfied that the response of the Authority to that claim, namely that it was entitled to do what it did do pursuant to the validation process, raises an issue of general importance for the operation of the MRP in the European Union.  More than that, I am satisfied that Synthon, if they can establish unlawful conduct on that score, would be likely to obtain a declaration in this court.  Where a good arguable case for a declaration exists, it would only be in exceptional circumstances that the court would take the view, at the outset of the proceedings, that it was not necessary for that entitlement to relief to be allowed to proceed in the normal way.
17.	As to the suggested damages position, Mr Coppel’s argument turns matters on their head.  One does not normally proceed upon the basis that you determine causation before determining liability.  I do not accept that in this case, there being two heads of liability capable of giving rise to damage, that a concession on one should lead to the prevention of proof on the other.  Of course it is obvious that, in this case, had the similarity of salts policy not been applied, there is no reason to believe authorisation would have been refused.  That said, had the Authority, as Synthon maintains, applied the MRP properly, no question of applying the salts policy would have arisen.  Nor am I persuaded on a proper view of European law, in particular as laid down in the case of Haim, that it can be said that the seriousness of the conduct on the part of the Authority can be properly determined without all the circumstances being looked at.  In my judgment, this must include whether or not there was a discrete breach of the law arising from the action of the Authority in entering upon the inquiry upon which it embarked.  Further, it will be relevant to have regard to its continued assertion that it was entitled to do so.  In normal circumstances this is precisely the situation in which either a declaration or an injunction will be considered as appropriate in order to clarify issues for the future.  Synthon has, by reason of its business, a continuing interest in establishing the true legal interpretation of the MRP.  
18.	For the above reasons, I am satisfied that it is necessary to make a reference to the ECJ in the terms sought in the draft order attached to the present application.  However, that said, the Authority and SKB may wish to take the opportunity of participating in settling the terms of the draft and, subject to any further representations from the parties which may be necessary, the court would encourage that participation.