Marks and Spencer plc v. Her Majesty's Commissioners of Customs and Excise

Where the determination of an appeal requires authoritative answers to unresolved questions of Community law, the House of Lords may request a preliminary ruling under Article 234 of the Treaty establishing the European Community. The questions referred may address whether directly enforceable Community rights arise, how the principles of equal treatment and fiscal neutrality apply, and what remedy Community law requires or permits. The reference does not determine those substantive questions. Further consideration of the appeal may remain adjourned pending the preliminary ruling.

In an appeal concerning value added tax, the appellants claimed repayment of tax charged at the standard rate on supplies said to benefit from a domestic exemption with refund of input tax. The dispute raised questions about Article 28(2)(a) of the Sixth VAT Directive, the principles of equal treatment and fiscal neutrality, unjust enrichment, and differences between claims for overpaid output tax and claims by repayment traders.

On 28 July 2005 the House had ordered that the issues identified by Lord Walker of Gestingthorpe be referred to the Court of Justice of the European Communities and had adjourned the appeal indefinitely: [2005] UKHL 53. This Report formulated the five questions on which a preliminary ruling was required before the House could give judgment.

1. Request for a preliminary ruling. The Appellate Committee, comprising Lord Nicholls of Birkenhead, Lord Steyn, Lord Hoffmann, Lord Scott of Foscote and Lord Walker of Gestingthorpe, collectively determined that answers from the Court of Justice of the European Communities were necessary before the House could give judgment. A preliminary ruling was therefore requested under Article 234 of the Treaty establishing the European Community.

2. Scope of the reference. The Committee referred five questions. First, it asked whether Article 28(2)(a) of the Sixth VAT Directive gave a trader a directly enforceable Community law right to zero-rating where a member state had maintained an exemption with refund of input tax. Secondly, if it did not, the Committee asked whether the general principles of Community law nevertheless gave a right to recover tax charged because the domestic exemption had been mistakenly interpreted.

3. Equal treatment and fiscal neutrality. The remaining questions concerned whether those principles required full repayment where it would unjustly enrich the trader, domestic law barred such enrichment for overpaid output tax, and no equivalent restriction applied to repayment traders. The Committee also asked whether proof of financial loss or disadvantage affected the analysis.

4. Remedy. The final question asked whether Community law required or permitted the domestic court to remedy unequal treatment by ordering repayment despite unjust enrichment, or instead required or permitted another remedy. The Committee expressed no conclusion on any of these substantive Community law issues.

5. Disposition. The questions were referred for a preliminary ruling. In accordance with the House's earlier order reported at [2005] UKHL 53, further consideration of the appeal remained adjourned sine die.

1. House of Lords, 12 July 2006: By this Report, the Appellate Committee formulated five questions for a preliminary ruling by the Court of Justice of the European Communities under Article 234 of the Treaty establishing the European Community.

2. House of Lords, 28 July 2005: The House ordered that the issues identified in Lord Walker of Gestingthorpe's speech be referred for a preliminary ruling and adjourned further consideration of the appeal sine die: [2005] UKHL 53.

3. Earlier stages: Not stated in the judgment.