Seabrook Warehousing Ltd, R (On the Application Of) v Revenue And Customs

National excise measures implementing EU legislation may be subject to the stringent less-restrictive-alternative test where they discriminate in effect or restrict fundamental freedoms. A requirement that an overseas owner appoint a UK duty representative can nevertheless be proportionate where it enables effective supervision and helps combat excise-duty fraud. Revocation of the representative’s approval may place goods outside a duty-suspension arrangement under article 7(2)(b) of Council Directive 2008/118/EC, even if the goods remain physically in the warehouse. Due-diligence requirements are lawful when construed flexibly, proportionately and as non-prescriptive guidance tailored to the risks and circumstances of each business.

Seabrook challenged the EU-law compatibility of regulations 9 and 21 of the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 and the due-diligence requirements in Excise Notice 196. The challenge concerned the requirement for non-UK owners to appoint a UK duty representative, the resulting excise-duty point if representation ceased, and the obligations imposed on duty representatives and authorised warehousekeepers.

Holman J refused permission in [2017] EWHC 2583 (Admin), considering the First-tier Tribunal to provide an adequate alternative remedy. Underhill LJ granted permission for judicial review and directed that it be retained in the Court of Appeal under CPR rule 52.8(6). The central questions were whether the statutory scheme was discriminatory or restricted EU freedoms without justification, and whether the due-diligence requirements were unlawful in their true construction.

Henderson LJ gave the reasons, with Simon LJ and the Chancellor agreeing. The judicial review claim was dismissed.

1. Excise-duty point. Article 7(2) of Council Directive 2008/118/EC exhaustively defined release for consumption. Polihim concerned only article 7(2)(a), where departure meant physical removal from the tax warehouse. It did not decide the separate issue under article 7(2)(b). If a foreign owner’s duty representative ceased to be authorised, the goods were then held outside a duty-suspension arrangement. Regulation 21(1)(b) therefore validly triggered an excise-duty point.
2. EU rights and proportionality. Calling the ability to trade under duty suspension a privilege did not remove EU-law protection, and the 72-hour facility was no practical substitute for long-term trading. Freedom of establishment was not meaningfully engaged because a foreign owner without a permanent UK presence was not seeking to establish itself in the United Kingdom. The requirements nevertheless potentially engaged non-discrimination, free movement of goods and freedom to provide services.
3. The appropriate proportionality standard was the stringent less-restrictive-alternative test. The Court applied the four Gebhard conditions, taking account of the discriminatory effect and restrictions on fundamental freedoms despite the implementation of EU legislation. The duty-representative regime was suitable for preventing evasion and enabling effective supervision. There was no plausible less restrictive alternative: foreign owners could appoint a UK representative or establish a UK branch or subsidiary and seek approval as registered owners.
4. Due diligence. Section 10 of Excise Notice 196 imposed flexible, non-exhaustive and non-prescriptive obligations. Checks had to be reasonable, proportionate and individually tailored to the risks and nature of the business. Properly construed, the requirements did not unlawfully transfer HMRC’s supervisory functions and were themselves proportionate. Complaints about HMRC’s practical application of the guidance belonged before the First-tier Tribunal.

• Court of Appeal (Civil Division): The court retained the judicial review application under CPR rule 52.8(6) and dismissed all challenges.
• Court of Appeal, permission stage: Underhill LJ granted permission for judicial review after the refusal of permission by Holman J, as recorded in [2018] EWCA Civ 2408.
• High Court (Administrative Court): Holman J refused permission on 13 October 2017 in [2017] EWHC 2583 (Admin), holding that the First-tier Tribunal offered an adequate alternative remedy.