FMX Food Merchants Import Export Co Ltd v Commissioners for Her Majesty’s Revenue and Customs

Where a customs debt results from an act liable to give rise to criminal proceedings, article 221(4) of the Council Regulation (EEC) No 2913/92 automatically displaces the ordinary three-year period for communicating the debt. This does not depend upon a member state first prescribing a substitute limitation period.

Under the majority’s approach, if EU and national law provide no applicable time limit, the EU principle of legal certainty requires communication within a reasonable time. What is reasonable depends upon the circumstances. A customs authority may reasonably await the outcome of closely related litigation. Domestic rules governing abuse of process, laches or the limitation of enforcement proceedings do not themselves control the earlier communication of the debt.

FMX imported garlic declared to originate in Cambodia and therefore exempt from import duty. The garlic originated in China and was subject to duty. Although FMX was not implicated in the underlying fraud, its presentation of false certificates constituted an act liable to give rise to criminal proceedings under section 167(3) of the Customs and Excise Management Act 1979.

HMRC communicated a post-clearance demand after the three-year period in article 221(3) of the Council Regulation (EEC) No 2913/92. The First-tier Tribunal and Court of Appeal, [2018] EWCA Civ 2401, substantially accepted FMX’s case that the demand was too late. The Upper Tribunal found for HMRC.

The central issue was whether article 221(4) displaced the three-year period automatically, or only where the member state had prescribed a substitute fixed period in advance. A further issue was how legal certainty controlled communication where domestic law supplied no fixed period.

1. Appeal allowed. Lord Briggs, with whom Lord Reed, Lord Hodge and Lord Kitchin agreed, held that article 221(4) of the Council Regulation (EEC) No 2913/92 automatically displaced the ordinary three-year period where the customs debt resulted from an act liable to give rise to criminal proceedings. The provision did not merely give member states an option to substitute another period. Its language, context and purpose showed that the three-year period was regarded as unsuitable in such cases.

2. The provisions considered in Ze Fu Fleischhandel and Kollmer were materially different. They preserved an EU-wide four-year period unless a member state exercised an option to prescribe another compliant period. Article 221(4), by contrast, disapplied the EU period when the criminal-proceedings condition arose and left applicable conditions to EU or national provisions in force.

3. No English provision fixed a period for communicating this customs debt. Abuse of process concerns the conduct or institution of legal proceedings, while laches concerns delayed claims for equitable relief. Neither controlled the prior administrative communication. The Limitation Act 1980 governs the commencement of actions after a cause of action has accrued. It did not directly impose a period for taking the step which made the debt payable or enforceable.

4. The absence of a domestic period created a lacuna. The EU principle of legal certainty supplied the applicable control: communication had to occur within a reasonable time. The reasonable-time principle was not confined to action by EU institutions and could protect private persons where legislation supplied no period. Because EU law supplied that remedy, section 37(2)(a) of the Limitation Act 1980 did not have to be disapplied.

5. The communication was made within a reasonable time. HMRC issued it within four months after related tribunal proceedings concerning later imports had concluded. Waiting for the resolution of that closely related dispute was reasonable. No remittal was required, and the Upper Tribunal’s decision was restored, although for somewhat different reasons.

Lady Arden agreed that the appeal should be allowed and that article 221(4) did not require enabling national legislation. She took a different route on the time control. In her view, EU law deferred to domestic law, the EU reasonable-time principle did not limit recovery, and any control had to arise from domestic mechanisms such as judicial review.

1. United Kingdom Supreme Court: The court unanimously allowed HMRC’s appeal and restored the Upper Tribunal’s decision. The majority held that communication had to be made within a reasonable time and that the demand satisfied that requirement: [2020] UKSC 1.

2. Court of Appeal: The court substantially accepted FMX’s argument that the three-year period remained applicable because the United Kingdom had prescribed no substitute fixed period: [2018] EWCA Civ 2401. Its decision was reversed.

3. Upper Tribunal: The tribunal found for HMRC, relying on domestic principles including abuse of process and laches. Its decision was restored, although the Supreme Court majority adopted different reasoning.

4. First-tier Tribunal: The tribunal broadly accepted FMX’s limitation argument. It had found that the false certificates satisfied the criminal-proceedings condition in article 221(4) of the Council Regulation (EEC) No 2913/92.