Court of Appeal - scope of abuse principle in Ankara Agreement cases
23 June 2009
Turkish nationals who set up businesses in the United Kingdom have long enjoyed the benefits of Article 41(1) of the Additional Protocol to the Ankara Agreement, originally signed between Turkey and the European Union in 1963 to give "freedom of establishment" to Turkish nationals.
Article 41 (1), which states:
The contracting parties shall refrain from introducing between themselves any new restrictions on the freedom of establishment and the freedom to provide services.
has the effect of making it impossible for EU Member States to impose more demanding conditions on Turkish nationals wishing to set up businesses in the UK than were imposed by the Immigration Rules which applied when the Sub Article came into force in 1973.
Needless to say those ancient Immigration Rules were far less demanding than the current Immigration Rules applying to people who wish to set up in business in the UK.
In Filiz Somnez & (3) Others v Secretary of State for the Home Department (2009) EWCA Civ 58 the Court of Appeal considered fourAppellants' appeals against the Home Office's decisions to refuse to vary the Appellants' leave to remain to a that of a person under the terms of the Ankara agreement. The first Appellant's existing leave to remain was as a visitor - the other three Appellants were students.
The rights enjoyed by Turkish nationals to establish themselves in business due to the Ankara Agreement have been examined fairly frequently by the Courts. In R (Tum and Dari) v Secretary of State for the Home Department (2007) ECR 1-07415 the European Court confirmed that the standstill clause in Article 41 (1) of the Additional Protocol had the effect of fixing the Immigration Rules in force in 1973 as applicable to applications thereafter.
In Tum and Dari the European Court noted that community law could not be used for fraudulent purposes. Thereafter in many cases like those of the Appellants in FS and others the Home Office's refusals to vary leave to remain have been explained by the assertion that the act of setting up in business perpetrated by a person here as a visitor or as a student was tantamount to fraudulent activity. This was invoked in each of the appeals before the Court of Appeal.
Looked at from the point of view of common sense - the suggestion that someone who enters the UK as a student and who perhaps many years after that initial entry sets up a business in his or her own name and pays taxes appropriately has perpetrated a "fraud" seems difficult to sustain. Fraud is a criminal offence.
It might be thought that the individual would at least have had to have planned all along to set up his or her business and, with this intention firmly in his or her mind, had nonetheless made an application for leave to enter as a visitor or for leave to enter or remain as a student, in the full knowledge that entrants in these capacities were forbidden from setting themselves up in business.
However the Home Office's position was strengthened by the Court of Appeal's judgment in LF (Turkey) v Secretary of State for the Home Department (2007) EWCA Civ 1441, which was an application for judicial review of a the Secretary of State's decision to refuse LF's application for leave to remain as a business person. In that case Lord Justice Laws said:
17. This, if I may say so with great respect, is an application of the abuse of rights principle which is well established in the jurisprudence of the Court of Justice. There is a plain affinity with the common law rule (if I may express it very broadly) that a man may not profit from his own wrong and the linked principle expressed in the Latin phrase ex turpi causa non oritur actio.There is in the present context no reasonable distinction, I think, between abuse of rights and fraud. Such a distinction if it were asserted could not in my judgment survive the reasoning of the Court of Justice in Kondova and Dari v Tum. This conclusion is, I apprehend, in line with first instance decisions in the Administrative Court, notably Yilmaz and Temiz to which I have made reference. I will not, with respect, cite those judgments.
When the first Appellant, Filiz Somnez's appeal came before the Asylum and Immigration Tribunal on "reconsideration" the Tribunal's deputy president said that she could not succeed in her appeal because of the principle of "ex turpi causa non oritur actio". This was because Ms. Somnez had set up her cleaning business in ontravention of the conditions of her leave to enter as visitor. So she couldn't say that she was allowed to stay in the UK because she was a businessperson. If she were allowed to do so she would be profiting from her own wrongdoing.
The Court of Appeal was unanimous in agreeing that the principle invoked by the Tribunal had no application in immigration cases.
Since it was because of its invocation by the Tribunal that Ms. Somnez had lost her appeal - her case would be sent back to the Tribunal for further reconsideration. But the Secretary of State's representative contended that the Court's judgment in LF (Turkey) - and that of the European Court of Justice in Kondova v United Kingdom (2001) ECR I - 6427 (to which Lord Justice Laws referred in LF (Turkey)) had the effect of making it impossible for the student cases to succeed.
The Court of Appeal was split over this issue. In his dissenting judgment Lord Justice Sedley said that if the Court was accepting that the ex turpi causa non oritur actio principle didn't apply it couldn't then also say that the Appellants must lose because they had entered the UK lawfully and had then acted contrary to the conditions of their leave to remain. In his view the judgment in LF (Turkey) did not mean they had to lose their appeals - because that judgment simply stated that the Secretary of State could refuse to grant leave to remain on the basis of "abuse" (in the sense of abuse of rights as referred to by Lord Justice Laws in LF (Turkey)) not that he must refuse it. The section of the European Court's judgment in Tum and Dari relating to fraud made it clear that the question of whether someone should lose their entitlement to the benefits of Community law because of abuse or of fraudulent behaviour must be decided under the national law of Member States. So there was no automatic bar to the Appellants' entitlement to rely on the Ankara Agreement.
The other two Lords Justices (Lord Justice Dyson and Lord Justice Maurice Kay) disagreed. In a lengthy judgment Lord Justice Dyson found that the abuse principle applied to actions conducted after a person's lawful entry to the UK - as the European Court in Kondova had found it did with regard to false representations made to obtain entry to the UK. Kondova was fatal to each of the Appellant's appeals.
He went on to find that the Court of Appeal's judgment in LF (Turkey) was an application of the abuse principle, which had been consistently stated in the European cases. Therefore the fact that the case was a judicial review application did not mean that the judgment was merely to the effect that the Secretary of State had been entitled to apply the principle - instead the outcome of the case depended on the Court's having applied the principle. This meant that the judgment in LF (Turkey) was binding on the Court of Appeal.
Lord Justice Dyson did say that the question of whether a person's conduct amounts to abuse within the meaning of the abuse principle is a matter of judgment to be determined on the facts of any individual case. Since in LF (Turkey) the classification of LF's having set up a business as abuse was satisfactory it followed that the same was true in each of the three student cases - all of which would be dismissed.
Lord Justice Maurice Kay agreed with Lord Justice Dyson.
This is an important case which will be referred to by the Secretary of State for the Home Department's representatives in any outstanding appeals before the Asylum and Immigration Tribunal by Turkish nationals who entered the UK as students or as visitors and who have been refused leave to remain on the basis of their businesses. (It won't apply to any cases like those of Tum and Dari themselves, who set up their businesses while they were on temporary admission).
Having said that it is unlikely that this is the end of the story for Turkish business people whose businesses are established during a period of leave in a different capacity. The judgment will almost certainly be petitioned to the House of Lords.
The subject matter of the case - and the fact that the Court of Appeal was divided, with the majority basing their judgments on Kondova (which was a "misrepresentation to gain entry to the UK case") both suggest that it's likely that the House of Lords will grant permission to appeal. It's also likely that the case will eventually end up being decided by the European Court of Justice.
Article 41 (1), which states:
The contracting parties shall refrain from introducing between themselves any new restrictions on the freedom of establishment and the freedom to provide services.
has the effect of making it impossible for EU Member States to impose more demanding conditions on Turkish nationals wishing to set up businesses in the UK than were imposed by the Immigration Rules which applied when the Sub Article came into force in 1973.
Needless to say those ancient Immigration Rules were far less demanding than the current Immigration Rules applying to people who wish to set up in business in the UK.
In Filiz Somnez & (3) Others v Secretary of State for the Home Department (2009) EWCA Civ 58 the Court of Appeal considered fourAppellants' appeals against the Home Office's decisions to refuse to vary the Appellants' leave to remain to a that of a person under the terms of the Ankara agreement. The first Appellant's existing leave to remain was as a visitor - the other three Appellants were students.
The rights enjoyed by Turkish nationals to establish themselves in business due to the Ankara Agreement have been examined fairly frequently by the Courts. In R (Tum and Dari) v Secretary of State for the Home Department (2007) ECR 1-07415 the European Court confirmed that the standstill clause in Article 41 (1) of the Additional Protocol had the effect of fixing the Immigration Rules in force in 1973 as applicable to applications thereafter.
In Tum and Dari the European Court noted that community law could not be used for fraudulent purposes. Thereafter in many cases like those of the Appellants in FS and others the Home Office's refusals to vary leave to remain have been explained by the assertion that the act of setting up in business perpetrated by a person here as a visitor or as a student was tantamount to fraudulent activity. This was invoked in each of the appeals before the Court of Appeal.
Looked at from the point of view of common sense - the suggestion that someone who enters the UK as a student and who perhaps many years after that initial entry sets up a business in his or her own name and pays taxes appropriately has perpetrated a "fraud" seems difficult to sustain. Fraud is a criminal offence.
It might be thought that the individual would at least have had to have planned all along to set up his or her business and, with this intention firmly in his or her mind, had nonetheless made an application for leave to enter as a visitor or for leave to enter or remain as a student, in the full knowledge that entrants in these capacities were forbidden from setting themselves up in business.
However the Home Office's position was strengthened by the Court of Appeal's judgment in LF (Turkey) v Secretary of State for the Home Department (2007) EWCA Civ 1441, which was an application for judicial review of a the Secretary of State's decision to refuse LF's application for leave to remain as a business person. In that case Lord Justice Laws said:
17. This, if I may say so with great respect, is an application of the abuse of rights principle which is well established in the jurisprudence of the Court of Justice. There is a plain affinity with the common law rule (if I may express it very broadly) that a man may not profit from his own wrong and the linked principle expressed in the Latin phrase ex turpi causa non oritur actio.There is in the present context no reasonable distinction, I think, between abuse of rights and fraud. Such a distinction if it were asserted could not in my judgment survive the reasoning of the Court of Justice in Kondova and Dari v Tum. This conclusion is, I apprehend, in line with first instance decisions in the Administrative Court, notably Yilmaz and Temiz to which I have made reference. I will not, with respect, cite those judgments.
When the first Appellant, Filiz Somnez's appeal came before the Asylum and Immigration Tribunal on "reconsideration" the Tribunal's deputy president said that she could not succeed in her appeal because of the principle of "ex turpi causa non oritur actio". This was because Ms. Somnez had set up her cleaning business in ontravention of the conditions of her leave to enter as visitor. So she couldn't say that she was allowed to stay in the UK because she was a businessperson. If she were allowed to do so she would be profiting from her own wrongdoing.
The Court of Appeal was unanimous in agreeing that the principle invoked by the Tribunal had no application in immigration cases.
Since it was because of its invocation by the Tribunal that Ms. Somnez had lost her appeal - her case would be sent back to the Tribunal for further reconsideration. But the Secretary of State's representative contended that the Court's judgment in LF (Turkey) - and that of the European Court of Justice in Kondova v United Kingdom (2001) ECR I - 6427 (to which Lord Justice Laws referred in LF (Turkey)) had the effect of making it impossible for the student cases to succeed.
The Court of Appeal was split over this issue. In his dissenting judgment Lord Justice Sedley said that if the Court was accepting that the ex turpi causa non oritur actio principle didn't apply it couldn't then also say that the Appellants must lose because they had entered the UK lawfully and had then acted contrary to the conditions of their leave to remain. In his view the judgment in LF (Turkey) did not mean they had to lose their appeals - because that judgment simply stated that the Secretary of State could refuse to grant leave to remain on the basis of "abuse" (in the sense of abuse of rights as referred to by Lord Justice Laws in LF (Turkey)) not that he must refuse it. The section of the European Court's judgment in Tum and Dari relating to fraud made it clear that the question of whether someone should lose their entitlement to the benefits of Community law because of abuse or of fraudulent behaviour must be decided under the national law of Member States. So there was no automatic bar to the Appellants' entitlement to rely on the Ankara Agreement.
The other two Lords Justices (Lord Justice Dyson and Lord Justice Maurice Kay) disagreed. In a lengthy judgment Lord Justice Dyson found that the abuse principle applied to actions conducted after a person's lawful entry to the UK - as the European Court in Kondova had found it did with regard to false representations made to obtain entry to the UK. Kondova was fatal to each of the Appellant's appeals.
He went on to find that the Court of Appeal's judgment in LF (Turkey) was an application of the abuse principle, which had been consistently stated in the European cases. Therefore the fact that the case was a judicial review application did not mean that the judgment was merely to the effect that the Secretary of State had been entitled to apply the principle - instead the outcome of the case depended on the Court's having applied the principle. This meant that the judgment in LF (Turkey) was binding on the Court of Appeal.
Lord Justice Dyson did say that the question of whether a person's conduct amounts to abuse within the meaning of the abuse principle is a matter of judgment to be determined on the facts of any individual case. Since in LF (Turkey) the classification of LF's having set up a business as abuse was satisfactory it followed that the same was true in each of the three student cases - all of which would be dismissed.
Lord Justice Maurice Kay agreed with Lord Justice Dyson.
This is an important case which will be referred to by the Secretary of State for the Home Department's representatives in any outstanding appeals before the Asylum and Immigration Tribunal by Turkish nationals who entered the UK as students or as visitors and who have been refused leave to remain on the basis of their businesses. (It won't apply to any cases like those of Tum and Dari themselves, who set up their businesses while they were on temporary admission).
Having said that it is unlikely that this is the end of the story for Turkish business people whose businesses are established during a period of leave in a different capacity. The judgment will almost certainly be petitioned to the House of Lords.
The subject matter of the case - and the fact that the Court of Appeal was divided, with the majority basing their judgments on Kondova (which was a "misrepresentation to gain entry to the UK case") both suggest that it's likely that the House of Lords will grant permission to appeal. It's also likely that the case will eventually end up being decided by the European Court of Justice.