UK Waste Control Ltd v Wren & Ors [1995] UKEAT 568_94_2505

EMPOLYMENT APPEAL TRIBUNAL

BAILII case number: [1995] UKEAT 568_94_2505

Case No Appeal No. EAT/568/94

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

UK Waste Control Ltd

Wren & Ors

Date 25 May 1995

This is an appeal by Onyx Las Limited (formerly UK Waste Control Limited), whom we shall call the appellants, against a decision of an Industrial Tribunal held at Brighton on 6 - 8 April 1994, which concluded that at the time when Mr Wren and 17 other persons named in the proceedings [whom we shall call, if we may, the employees] were dismissed by the Eastbourne Borough Council:

(a) there was a relevant transfer of that part of the Council's undertaking, in which the employees were engaged, to the appellants within the meaning of the Transfer of Undertakings (Protection etc) Regulations of 1981 ["the Regulations"]; and

(b) in consequence, their contracts of employment were transferred to the appellants by operation of law.

The Decision of the Industrial Tribunal was entered in the Register on 9 May 1994.

This case has a history. With effect from 30 September 1990 the Eastbourne Borough Council ["the Council"] dismissed the 18 employees. The dismissal was effected as a result of the Council contracting-out their cleansing and refuse collection work, in response to their obligations under the Local Government Act 1988 . The appellants successfully bid for the work. The employees were part of a group of 83 employees who were employed within the Cleansing department, which itself was within the Council's Services Department. After the appellants won the contract, they employed 47 of the 83 but did not employ the remaining 36, and, instead, recruited 23 new employees. The 18 employees with whom this case is concerned were amongst the 36.

Their applications for unfair dismissal against the appellants originally came before a differently constituted Industrial Tribunal, which dismissed them on the grounds that there had not been a relevant transfer within the meaning of the Regulations. That Decision was entered in the Register on 23 April 1992. There was an Appeal. The EAT, presided over by the former President, Sir John Wood MC, in a judgment delivered on 30 July 1993, allowed the appeal and remitted the matter back to another Tribunal.

The legal framework

Under Article 189 of the Treaty of Rome the UK Government are under a duty to give effect to Directives, including what is called the Acquired Rights Directive , No. 77/187 ["the Directive"]. It is to be noted, in passing, that the Directive required member states to bring into force laws, regulations and administrative provisions needed to comply with it within two years of its notification, in other words by 16 February 1979. The Regulations were introduced into Parliament and became effective in our domestic law as from 1 February 1982.

Until they were amended, the definition of an `undertaking' to which the Regulations applied, to be found in Regulation 2, was:

"`undertaking' includes any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture ."

The words of limitation, which are underlined, do not appear in the Directive, which refers, simply, to the transfer of an undertaking or business.

Article 169 of the Treaty provides as follows:

"If the Commission considers that a Member State has failed to fulfil an obligation under this Treaty it shall deliver a reasoned opinion on the matter after giving the State concerned an opportunity to submit its observations.

If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice."

In due course, in late 1989, the Commission of the European Communities gave notice to the UK authorities that it was of the opinion that the Regulations did not give effect to the Directive in six respects and invited the UK authorities' observations. One of the alleged failures related to the limitation on the definition of an undertaking to which we have referred. Broadly, the UK authorities indicated disagreement with the Commission's views, in their response in March 1990. In due course, in March 1991, the Commission delivered a reasoned opinion to the effect that the UK Government had failed to fulfil its obligations under the Directive and the Treaty and set a deadline for compliance. Shortly thereafter, the UK Government indicated that their legislation required clarification with regard to three of the matters, including the limitation in the definition of an undertaking. However, the Government did not accept that the legislation was at variance with the Directive. Not satisfied with this response the Commission brought the matter before the European Court of Justice under Article 170. Their application was lodged at the Court Registry on 21 October 1992; Mr Advocate General Van Gerven delivered his opinion on 2 March 1994 and the European Court of Justice delivered its judgment, under Article 171, on 8 June 1994: Commission of the European Communities v UK

[1994] ICR page 664

["the Commission case"].

Meanwhile, Parliament enacted the Trade Union Reform and Employment Rights Act 1993 , and by section 33(2) the definition of an `undertaking' in the Regulations was amended to read:

"`undertaking' includes any trade or business"

and, thus, the [underlined] words of limitation were removed. By paragraph 2(1) of the Trade Union Reform and Employment Rights Act (Commencement No 1 and Transitional Provisions) Order 1993 , made under section 52 of the Act, the Secretary of State for Employment brought section 33 into force on 30 August 1993. Section 50 of the 1993 Act provided for those transitional provisions and savings which are contained in Schedule 9. Paragraph 4 of Schedule 9 provides that none of the amendments to the Regulations, including that which is relevant to this case, shall have effect

"in relation to any transfer of an undertaking before the date on which [section 33] comes into force ..."

Therefore, the amendment to the Regulations does not affect the outcome of this appeal, as the alleged transfer occurred in 1990.

In the light of the arguments presented to us, we will have to refer, extensively, to this Decision of the European Court. At this stage, we may summarise the position in this way:

The fact that the UK Government had amended the law before the Court had delivered its judgment [and before the Advocate General's opinion] did not have any bearing on the matter, as the case had to be decided on the basis of the laws of the Member State at the end of the period laid down in the Commission's reasoned opinion. That was the submission of the Advocate General which, implicitly, must have been accepted by the Court.

The Court noted that according to the Commission

"whose contentions have not been seriously challenged by the United Kingdom, the Regulations of 1981 must be interpreted as not applying to transfers of non-profit making undertakings."

It continued:

"The United Kingdom submits that the Directive cannot apply, as the Commission claims, to transfers of non-profit making undertakings, on the grounds that such undertakings which are not engaged in "economic activities" within the meaning of the EEC Treaty, do not come within its scope."

That argument must be rejected.

The Court has already accepted, at least implicitly, in the context of competition law [and a case is then cited] or social law (see, in fact, for the application of the Directive, the Sophie Redmond Stichtung case [1992] ECR 1-3189; (

[1992] IRLR 366

) that a body might be engaged in economic activities and be regarded as an "undertaking" for the purposes of Community law even though it did not operate with a view to profit.

It follows from those judgments that the fact that an undertaking is engaged in non profit making activities is not in itself sufficient to deprive such activities of their economic character or to remove the undertaking from the scope of the Directive.

Accordingly, the scope of the Directive cannot, as the United Kingdom contends, be limited to undertakings which operate with a view to profit.

It follows that by restricting the application of the national rules transposing the Directive to transfers of profit making undertakings, the United Kingdom has failed to fulfil its obligations under article 1(1) of the Directive."

The Arguments

This case provided the cornerstone which supported Mr Pannick's submissions to us, which were, as usual, as clear as they were compelling, albeit that on this occasion we regard them as misconceived.

His arguments may be summarised as follows:

The European Court of Justice, in the Commission case, held that the Regulations were in conflict with the Directive in that Regulation 2(1) did not apply to an undertaking which did not operate with a view to profit immediately prior to the relevant transfer. In this context, operating with a view to profit involves a commercial concept of trading in order to make a profit for distribution, in whole or in part, to others such as shareholders.

Therefore, none of a local authority's economic activities could be `undertakings' to which the unamended Regulations applied, as a Local Authority did not, and could not lawfully, carry out those activities with a view to profit. The case of Hazell v Hammersmith LBC

[1992] 2 AC 1

was relied upon, in particular the dictum of Lord Templeman at page 31F-G:

"But a local authority is not a trading or currency or commercial operator with no limit on the method or extent of its borrowing or with powers to speculate. The local authority is a public authority dealing with public moneys, exercising powers limited by Schedule 13."

Reliance was also placed on a passage in Bingham LJ's judgment in the same case in the Court of Appeal

[1990] 2 QB 697

at 779G-H:

"Secondly, it was accepted by the banks and Barclays, and in our view rightly so, that local authorities are not empowered to carry on a trade or business of entering into interest rate swaps and related transactions, even if the object is to apply the profits which they hope to earn in reducing their cost of borrowing. Such a trade or business would stand on no different footing from any other trade or business in which a local authority might seek to engage, in the hope of profit. But, in general, local authorities have no implied power to engage in a trade or business for profit. And an intention to apply the profits in reducing the local authority's costs or expenses in a particular way would not render intra vires an activity which would otherwise be ultra vires ."

The Decision of the Industrial Tribunal is in conflict with the European Court's Judgment. The Employment Appeal Tribunal is bound by the European Court's Decision as to the true meaning of Regulation 2(1).

(a) The European Court of Justice `sits at the top of the judicial system' and every domestic court is bound by its Decisions.

(b) The Decisions of the European Court which interpret the Treaty and Directives are part of community law which Parliament adopted under section 2(1) of the European Communities Act 1972 and all domestic law must be construed consistently with such judgments.

(c) One of the Court's functions is to determine, under Article 171, whether a Member State has failed to fulfil an obligation under the Treaty: it can only carry out its duty under that Article if it has the competence to decide the limits and extent of the domestic law of a Member State. Here, its binding decision is that the Regulations did not apply to non-profit making undertakings and it is not open to any domestic court to say otherwise.

(d) In so far as other decisions of superior courts in the United Kingdom appear to conflict with the European Court's Decision they are over-ruled. Thus, if the true ratio decidendi of the decision of the Court of Appeal in Woodcock v The Committee of the Friends School Wigton & Genwise Limited

[1987] IRLR 98

, is that a non-profit making venture is capable of being covered by Regulation 2(1), it has now been over-ruled by the European Court and we are not bound, as we otherwise would have been, by that decision. In fact, it was submitted that Woodcock established no coherent principle nor any statement as to when a non-profit making undertaking could be covered by the Regulations.

If the Industrial Tribunal had applied the right test, namely that referred to in the decision of the European Court of Justice, it would inevitably have held that there had not been a relevant transfer of an undertaking within the meaning of the Regulations. The Tribunal placed reliance on three factors, none of which, either singly or in combination, justified their conclusion:

(a) that the Council had adopted an internal accounting system with a notional rate of return of 5%. This factor did not make the activity of the cleansing department in the nature of a commercial venture; it was simply a product of the Local Government legislation which required that rate to be applied.

(b) that the Council were required to invite tenders for the provision of these services. Again, this was simply a product of legislation.

(c) that the services had previously been performed by a concessionaire between 1983 and 1987. This was irrelevant as the Tribunal were required to look at the matter as at the date of the alleged relevant transfer, at which time the concessionaire had dropped out of the picture and the work was being done by the Council through it own employees.

In an equally able argument, Mr Hand QC on behalf of the applicants submitted that

The European Court's interpretation of our domestic law is not binding on the courts of the United Kingdom; on the contrary we were bound by the Court of Appeal's decision in Woodcock . When the matter came before the EAT in 1993, it said:

"The Court of Appeal has laid down guidance in this connection and stresses that the issue is one of fact. The primary facts must be found. These will no doubt indicate factors - let us call them "positive" or "negative" - which point in one direction or the other. No one factor is conclusive, whether positive or negative. No definition is desirable. All this is made clear in the judgment of May LJ in Woodcock ... "

The Decision of the European Court was per incuriam , because the legal representatives on behalf of the United Kingdom appear not to have argued the matter fully or correctly. The decision of the Court of Appeal in Woodcock was not cited in any part of the proceedings. Further, in the Advocate General's Opinion, it would appear that the representatives implicitly conceded ["this point ... was not contradicted by the United Kingdom"] the Commission's assertion that in Regulation 2(1)

"the term "commercial venture" is interpreted as referring to the investment of capital with a view to making profits and accepting the risk of losses."

That was not the way that Regulation 2(1) had been interpreted by the courts of the United Kingdom.

In any event, since the decision of the House of Lords in Litster v Forth Dry Dock & Engineering Co. Ltd

[1989] ICR 341

it is now clear that our domestic courts are required to construe the Regulations in a manner compatible with the meaning and purpose of the Directive, if necessary by the addition of words. He referred, also, to the well known dictum of Lord Keith in Webb v EMO Air Cargo (UK) Ltd

[1993] ICR 175

at 186 D-E. There were numerous dicta in the European decisions which stressed that the purpose of the Directive was to protect the rights of workers in the event of a change of employer. If the appellants' arguments were correct, the European Court will have compelled domestic courts to take a more narrow view of the ambit of the Regulations than they otherwise would have done. That cannot have been the result the Court intended to achieve, as it would conflict with the general purpose of the Directive.

On the facts, the decision of the Industrial Tribunal cannot be faulted. Following Woodcock , and the guidance given to it by this court in its judgment in July 1993, the Industrial Tribunal considered all the relevant facts and placed stress on the words "in the nature of" in Regulation 2(1).

The Decision

It seems to us clear that the two premises upon which the appellants' arguments are posited, are

first, that the European Court of Justice decided in the Commission case that, on their proper interpretation, the Regulations applied only to undertakings which operate with a view to profit

second, that that decision is binding on this court.

Before dealing with them, we shall first return to the nature of the arguments which were before the European Court of Justice. The position is not entirely clear, without seeing the papers submitted to the Commission and to the Court. However, the following appears to be the position.

In its application to the Court, the Commission submitted that undertakings in the nature of a commercial venture

"according to the interpretation of regulation 2 by United Kingdom courts and tribunals [meant] undertakings in which capital had been invested with a view to making profits and accepting the risk of losses." - page 677 C.

The United Kingdom submitted that its legislation was consistent with the Directive, although the proposed amendment to the regulations "would assist in clarifying the matter". The United Kingdom also submitted that the Directive could not apply to non-profit making undertakings, and doubted the correctness of the Sophie Redmond case; to which the Commission responded that, whilst it was true that the Directive could only apply to entities engaged in `economic activities' it did not follow that such an entity had to be profit making; to which the United Kingdom responded that such an interpretation would go beyond the legal basis on which the Directive was adopted, and made reference to those parts of the Treaty relating to freedom of goods and services which were restricted to profit making activities.

The Advocate General noted that the United Kingdom did not contradict the Commission's assertion that:

"the term "commercial venture" is interpreted as referring to the investment of capital with a view to making profits and accepting the risk of losses."

He went on to note that:

"Undertakings which do not aim to be profit making are unlikely to be regarded as "commercial ventures" even though they may to all intents and purposes operate as "businesses" offering goods or services for remuneration. That definition of "undertaking" in the Regulations ... is, in the Commission's view too restricted in view of the fact that [the] Directive ... applied to all undertakings, even those which do not aim to be profit making. This last point becomes clear from the court's judgment in Dr Sophie Redmond Stichtung v Bartol [1992] IRLR 366, which concerned the transfer of activities of a foundation financed wholly out of public funds."

Having reviewed the United Kingdom's arguments based, first, upon the proper interpretation of Article 100 on which the Directive was founded, and, second, upon an analogy with Articles 58 and 66 (in relation to competition matters), and the case law thereunder, the Advocate General concluded that the scope of the Directive covered all entities which pursued an economic activity within the meaning of Article 2 of the Treaty:

"and not only those which operate with a view to making profit. As the version of regulation 2(1) of the Regulations ... included only the latter undertakings within the expression "undertaking", the United Kingdom has failed in that regard to fulfil its obligations under the Treaty and the Commission's application must be upheld."

These passages seem to us to indicate:

The United Kingdom were maintaining alternative and conflicting arguments:

(a) The Regulations were not inconsistent with the Directive in that they would apply to non-profit making undertakings either because of the words used or because those words would be construed by the courts so as to give effect to decisions of the European Court and to the purpose of the Directive.

(b) If the Regulations did not apply to non-profit making undertakings they did not thereby fail to give effect to the lawful objectives of the Directive which could not lawfully apply to such undertakings.

Second, the interpretation of the Regulations was a question of fact , based upon assertion and denial or admission by the parties to the litigation. Rightly or wrongly, in the end the parties appeared to be at one on this issue.

Both the Advocate General and the Court treated the Sophie Redmond case as the exemplar of the defect in regulation 2(1).

It seems to us that we should not fall into the trap, skilfully opened up for us by Mr Pannick, of treating the European Court's Decision on the interpretation of the UK Regulations as constituting binding authority. It is not the function of the European Court of Justice to interpret English law or to change it by judicial decision. That Court's important function is to interpret the provisions of the Treaty and Directives, inter alia , to enable domestic courts to interpret their own domestic law accordingly. When carrying out its function under Article 171 it is required to ascertain what the relevant provisions of domestic law are; that task is inherently different from interpreting the provisions of the Treaty. In carrying it out the European Court of Justice can only act on the basis of the evidence it receives as to what the Regulations mean. As the Court itself said in Katsikas v Konstantinidis [1992 ECR 1-6577, the scope of national laws and regulations must be assessed `in the light of the interpretation given to them by national courts'. Further, in the Commission case itself, in relation to the second complaint, the Court rejected it because the Commission had

"failed to establish that on 26 May 1991 .... regulation 3 of the Regulations ... had the scope attributed to it by the Commission."

If the Court saw itself as having the right and authority to determine the ambit of English law, there could have been no question of the Commission having to establish the scope of the law. A claim does not fail because a party has failed to establish the scope of the law, unless proof of the scope of the law is a necessary element to a party proving its case. This shows that the scope of English law was regarded by the court as a matter requiring proof; in other words as a matter of fact.

It frequently happens that courts are required to reach conclusions on matters of foreign law; for example, when interpreting a contract whose proper law is other than that of the lex fori . Issues as to what are the relevant provisions of foreign law can only be resolved as a matter of evidence, submission and agreement. Findings made by such a court are findings of fact which do not bind a foreign court. English domestic law is determined by the application by domestic courts of judicial techniques, which do not include the reception of evidence. These two functions are wholly distinct. Mr Pannick's arguments confuse the two.

Our conclusion is that the European Court's decision as to the meaning of the words "in the nature of a commercial undertaking" is not, and was never intended to be, binding upon us or upon any court in the United Kingdom. This conclusion is entirely consistent with section 2 of the European Communities Act to which Mr Pannick referred us. The conclusion which Mr Pannick urged upon us is not only constitutionally unsound but leads to a peculiar result, namely that the European Court was giving a more restricted interpretation to the Regulations than would our national courts, thus defeating the fulfilment of the very purpose for which the Directive had been made. We are not bound by what the representatives on behalf of the UK authorities submitted or conceded our law to be; it is our function to decide what our law is.

We have little difficulty in concluding that an undertaking of the sort involved in the Sophie Redmond case, a charitable drugs relief agency which was funded by the Government, may well not have been covered by the unamended Regulations, because it lacked all the elements of a commercial venture. That is not to say that no charitable work would have been covered: some charities undertake operations which are obviously in the nature of a commercial venture, such as charitable shops. Therefore, we do not say that the decision of the European Court in the Commission case was wrong. Having satisfied itself that the unamended regulations probably did not cover the Sophie Redmond type of situation, the court would have been bound to conclude that the Commission's complaint had been made good because

"... Member States must implement Directives which fully satisfies the requirement of legal certainty and must therefore transpose their terms into national law as binding provisions ...." Steenhorst-Neerings v Bestuur Van De Bedrijfsvereniging Voor DetailHandel, Ambrachten En Huisrouwen

[1994] IRLR 244

at paragraph 32.

The remaining question (see paragraph 34 of Steenhorst ) was whether it could be said that despite its wording, the Regulations would have been consistently applied by English domestic courts to make them compatible with the decision in Sophie Redmond . It would appear, although no reasons have been stated, that the European Court was not prepared to accede to the United Kingdom's submission that the national courts and tribunals

"will in future interpret the concept of an undertaking "in the nature of a commercial venture" in the light of the Directive and the case law of the court."

We do, however, take the view that if the European Court found as a fact that no undertaking which did not operate for profit was covered by the Regulations, it was going too far. We say that for three reasons:

It was made clear in the Court of Appeal in Woodcock that whether an enterprise is entered into with a view to making profit is relevant but not of itself determinative. If it is not determinative, there must be some undertakings not operating for a profit which would have been covered by the unamended Regulations. But the report of that case was not before the European Court.

The importance of giving effect to the meaning and purpose of the Directive, as determined by the European Court of Justice, when domestic courts construe English legislation, has recently been stressed by the House of Lords. What persuaded the European Court to reject the second complaint against the United Kingdom was the decision in Litster , and the Court observed that

"The Commission does not cite any judicial decision which is later than that judgment and incompatible with article 1(1) of the Directive as interpreted by the court."

We have no doubt that great stress can and should be placed on the words " in the nature of ". These words show that an enterprise does not require to be a commercial venture to qualify under the unamended Regulations: it is sufficient if it was "in the nature of" one. The Advocate General thought it "unlikely" that undertakings which do not aim for profit would be regarded as "commercial ventures". It is not clear that he appreciated the importance of the qualifying words " in the nature of ". He also did not have the benefit of seeing what the Court of Appeal said in Woodcock . This failure seems to have carried through to the Court's decision [paragraph 46].

It may well be, as Mr Hand suggested in argument, that the Advocate General and the Court were somewhat sceptical of or confused by the United Kingdom's multi-directional stance: insisting that the Regulations were wide enough to cover non-profit making undertakings, whilst at the same time arguing that the Directive itself did not apply to such entities, but also asserting that the Regulations would be amended, for `clarification'.

It seems to us that we are free to decide this case in the light of Litster , Woodcock and the European cases which interpret the Directive.

There is no doubt that the activities being carried on by the appellants after the transfer would fulfil the definition of an undertaking in the nature of a commercial venture. That is accepted by Mr Pannick. The reason why Mr Pannick says it was not an enterprise in the nature of a commercial venture before the transfer must, therefore, have something to do with the way the enterprise had been run by the Council before the transfer or by reason of the nature and function of a local authority.

Apart from the fact that it is not the function of a local authority to trade for profit, in the sense of making a profit for distribution, in every other sense the Council was carrying on a cleansing business before the transfer and that business was "in the nature of a commercial venture" . The customers are the ratepayers. They do not pay directly for this service, either before or after the transfer. So far as they are concerned, they receive a service, for the provision of which the Council remains statutorily responsible.

At the date of the transfer, those employees of the Council who were engaged on refuse collection and street cleansing were in the Cleansing Department, a sub department of the Borough Services Department which was the Council's direct labour organisation. These arrangements must be seen in the context of local government finances. Such are highly technical and it is not necessary for the purposes of this decision to explore them in detail. In general terms, local authorities have for many years been required to maintain internal accounting procedures which enable the Council and, district auditor, to monitor their performance in terms of value for money. This involves, inter alia , the `charging' to user departments of the cost of the provision of labour from the Council's direct labour department. Statute has required authorities to ensure that such departments make `a rate of return' on the provision of their services to other user departments within the Council, eg the Housing Department or, in this case, the Environmental Services Department. In the run-up to the beginning of each financial year [1 April] budgets are agreed, as a result of spending departments submitting their spending plans to the appropriate committees. Included within the spending plans of the Environmental Services Department would be the cost of the services provided by the Cleansing Department. That cost would include a rate of return or `profit' on the provision of those services, which would include the provision of vehicles, fuel and labour and so on. When the budgets have been approved the Council will then determine its total expenditure and income and the difference between the two will be the amount by way of tax which the Council will need to raise and the tax will then be set. Part of the Council's enterprises included the provision of a street cleaning and refuse collection service. It involved the provision of employees and equipment and it was required to provide those services in a business like manner. From the perspective of the employees engaged on this work, they were employed by the Council to provide these services, and were themselves provided with the vehicles and other equipment needed to carry on this business. Those who were taken on by the appellants were doing the same job on the same vehicles after the transfer, although, no doubt, there would have been a change in employment practices.

This enterprise of the Council has all the hall marks of a commercial venture, except the lack of a power in a Council to make a distributable profit. The more efficiently the work was done by the Council's employees the cheaper the service; the cheaper the service, the lower the tax on the customer. In other words the service was provided to the users who paid for its cost. Therefore, unless an undertaking which does not make a distributable profit cannot be an undertaking in the nature of a commercial venture, this was an undertaking to which the Regulations would surely apply. As

Lord Justice May said in Woodcock :

"For my part although as a general guide I think the fact that a venture or enterprise is entered into with a view to making a profit is a consideration in deciding whether or not it is in the nature of a commercial one, that is only a general guide and I prefer the first impression approach of the Employment Appeal Tribunal to the particular question in issue. I think that it is impossible to define `in the nature of a commercial venture' so as to cover every set of circumstances."

He went on to say that he thought he knew a commercial venture when he saw one. We can see no distinction between a company canteen which is not run at a profit [ Rask ] and the Council's services in this case. A profit motive or intention may often distinguish an enterprise which is in the nature of a commercial venture and one which is not; but not invariably so. If the words of the regulations were:

"an undertaking which is a commercial venture"

that might have been a different matter, but we ask ourselves whether the Council's enterprise was "in the nature of a commercial venture" and the answer is plainly yes. It has every attribute of a commercial venture except for the very special position of a local authority which prevents it from making an overall profit capable of distribution. We agree with the Industrial Tribunal's conclusion and their reasoning. All of the factors they took into account were part of the picture which they were required to look at. None of them was conclusive but all of them were material. We do not accept Mr Pannick's criticism of them. Nor do we find the case of Hazell helpful. There, the Court was concerned with the vires of a local authority. It is not in dispute that a local authority cannot, in general terms, carry on a business for profit, even if it hands over the profit for the benefit of the ratepayers. What is in issue here is whether an activity is in the nature of a commercial venture, which is an entirely different question.

It follows, therefore, that this appeal must be dismissed.

Before we leave the case we should mention two further matters.

In the first place, during the course of the argument we put to Mr Hand the following argument:

Under the European Communities Act 1972 , subordinate legislation is expressly permitted for the purpose of implementing any Community obligation, including the United Kindom's obligations to give effect to Directives. The Regulations were expressed to have been made pursuant to section 2(2) of that Act. If the words of limitation in the definition of an undertaking had the restricted effect contended for, then, to that extent, they were ultra vires and void, because Parliament had not authorised the making of subordinate legislation which did not give effect to the Treaty and Directives.

Mr Hand indicated that he would reserve that argument for another occasion should it appear to him worth arguing.

The second matter relates to the question whether, if the Regulations did have the exclusionary effect contended for by Mr Pannick, the employees would have a remedy against the United Kingdom Government. This is a question which may have to be addressed by the domestic Courts in due time. But we do not have to consider the position now, and decline to say anything on the topic at this stage.