## Facts

- The case concerned Factortame Ltd, a group of Spanish fishermen operating in UK waters.
- The UK government enacted the Merchant Shipping Act 1988, imposing nationality requirements on fishing vessel registration.
- These requirements conflicted with rights under EU law, particularly concerning freedom of establishment and services.
- Factortame Ltd challenged the UK legislation, arguing that it breached directly effective provisions of EU law.
- The House of Lords referred questions to the European Court of Justice (ECJ), adhering to the principle that ECJ rulings are binding on national courts.

## Issues

1. Whether UK courts must set aside national legislation that conflicts with directly effective rights under EU law within the scope of EU policy.
2. Whether the principle of the supremacy of EU law, as recognized by the ECJ, required UK courts to disapply an Act of Parliament.
3. The extent to which Parliament retained sovereignty in the presence of directly enforceable EU legal obligations.

## Decision

- The House of Lords confirmed that national courts must set aside UK legislation that conflicts with directly effective rights derived from the EU Treaties in areas falling within the EU’s competence.
- The Court followed the ECJ's position on EU law supremacy from prior cases such as Costa v ENEL (1964) Case 6/64, implementing the doctrine in UK law.
- The ruling demonstrated that, as long as the UK remained an EU member, its courts were obligated to recognize the precedence of EU law in relevant policy areas.
- The decision led to the suspension and disapplication of sections of the Merchant Shipping Act 1988 that conflicted with EU law.

## Legal Principles

- EU law takes priority over conflicting national law in areas governed by the EU.
- The doctrine of direct effect allows individuals to rely on EU law in national courts.
- National courts are required to set aside domestic legislation that contravenes directly effective EU legal provisions.
- Parliamentary sovereignty is limited in policy areas governed by directly applicable EU law during membership, as long as the European Communities Act 1972 remains in force.
- ECJ rulings on matters of EU law are binding on national courts.

## Conclusion

Factortame (No 2) firmly established the supremacy of EU law over UK legislation in relevant policy fields and demonstrated the enforceability of directly effective EU rights in national courts. The case significantly altered the understanding of parliamentary sovereignty during EU membership and remains a leading authority on the interaction between domestic and supranational legal orders.

R v Secretary of State for Transport, ex p Factortame Ltd (No 2) [1991] 1 AC 603