## Facts

- In 1971, the British government acquired sole ownership of the gas‑turbine‑engine business of an insolvent Rolls Royce Limited and placed it into a new company later renamed **Rolls Royce plc (RR)**.
- Upon that acquisition, employees of the former company became employees of RR on the same terms and conditions as before; **D. S. Doughty** was one such employee.
- RR operated a mandatory retirement policy under which **women were required to retire at 60** and **men at 65**.
- In September 1985, RR notified Doughty that she would be retired on her **sixtieth birthday** in accordance with that policy.
- Doughty complained to the Industrial Tribunal that her compulsory retirement constituted sex discrimination contrary to **Article 5(1) of Council Directive 76/207/EEC** (Equal Treatment Directive), which required equal treatment for men and women in working conditions, including dismissal.
- Domestic law at the time (including the Sex Discrimination Act 1975 framework) did not give an effective remedy for differential retirement ages, so Doughty sought to rely on the directive **directly** against RR.
- The Industrial Tribunal treated as a preliminary matter whether RR could be treated as an **“emanation of the State”**, allowing vertical direct effect against it.
- The tribunal relied on the government’s ownership and influence, including a **memorandum of understanding** requiring RR to pay proper attention to defence needs and to consult the government about major matters such as:
  - reorganizations or strategy changes that could substantially affect defence interests,
  - financing changes,
  - entering new business areas, disposing of significant interests, and launching major new engine projects or developments, and
  - appointing senior executives and setting directors’ remuneration.
- The memorandum also provided that the **government would appoint RR’s directors**.
- The tribunal nevertheless found RR handled labour relations like a private employer (recognising the same unions as before, not treating employees as civil servants, and not providing civil‑service benefits).
- The Industrial Tribunal concluded the directive was sufficiently clear and unconditional and that RR was an emanation of the State; **RR appealed**.

## Issues

1. Whether Rolls Royce plc, though wholly Crown‑owned and subject to substantial government influence, was an **emanation of the State** so that Doughty could rely directly on Directive 76/207/EEC against it.
2. Whether state ownership and shareholder‑type controls over strategy and defence‑related consultation are enough, without a governmental function or public powers, to treat a commercial company as “the State” for vertical direct effect.

## Decision

- The Employment Appeal Tribunal **allowed RR’s appeal**.
- The EAT held that RR was **not an organ or agent of the State** for these purposes, but a **commercial company** with its own separate legal personality.
- As a result, Doughty **could not enforce the directive directly against RR** to overcome the domestic position on retirement ages, and the tribunal’s contrary conclusion was set aside.

## Legal Principles

- A directive may be relied on directly only against the State (and bodies properly treated as part of the State); the key question is whether the defendant is an **organ or agent of the State**.
- **State share ownership, even 100% ownership, is not enough** by itself to make a company part of the State for vertical direct effect.
- The analysis focuses on **what the body does and what powers it has**: whether it is carrying out a governmental/public function and whether it possesses powers beyond those of ordinary private actors.
- Extensive governmental influence through appointments and consultation rights, where the company still trades and manages its workforce as an ordinary commercial employer, points away from State status.

## Conclusion

Rolls Royce plc v. Doughty held that a wholly Crown‑owned company operating as a market‑trading manufacturer, even with significant government influence and defence‑related consultation arrangements, was not an emanation of the State; therefore, Doughty could not rely directly on the Equal Treatment Directive to challenge her compulsory retirement at 60.


Rolls Royce plc v. Doughty, [1988] 1 CMLR 569 (1987)