AS TO THE ADMISSIBILITY OF

Application No. 33298/96

by PINNACLE MEAT PROCESSORS COMPANY and 8 Others

against the United Kingdom

The European Commission of Human Rights (First Chamber) sitting in private on 21 October 1998, the following members being present:

MM M.P. PELLONPÄÄ, President

N. BRATZA

E. BUSUTTIL

A. WEITZEL

C.L. ROZAKIS

Mrs J. LIDDY

MM L. LOUCAIDES

I. BÉKÉS

G. RESS

A. PERENIČ

C. BÃŽRSAN

M. VILA AMIGÓ

Mrs M. HION

Mr R. NICOLINI

Mrs M.F. BUQUICCHIO, Secretary to the Chamber

Having regard to Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;

Having regard to the application introduced on 26 September 1996 by PINNACLE MEAT PROCESSORS COMPANY and 8 Others against the United Kingdom and registered on 2 October 1996 under file No. 33298/96;

Having regard to:

- the reports provided for in Rule 47 of the Rules of Procedure of the Commission;

- the observations submitted by the respondent Government on 18 November 1997 and the observations in reply submitted by the applicants on 9 March 1998;

Having deliberated;

Decides as follows:

THE FACTS

The applicants were each involved in the business of deboning cattle heads. A complete list of the applicants is annexed to the present decision, together with a summary of the applicants' valuations of their businesses in March 1996. The businesses of the first eight applicants were situated in England. The ninth applicant's business was situated in Northern Ireland. The applicants are all represented by Messrs. Sherwin Oliver, solicitors practising in Portsmouth. The facts of the case, as submitted by the parties, may be summarised as follows.

A. The specific circumstances of the case

The applicants' businesses involved the removal and processing of meat from the heads of cattle. Cattle head deboners would purchase heads from abattoirs and then extract meat products which were sold on to retailers. The applicants supplied this meat to national and international manufacturers of various food products such as beefburgers , sausages, mince and meat spreads.

Cattle head deboning is a specialised and extremely small sector of the beef processing industry, typically carried out by small, family run businesses. Each of the applicants is one such small cattle head deboning business.

Controls over the conduct of the head deboning business were strict, and had increased over the years.

Each of the applicants invested substantially in specialised plant and premises in order to obtain licences to continue their businesses.

On 20 March 1996, the Spongiform Encephalopathy Advisory Committee ("SEAC") reported to the Government on its latest findings in respect of the spread and causes of Bovine Spongiform Encephalopathy ("BSE").  As a result of SEAC's recommendations, on 28 March 1996, the Government introduced the Specified Bovine Material Order 1996 in England and Wales and the Specified Bovine Material (Treatment and Disposal) Regulations (Northern Ireland) 1996 in Northern Ireland (the "1996 Orders") which took effect on 29 March 1996. The 1996 Orders make it an offence to sell any "specified bovine material" for human or animal consumption, or to use it in the preparation of food for human or animal consumption. The entire head of cattle is defined in the 1996 Orders as "specified bovine material".

The applicants' businesses, which involved buying cattle heads from abattoirs and then processing head meat, thus became illegal and all their cattle head deboning work ceased immediately.

By a letter dated 8 May 1996, the applicants' request for compensation other than under the Beef Stock Transfer Scheme was refused.  The letter provided "the purpose of the financial assistance which has been made available is to provide market support to keep the essential links in the beef supply chain operating while companies adjust to the changed market circumstances.  It is not our policy to use public funds to compensate businesses for losses incurred. ... we have therefore concluded that we cannot offer any financial assistance to [the applicants] other than the stock transfer scheme ..."

Six out of the nine applicants have ceased trading entirely. The other applicants continue in business by attempting to diversify (for example, pig head deboning ) and by investing more funds.

Six of the applicants received payments under the Beef Stocks Transfer Scheme - which provided for compensation at the rate of 65% of the value of unsaleable stocks held on 9 April 1996 - to a total value of over £430,000.             

A debate was held in the House of Commons on 13 November 1996 at which various members of parliament raised their concerns about the plight of the head deboning industry. The Minister of State for the Ministry of Agriculture, Fisheries and Food stated inter alia that:

"It has ... been a long-standing matter of settled public policy that no Government are under any obligation to pay compensation to a business for any loss of opportunity of carrying on that business which may arise from Parliament's properly considered legislative decisions."

B. Relevant domestic law

In 1988 BSE was declared a notifiable disease and animals suffering from BSE had to be destroyed in their entirety.  From November 1989 (January 1990 in Scotland and Northern Ireland), the brains and spinal cords of all bovine animals, including those which showed no clinical signs of BSE, had to be removed by slaughterhouses and disposed of in such a way as to ensure that they were excluded from the human food chain.

In 1992 the Government introduced the Fresh Meat (Hygiene and Inspection) Regulations (the "1992 Regulations") which came into force on 1 January 1993 and gave effect in part to Council Directive 91/497/EEC amending and updating Council Directive 64/433/EEC.  The 1992 Regulations introduced a requirement for the applicants to obtain a licence in order to continue carrying on their businesses as cutting premises.  The 1992 Regulations were subsequently replaced by the Fresh Meat (Hygiene and Inspection) Regulations 1995 which set out very similar conditions for obtaining the grant of a licence .

On 15 August 1995, the Specified Bovine Offal Order 1995 came into force and banned the use of bovine vertebral column for mechanically recovered meat.  No compensation was available for any loss suffered as a result of the ban.

The Specified Bovine Material Order 1996 (which took effect as of 29 March 1996) made it an offence to sell any "specified bovine material" for human or animal consumption or to use it in the preparation of food for human or animal consumption.  In Northern Ireland, the relevant enactment is the Specified Bovine Material (Treatment and Disposal) Regulations (Northern Ireland) 1996, which are almost identical to the 1996 Order.

The Government provided financial support pursuant to the Slaughtering Industry (Emergency Aid) Scheme 1996, a scheme which provided, inter alia , for payments to be made to operators of "qualifying cutting premises" in respect of "eligible bovine products" owned by them on 9 April 1996.  Payment was made under the Beef Stocks Transfer Scheme element of the Slaughtering Industry (Emergency Aid) Scheme at a rate of 65% of the pre-crisis value of the stocks.

Further grant aid was available to farmers through the "Over 30 month slaughter scheme" which compensated farmers for the slaughter of cattle over 30 months in age, the "Calf Processing Aid Scheme" and by additional EU aid (£10 million).  Payments were also made to slaughterhouses (£30 million), and the Government purchased unsold stocks of beef in April 1996 at 65% of defined pre-crisis market values under the Beef Stocks Transfer Scheme (costing £80 million). Renderers , whose business involves the removal and disposal of all the non edible parts of the cattle carcass, suffered due to the prohibition on the use of mammalian meat and bone meal in animal feed.  The Government provided transitional aid to this industry (up to £118 million).

COMPLAINTS

The applicants complain that they have been deprived of the peaceful enjoyment of their property and consequently their livelihood. The applicants do not deny that the Government pursued a legitimate objective in enacting the 1996 Orders but contend that, in the absence of compensation or other aid for the loss of their livelihood, the 1996 Orders placed an excessive burden on them, which amounts to a violation of Article 1 of Protocol No. 1 of the Convention. The applicants further complain under Article 14 of the Convention that there was an arbitrary and discriminatory failure to compensate their financial losses, in contrast with other sectors of the beef industry that were given aid.

PROCEEDINGS BEFORE THE COMMISSION

The application was introduced on 26 September 1996 and registered on

2 October 1996.

On 2 July 1997 the Commission decided to communicate the application.

The Government's written observations were submitted on 18 November 1997, after an extension of the time-limit fixed for that purpose.  The applicants replied on

9 March 1998, also after an extension of the time-limit.

THE LAW

1. The applicants complain that they have been deprived of the peaceful enjoyment of their property and consequently of their livelihood.  They contend that they had a legitimate expectation to be able to carry on their businesses and that, in the absence of compensation, the 1996 Orders placed an excessive burden on them which amounts to a violation of Article 1 of Protocol No. 1 to the Convention.

Article 1 of Protocol No. 1 provides as follows:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

The Government raise as a preliminary point that the applicants have failed to exhaust domestic remedies as required by Article 26 of the Convention.  They assert that the applicants could have sought judicial review in respect of their exclusion from financial support before the United Kingdom courts and refer to a recent case in the United Kingdom (R. v. Minister of Agriculture, Fisheries and Food and another ex p. First City Trading Ltd. and others [1997] EuLR 195) where the applicants alleged that their non-eligibility for support payments was in breach of the principle of equal treatment within the scope of the rights guaranteed by Community law.  The applicants were meat exporters who had not received compensation from the Government when the export of British beef was banned whereas slaughterers (who in some cases also happened to be exporters) were compensated.

The applicants in the present case note that the judge in the First City Trading case found that the meat exporters' claims fell outside the scope of Community law and was therefore unsuccessful.  The applicants therefore contend that any attempt to address a breach of Article 1 of Protocol No. 1 or Article 14 of the Convention before the United Kingdom courts would be unsuccessful whether the applicants tried to found a claim under Community law or pursuant to the Convention.

The Commission recalls that under Article 26 of the Convention, normal recourse should be had by an applicant to remedies which are available and sufficient to afford redress in respect of the breaches alleged.  The existence of the remedies in question must be sufficiently certain, both in theory and in practice, although there is no obligation to have recourse to remedies which are inadequate or ineffective.  In the first place, it is for the Government claiming non-exhaustion to satisfy the Convention organs that the remedy was effective, and thereafter for the applicant to establish that the remedy was exhausted or that it was for some reason inadequate and ineffective, or that there existed special circumstances absolving him or her from the requirement (see Eur. Court HR, Akdivar and others v. Turkey judgment of 16 September 1996, Reports 1996-IV, pp. 1210-1211, paras. 65-69).

The Government's contention in the present case is that the applicants could and should have made an application similar to that made by the applicants in the First City Trading case.  They therefore contend, in effect, that the applicants should have challenged, by way of judicial review, the compensation schemes which provided for compensation for certain groups affected by the 1996 Order, but not for the applicants.

It is clear to the Commission that it was not open to the applicants in the present case to challenge the compensation schemes on the basis of English administrative law, and the Government do not suggest otherwise.  The applicants in First City Trading, however, based their claims on Community law, that is, they claimed that community principles of equal treatment should apply to them, and it is such an avenue that the Government say should have been pursued.

Community law is part of domestic law in the United Kingdom.  It follows that, to the extent that Community law provides a remedy which is available in both theory and practice and which is capable of providing redress in respect of Convention complaints, Article 26 of the Convention requires such a remedy to be pursued.

In the present case, however, the case of First City Trading does no more than confirm the applicants' contention that no such remedy existed: the judge in First City Trading found that there was no Community aspect to the Beef Stocks Transfer Scheme (that is, although a Commission decision had prohibited the export of certain beef and beef products, the compensation scheme was a purely domestic matter) such that the Community principle of equal treatment did not apply; but that in any event the difference in treatment of exporters who also slaughtered and those who did not was justified.  The Commission notes that the Government do not contend that it was, in practical terms, open to the applicants to challenge the compensation schemes.  Rather, they claim that as the First City Trading applicants brought an application (which failed on all heads), the applicants should do likewise.

The Commission finds that the Government have not established that an application for judicial review of the compensation schemes for losses occasioned by the 1996 Order would have provided an effective remedy within the meaning of Article 26 of the Convention.

The Government note that the applicants do not challenge the 1996 Orders as such, but merely claim that the financial support available to them was limited to the moneys paid under the Beef Stocks Transfer Scheme.  They consider that the applicants' possessions are considerably less extensive than the applicants claim, as many of the "possessions" are no more than future expectations.  The Government take the view that the 1996 Orders did not amount to a deprivation of possessions, but that it was either a control of use or that it falls within the residual category in the first sentence of Article 1 of Protocol No. 1.  The Government say that it is not possible to transfer the European Court's statements on the importance of compensation for deprivations of possessions to the present case, where there has been no deprivation.  They add that the Government were not acting as an economic operator in passing the 1996 Orders, but were responding to scientific advice which had rendered the measures inevitable.  They also add that the applicants must have been aware of the possible risks inherent in handling bovine heads.

The applicants consider that, as they had made extensive investments in their businesses, and had obtained necessary approvals and licences , there was an implied representation that they would be able to carry on their businesses, subject to the Government's right to take measures in the public interest and without subjecting the applicants to any excessive burdens.  They claim that the prohibition on the use of bovine heads without any compensation was disproportionate and excessive, however the interference is labelled . 

Article 1 of Protocol No. 1 guarantees in substance the right of property and comprises three distinct rules.  The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property.  The second rule, in the second sentence of the same paragraph, covers deprivation of possessions and subjects it to certain conditions. The third, contained in the second paragraph, recognises that the Contracting States are entitled, amongst other things, to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

However, the rules are not "distinct" in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property.  They must therefore be construed in the light of the general principle laid down in the first rule (see, for example, Eur. Court HR, Air Canada v. the United Kingdom judgment of 5 May 1995, Series A no. 316-A, p. 15, paras. 29, 30).

The Commission will first consider the extent to which the applicants' "possessions" were affected by the 1996 Order.

The applicants' businesses in March 1996 comprised their stock at that time, the assets of the businesses, and the goodwill, or the "present value of the future income stream which the company can be expected to derive".

The Commission notes that in respect of  "eligible bovine products" owned by the applicants on 9 April 1996, compensation was available under the Beef Stocks Transfer Scheme element of the Slaughtering Industry (Emergency Aid) Scheme at a rate of 65% of the pre-crisis value of the stocks.  As the Government submit, six of the applicants received payments under the scheme to a total value of over £430,000.00.  Thus in respect of this unsold stock, which was rendered unsaleable by the 1996 Order, compensation was received.

The values of the assets owned by the applicants at the date of the 1996 Order are set out in the valuation of their businesses provided by their accountants.  These assets comprised in part items such as premises, motor vehicles, office furniture and the like, whose value was largely independent of the nature of the business and whose values are unlikely to have been substantially affected by the 1996 Orders.

The assets included in the heading of "net assets" will also have included specialised plant and tools.  The applicants claim that their premises were modified between 1992 and 1995 at a cost of £20,000 to £400,000 in order to comply with MAFF requirements.  These modifications included the provision of new receptions, unloading bays and sterilising facilities; A frames for the storage of cattle heads; new floors and ceilings; new recording thermometers; new ventilated hygiene areas; staff amenity areas and showers, and the construction of chemical stores.  The applicants also claim that the 1996 Order effectively revoked the applicants' licences under the 1992 Regulations and the Specified Bovine Offal Order, leaving the applicants with specialised plant and premises which it is difficult or impossible to use for other purposes.  They also assert that staff would have to be retrained before other work could be considered.  The Government claim that the equipment used for cattle head deboning consisted largely of items such as clamps, cleavers, knives, vacuum pumps and sterilisers , which have many other possible uses, and deny that any licences which the applicants had were revoked.  They note that the applicants' licences were licences to operate cutting premises, and not specifically head deboning licences .   The Government also doubt whether extensive staff retraining was required before other operations could be undertaken.

The Commission is not able, on the papers before it, to determine the precise nature of the impact of the 1996 Order on the applicants' specialised plant and tools.  It cannot, however, accept that the applicants' investments in their business over the years preceding the Order correspond to their loss: most of the investments specifically mentioned are not related directly to head deboning , and it would, in any event, be unusual to see the cost of investments over a period of years reflected directly in the value of a business at a particular time.  Moreover, at least some of the specialised plant and tools will be useable in the context of other meat operations.

The third head of valuation of the applicants' businesses is the goodwill they had when the 1996 Order affected the businesses.  The applicants' valuation speaks of the "present value of the future income stream".

The Commission recalls that it has in the past held that goodwill may be an element in the valuation of a professional practice (No. 10438/83, Batelaan and Huiges v. the Netherlands, Dec. 3.10.84, D.R. 41, p. 170).  On the other hand, future income itself is only a "possession" once it has been earned, or an enforceable claim to it exists (No. 10426/83, Pudas v. Sweden, Dec. 2.12.84, D.R. 40, p. 234).  In the case of Pressos Compania Naviera S.A. and others v. Belgium, the European Court of Human Rights accepted that, in the circumstances of that case, a claim in tort was a possession within the meaning of Article 1 of Protocol No. 1, even before it had been determined by the courts ( Pressos Compania Naviera S.A. and others v. Belgium judgment of 20 November 1995, Series A no. 332, p. 21, para. 31).

The applicants' valuations of their businesses include substantial elements represented by future income, on the basis inter alia that the applicants were to sell their businesses to a willing buyer and that the state of the market, level of values and other circumstances were the same as on the date of valuation.  The Commission notes that by the entry into force of the 1996 Order on 29 March 1996, a number of factors were present which must have had a considerable impact on the market for beef meat in general and head meat in particular:

- The Scientific Veterinary Committee of the European Commission, in its report of 11 July 1994 (submitted by the Government), based its conclusions on the theoretical possibility that BSE could be transmitted to man;

- The World Health Organisation , reporting in May 1995 on public health issues related to human and animal transmissible spongiform encephalopathies , concluded that all mammals, including humans, should be regarded as being potentially susceptible to BSE if sufficiently exposed;

- the Specified Bovine Offal Order 1995 banned the use of bovine vertebral column for mechanically recovered meat;

- the statements by the Spongiform Encephalopathy Advisory Committee of 20 March 1996 and 24 March 1996, which included the recommendation that the whole head of animals over 6 months of age (except for the tongue) should be treated as specified bovine offal.

The Commission thus considers that whilst the applicants' businesses were affected by the 1996 Orders, it cannot accept the applicants' contentions as to the extent of their losses as the market for those businesses must have been seriously depressed by the state of the beef market in general and the offal market in particular.

As to a Convention analysis of the effect of the 1996 Orders on the applicants' possessions, the Commission notes that there has been no formal expropriation of any assets of the applicants, whether in favour of the Government or in favour of a third party.  Whilst it is possible that in certain circumstances there may be a de facto expropriation of possessions even without any formal alienation, on the ground that property has become wholly unusable (see, for example, Eur. Court HR, Papamichalopoulos and others v. Greece judgment of 24 June 1993, Series A no. 260-B, p. 70, paras 43-45), the present application does not disclose such a case.  The interference with the applicants' possessions is more akin to that in the case of Tre Traktörer (Eur. Court HR, Tre Traktörer AB v. Sweden judgment of 7 July 1989, Series A no. 159), in which the European Court assessed the loss of a restaurant business consequent on withdrawal of a drinks licence as a control of use rather than as a deprivation of possessions.  The Commission accepts that there is no question in the present case of the applicants' having acted unlawfully, or in breach of the terms of a licence , but the 1996 Orders were nevertheless directed at controlling the use of specified bovine material, and the loss of business suffered by the applicants must be seen as resulting from the restrictions on the use of specified bovine material, rather than as any form of de facto expropriation.  The interference with the applicants' possessions was thus a "control of use" rather than a "deprivation of possessions".

As to that "control of use", the Commission recalls that the aim of Article 1 of Protocol No. 1 is to achieve a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights, and that this concern to achieve a balance applies also to the second paragraph of Article 1 of the Protocol.  There must therefore be a reasonable relationship of proportionality between the means employed and the aim pursued (see the above-mentioned Air Canada v. the United Kingdom judgment, p. 16, para. 36).

The aim pursued by the 1996 Orders was, as expressed by the Government, to protect "the populace against a potentially fatal disease of unknown proportions".  The Orders were clearly pursuing a general interest of the first importance.

Against this major aim must be set the hardship suffered by the applicants, and in this connection the Commission again notes that there is no agreement between the parties as to the impact of the 1996 Orders on the applicants' material assets.  However, as mentioned above, some of the assets were items such as premises and motor vehicles whose value was largely independent of the nature of the business.  At least some of the specialised plant and tools were capable of being used in the context of other meat operations.

Further, the Commission notes that, although the goodwill elements of the applicants' businesses were real in the sense that they could be valued and, if the applicants had attempted to sell their businesses in early March 1996 they may well have found a purchaser for them - even if not at the figures in the valuation - they were nevertheless possessions whose value was always likely to fluctuate with the state of the market.  Any purchase of the goodwill of the business would depend on a number of factors - inter alia the relationship between the vendor and the purchaser, the valuation put on the other assets, the state of scientific knowledge about BSE and so on.

Finally, the Commission must assess whether, taken overall, the applicants can be said to have suffered an "individual and excessive burden" (see the James and others v. the United Kingdom judgment of 21 February 1986, Series A no. 98, p. 34, para. 50 with further references).

Whilst it is true that some of the applicants have now ceased their businesses as cattle head deboners , the Commission notes that they remain owners of all their tangible assets, and that those assets can either be used in new or related businesses, or they can be sold.  Further, in respect of eligible beef stocks held on 9 April 1996, the applicants have in fact received compensation totalling over £430,000.00.

Given these circumstances, the Commission does not accept that, overall, the applicants can be said to have suffered an excessive burden.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention.

2. The applicants also complain that they have suffered discrimination as against comparable sectors of the industry and allege a violation of Article 14 of the Convention in conjunction with Article 1 of Protocol No. 1.  They consider that the failure to compensate them for their loss applies specifically to one branch of the beef industry alone, and that there was no possible legitimate aim for refusing compensation to one part of the industry, and that there was no relationship of proportionality between the means employed and the aim pursued.

Article 14 of the Convention provides as follows:

"The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour , language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status."

The Government do not accept that the applicants are in analogous situations to farmers, slaughterers or renderers since each of those categories constitutes an essential link in the beef supply chain, whereas the cattle head industry - and other sectors of the industry such as livestock auctioneers, pet food manufacturers, beef exporters and others - were not.  In any event, the Government consider that the different treatment of essential and non-essential links in the beef supply chain is justified as it was vital for the survival of the beef industry to support the former, but not the latter.  Further, the applicants benefitted from the Beef Stocks Transfer Scheme in the same way as other categories.

The applicants disagree.  They consider that deboners are in an equivalent position to farmers as their business, like that of farmers, requires investment and expertise to be built up over many years, and cannot be rapidly changed.  Further, they, like farmers, were affected immediately by the relevant prohibitions.  The applicants accept that some of them received modest one-off payments under the Beef Stocks Transfer Scheme, but point out that farmers could, and did, continue to purchase and raise cattle in respect of which they would receive compensation once the animals reached the age.  Slaughterers, too, received extensive payments under the Slaughtering Industry (Emergency Aid) Scheme 1996.  The applicants also point out that the payments to others were not based on the need of a particular operator, but were purely compensatory, and not dependent on continued operation.

The Commission recalls that Article 14 affords protection against discrimination, that is treating differently, without an objective and reasonable justification, persons in "relevantly" similar situations.  For a claim of violation of this Article to succeed, it has therefore to be established, inter alia , that the situation of the alleged victim can be considered similar to that of persons who have been better treated (see Eur. Court HR, Fredin v. Sweden judgment of 18 February 1991, Series A no. 192, p. 19, para. 60).  Further, a difference of treatment is discriminatory if it "has no objective and reasonable justification", that is if it does not pursue a "legitimate aim" or if there is not a "reasonable relationship of proportionality between the means employed and the aim sought to be realised " (see Eur. Court HR, Gaygusuz v. Austria judgment of 16 September 1996, Reports 1996-IV, p. 1129).

The 1996 Orders did not apply only to the applicants, but affected all those involved in the processing of specified bovine material.  The Commission will therefore assume that the applicants were in the same position as others in the industry who were affected by the 1996 Orders, and will consider whether the exclusion of the applicants had an "objective and reasonable justification".

The Commission first notes that the Convention does not provide for an automatic right to compensation for the consequences of legislation, and recalls that it has just rejected the applicants' contentions that the failure to provide compensation for the impact of the 1996 Orders on their businesses violated Article 1 of Protocol No. 1.

The Commission next notes that - apart from the Beef Stocks Transfer Scheme, under which the applicants were eligible for compensation for stocks of beef unsold on 9 April 1996 - compensation was limited to those parts of the industry which formed essential links in the beef supply chain, such as farmers, slaughterers and renderers .

The Commission accepts that, in assessing which sectors of the beef industry should receive compensation for the effects of the 1996 Orders, the Government decided to limit compensation to those sectors of the industry whose demise would cause considerable general problems in the economy as a whole.  However, in the absence of a right to compensation, the limitation of compensation to essential parts of the industry cannot be said to be arbitrary or to lack an "objective and reasonable justification".

It follows that this part of the application is also manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention. 

For these reasons, the Commission, by a majority,

DECLARES THE APPLICATION INADMISSIBLE.

  M.F. BUQUICCHIO    M.P. PELLONPÄÄ

     Secretary President

to the First Chamber of the First Chamber

A N N E X E

The first applicant, Pinnacle Meat Processors Company Ltd , is a company registered in England and Wales.  Its registered office is in Gosport , Hampshire.

The second applicant, Mr. H.J. Wilson, is a British citizen and a sole trader.  He lives in Harrogate , and the business operates in Boston Spa, Yorkshire.

The third applicant, Touchmead Ltd , is a company registered in England and Wales.  Its registered office is in Amesbury , Wiltshire.

The fourth applicant, Mr. M.C. Twells , is a British citizen and the sole proprietor of T & D Meats, formerly a partnership.  The business is based in Portsmouth, Hampshire.

The fifth applicant, Headland Meats, is a partnership between Messrs. J. Beverly, G. Hulme , S.T. Hough and G. Beverly.  The individuals are all British citizens, and the business is based in Manchester.

The sixth applicant, Streeters Wholesale Meats, is a partnership between Messrs. N. Streeter and T. Streeter and Ms. T. Dryden .  The individuals are all British citizens and the business is based in Bagshot , Surrey.

The seventh applicant, F.D. Hughes (Liverpool) Ltd , is a company registered in England and Wales.  Its registered office is in Liverpool.

The eighth applicant, A.J. & J.A. Cattermole Ltd , is a company registered in England and Wales.  Its registered office is in Coventry.

The ninth applicant, Turkington Meats, is a partnership between Mr. J. Turkington and Ms. B. Turkington .  The individuals are both British citizens and the business is based in Porterdown , County Armagh , in Northern Ireland.

* * *

Messrs Kidsons Impey's Report of 23 September 1996 ("the Report"), prepared for the Association of Cattle Head Deboners for the purposes of the present application, gave a valuation of the applicant businesses on 28 March 1996, the last day on which the head deboning industry was permitted to trade normally before the entry into force of the 1996 Orders.  The valuation is of the open market value of the business, meaning the best price which could be expected assuming a willing seller, a reasonable time for marketing, a stable market and no special interest on the part of any purchaser.

In their 74 page Report (plus appendices), Messrs Kidson Impey give two relevant methods of valuing the businesses: on an assets basis, and on an earnings basis.  The assets basis takes into account the net assets in the businesses' accounts.  The earnings basis involves taking as the value of a company "the present value of the future income stream which the company can be expected to derive".  Two unknowns have to be estimated for the earnings basis; the future profits of the business, and the price/earnings ratio which a purchaser would regard as appropriate for capitalisation (that is, the return which a purchaser would expect on his investment: broadly, the greater the risk involved, the higher the return would need to be).

The first applicant, Pinnacle Meat Processors Company Ltd

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £128,665.  On the earnings basis, the Report estimates future earnings as £220,000 pa, and puts the value of the company at £1,300,000.

The second applicant, Mr. H.J. Wilson

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £67,108.  A freehold property necessary for the business was valued in the accounts at £38,510, but had a net worth of some £120,000.  On the earnings basis, the Report estimates future earnings as £51,000 pa, and puts the value of the business at £371,250.

The third applicant, Touchmead Ltd

On the assets basis, on the basis of the last financial statements and including the assets of a linked company, the Report notes net assets of £251,570.  On the earnings basis, the Report estimates future earnings as £300,000 pa, and puts the value of the business at £2,100,000.

The fourth applicant, Mr. M.C. Twells

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £52,212.  On the earnings basis, the Report estimates future earnings as £95,000 pa, and puts the value of the business at £522,500.

The fifth applicant, Headland Meats

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £458,656.  On the earnings basis, the Report estimates future earnings as £250,000 pa, and puts the value of the business at £1,750,000.

The sixth applicant, Streeters Wholesale Meats

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £59,282.  On the earnings basis, the Report estimates future earnings as £110,000 pa, and puts the value of the business at £660,000.

The seventh applicant, F.D. Hughes (Liverpool) Ltd

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £7,711.  On the earnings basis, the Report estimates future earnings as £30,000 pa, and puts the value of the business at £150,000.

The eighth applicant, A.J. and J.A. Cattermole Ltd

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £77,000.  On the earnings basis, the Report estimates future earnings as £275,000 pa, and puts the value of the business at £1,650,000.

The ninth applicant, Turkington Meats

On the assets basis, on the basis of the last financial statements, the Report notes net assets of £312,218.  On the earnings basis, the Report estimates future earnings as £75,000 pa, and puts the value of the business at £375,000.