Background 
The fines were introduced under Part II of the Immigration and Asylum Act 1999 to deter those intentionally or negligently allowing clandestine entrants into the UK. Those responsible (generally the owner, hirer or driver of the vehicle) found themselves liable unless they could establish (1) that they were acting under duress or (2) that they had neither actual nor constructive knowledge of the entrant and they had an effective system for preventing the carriage of clandestine entrants which was operating properly at the time. Once a penalty notice was issued, the vehicle could be detained and would be released only if satisfactory security had been tendered, or there was no real risk of the penalty not being paid, or there was a real doubt as to whether the penalty was payable and the applicant had a compelling need to have the vehicle released.

Article 6 of the Convention provides that everyone is entitled to a fair and public hearing in the determination of their civil rights and obligations or of any criminal charge. In the case of criminal charges, everyone is presumed innocent until proved guilty according to law (Article 6(2)) and, under Article 6(3), they have certain minimum rights (such as being informed of the charges, having time for the preparation of a defence etc). Article 1 provides that every person is entitled to the peaceful enjoyment of his possessions and no one shall be deprived of them except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

At first instance the High Court declared the scheme incompatible with Articles 6 and 1 because the penalty involved the determination of a "criminal charge" and failed to meet the procedural requirements of Article 6(1), (2) and (3). It also breached Article 1 because the provisions for the detention of vehicles constituted an unjustifiable infringement of the right to property.

Judgment
Two of the three appeal judges upheld the High Court’s decision. Whilst it was recognised that firm action of some kind was required to combat the acute problem of illegal immigration, the question to ask was "is the scheme not merely harsh but plainly unfair so that, however effectively that unfairness may assist in achieving the social goal, it simply cannot be permitted?"

LJJ Brown and Parker found that the scheme imposed a criminal rather than a civil sanction. This brought into play the specific provisions of Article 6 regarding criminal charges, in particular the presumption that the individual is innocent until proved guilty. The terms of the scheme (whereby it was for the defendant to show they had no knowledge of the entrant and were operating an effective system to prevent such entrants) reversed this presumption.

This factor alone was not necessarily unfair, but looked at in combination with the vehicle detention provisions and the inflexibility of the fines, it placed an immense burden on carriers. It was not right to impose so high a fixed penalty without the possibility of mitigation. Even if the liability was civil and not criminal, the penalty far exceeded what any individual should reasonably be required to sacrifice in the interests of achieving improved immigration control.

Lord Justice Laws, however, dissented on the grounds that the scheme imposed a civil liability and so Articles 6(2) and (3) had no direct application to the situation.

The other issue was whether the scheme breached Articles 28 and 49 of the European Treaty concerning the freedom to trade. On this point, all three judges were in agreement. The fact that the scheme may have persuaded some hauliers to reduce services to the UK was too indirect, remote and uncertain an outcome to constitute restrictions on the free movement of services or imports within the meaning of Articles 28 and 49.