R (Factortame Ltd) v Secretary of State for Transport was a judicial review case taken against the United Kingdom government by a company of Spanish fishermen who claimed that the United Kingdom had breached European Union law (then Community Law) by requiring ships to have a majority of British owners if they were to be registered in the UK. The case produced a number of significant judgements on British constitutional law, and was the first time that courts held that they had power to restrain the application of an Act of Parliament pending trial and ultimately to disapply that Act when it was found to be contrary to EU law.

The litigation was lengthy, and is typically divided into five main stages:

The EU's Common Fisheries Policy, which began in 1970, aimed at creating a common market for fisheries products by providing for free access to the waters of all member states and introducing structural funds to ensure modernisation of the sector. In 1976 it was agreed that, as from 1 January the following year, member states would extend their exclusive economic zone, which included the limit of their fishing zones, to a distance 200 nautical miles (370 km) from their coastlines. In 1980 the EU concluded a fisheries agreement with Spain, which did not become a member of the EU until 1985, which gave the latter (which had the largest fishing fleet in Europe) limited rights to fish in the waters of the member states. In 1983 concerns over the effect that equality of access might have on fishing stocks led to the introduction of certain controls, notably the concept of "total allowable catches" which set maximum quotas of fish which could be caught by each member state, and the British Fishing Boats Act 1983 (BFBA). In 1985, with Spanish accession, everything changed and the BFBA no longer applied to the Spanish fishermen.

From 1980, as seen earlier, Galician fishermen began to enter the UK fishing market by taking advantage of easy fishing vessel registration requirements contained in the Merchant Shipping Act 1894. (57 & 58 Vict. c. 60) Although the 1894 act prohibited ownership of vessels by non-UK nationals, UK-domiciled companies were allowed registration as the owners. Amongst the early beneficiaries of the 1894 act was Factortame Limited, a company whose directors were Joseph J L Couceiro, John A Couceiro and Ken L Couceiro, all British nationals with Spanish ancestry resident and domiciled in the United Kingdom. The company, together with 96 others whose directors and shareholders were mostly Spanish nationals, re-registered 53 vessels which had formerly flown the Spanish flag as British fishing vessels under the 1894 Act. They also acquired 42 existing British vessels with a view to using them in the fishing zone. Most of these vessels landed their catches in Spain, but as the fish were caught in UK waters, they counted against the UK fishing quota, a practice known as "quota hopping".

In order to put an end to this practice, the British Government enacted a series of measures which proved largely ineffective. In two cases the High Court of Justice of England and Wales asked preliminary questions to ECJ; based on which both cases were lost by HMG – see Agegate (C-3/87, ECLI:EU:C:1989:650) and Jaderow (C-216/87, ECLI:EU:C:1989:651). In 1988 the Merchant Shipping Act 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations were introduced as a result, to replace the system of registration contained in the 1894 Act with a new system under which a vessel could only be registered if it had "a genuine and substantial connection" with the UK. For this to be the case, three conditions had to be fulfilled: (i) the vessel must be British-owned; (ii) the vessel had to be managed and its operations had to be directed and controlled from the UK; and (iii) any charterer, manager or operator had to be a qualified person or company. A "qualified person or company" was a person who was a British citizen resident and domiciled in the UK or a company which was incorporated in the UK and had its principal place of business there having at least 75% of its shares owned by, and at least 75% of its directors being, "qualified persons".

As from 31 March 1989, fishing vessel registrations under the 1894 Act would lapse and the owners would be required to re-register under the 1988 Act. None of Factortame's vessels could satisfy the new requirements and an action for judicial review was brought by its owners in a divisional court of the High Court in December 1988.

Factortame Ltd sought, first, a preliminary injunction declaring that the offending part of the 1988 Act could not be applied to them on the grounds that such application would be contrary to directly effective rights under EU law, specifically the right not to be discriminated against on the grounds of nationality (article 7 of the Treaty of Rome), the right of individuals and companies to establish themselves in business anywhere in the EU (articles 43–48), and the right to participate in the capital of companies situated in another Member State (article 294). The claimants also demanded an order of prohibition preventing the Secretary of State from treating its registrations under the 1894 Act as having ceased.

HMG argued that the registration requirements were intended to ensure that fishing vessels flying the British flag had a genuine link with the UK. It maintained that international law entitled each State to determine the conditions under which a ship might fly its flag and that Community law had not removed that right. It was also contended that the 1988 Act was consistent with the Community policy on fisheries. In the event this assertion proved false.